Budgeting
LESSON 7
The budget
A budget can be described as a quantified statement of plans (in other words, the
plan is expressed in numerical terms). The budget process includes costing and
estimating income and the allocation of financial resources.
The budget of an event is used to compare actual costs and revenues with
projected costs and revenues.
Why budgets are important for
management of events?
o event need payment before the revenue is obtained
oCash flow needs special attention
oMost funding or sponsorship bodies need a budget of the event before they will
commit theirbresources
Constructing the budget
▪Two types of budget process can be used in event management. The master
budget, as the name suggests, focuses on each cost and revenue item of the total
event (or event company) and the functional budget is constructed for a specific
programme element, costs centre or department (Dyson, 2004).
▪The construction of a budget has the advantage of forcing the event management
to allocate resources and financially plan the event. It imposes a necessary
financial discipline on an event no matter how informally it is organized.
Constructing the budget
Constructing the budget
1. Establish what is the economic environment
▪The economy of the region and the country (and even European or world
economy) may impose on the event and significantly change the budget.
▪To determine the economic environment, it is useful to ask the following
questions. What similar events can be used as a guide? Will changes in the local
or national economy affect the budget in any way? If it involves international
performers or hiring equipment from overseas, will there be a change in the
currency exchange rates?
Constructing the budget
2. Establish budget guidelines to fit objectives including sub-budgets
▪The next step is to obtain the guidelines from the client, sponsors or event
committee. For example, a client may request that only a certain percentage of
their sponsorship be allocated to entertainment, with the rest to be allocated to
hospitality. Guidelines must fit with the overall objectives of the event and may
require constructing sub-budgets or programme budgets.
Constructing the budget
3. Identify and estimate cost areas and revenue sources
▪This is a summary, or a first-level budget, of the cost and revenue areas..
▪The next level down expands each of these main items
Constructing the budget
4. Prepare a draft budget for committee and approval
▪Once the costs and possible revenue sources and amounts are estimated, a draft
budget is prepared and submitted for approval to the controlling committee. This
may be the finance subcommittee of a large festival. The draft budget is also used
in grant submissions and sponsorships.
Constructing the budget
5. Evaluate draft budget and prepare final budget and control rations
▪The final step is the preparation of the budget and financial ratios that can
indicate deviations from the plan. An operating business has a variety of budgets
including capital expenditure, sales, overheads and production. Most events will
only require an operation budget or cash budget.
Checking
1. What is budgeting?
2. Why budgets are important for management of events?
3. State two types of budget process used in event management?
4. Why its important to scan economic environment before making budget?
5. What is the role of ‘guideline’ in budget making process?
6. State two uses of draft budget?
