CHAPTER 11

COSTING,PROCUREMENT
AND CASH FLOW
 COSTING
 It is the estimating of event costs,
establishing a baseline or budget, controlling
those costs and documenting and reporting
the process
 Cost must be classified in order to apply
standards and make cost comparisons, such
as well as to allocate the appropriate funding
the element
 COST CLASSIFICATION
 DIRECT OR INDIRECT COSTS
 UNIQUE OR STANDARDS COSTS
 FIXED OR VARIABLE COSTS
 ONETIME OR RECURRING COSTS
 LOST OPPORTUNITIES COSTS
DIRECT OR INDIRECT COSTS
 DC are those that specifically incurred by the project
 Such as hiring staff, catering, renting the venue and
obtaining specific insurance for the event
 IC are the rest of the cost such as office expenses
and general insurance
 IC also called overhead expenses
 DC can be calculated fairly easily as they often
quotes from suppliers
 UNIQUE OR STANDARDS
COSTS
 SC are those that are normal within the industry
 They are easily computed and therefore generally
have low risk
 As the event is meant to be special, the unique
aspects of the event may incur unknown costs
 For example: the use of special lighting setup with
laser and latest in digital control
 The uniqueness of the setup may hide additional
unplanned cost
 FIXED OR VARIABLE COSTS
 FC stay the same no matter what happens at the
event
 VC will change, they rise and fall depending on
known aspects of the event
 For example : the cost of the catering invitation or
ticketed hospitality event will vary according to the
number of people who attend
 VC have greatest opportunity for the event to go
over budget, therefore event project managers who
focus their business should expand their knowledge
in this area
 ONETIME OR RECURRING
COSTS
 RC are those that repeat during the life cycle
of the event and need to be scheduled into
the cash flow
 OC are generally found at the beginning of
organizing the event,
 For example : the administration cost such as
general staff wages, photocopying and
telephone will vary according to the size of
the event and profile of the event
LOST OPPORTUNITIES COSTS

 Concentrating on one event may cause the

independent event company to turn down
many smaller event
 The event manager may compare the cost of
losing the next-best opportunity to the cost of
the one chosen
 ESTIMATING METHODS
 To make the best possible estimate, the
event manager needs to understand the
different methods used:
 Top-down estimating
 Bottom-up estimating
 Parametric estimating
 Top-down Estimating

 Also called analogous estimating

 Event manager base estimates on their
experience in managing similar events
 For instance : how much a standard product
launch cost?
 What is normally spent on the event is
valuable starting point in cost estimation
 Bottom-up Estimating

 The cost of the whole event is assumed to be

the sum of the cost of its parts.
 Bottom-up estimating is a simple matter in
theory but the process can become complex
as the event nears, because many changes
may occur as the event evolves into its final
form
 Parametric Estimating
 The overall cost of the event is assumed to be
related to one element, a parameter, of the event
 For example : standard exhibition cost are related to
floor space.
 Concert costs are related to the number of
attendees
 The accuracy of this type of estimating will depend
on the direct relationship between the event
characteristics or parameter and the event as a
whole
 COST CONTROL
 The basis of cost control is to recognize
possible deviation from the baseline and to
response in an effective way
 BOOKKEEPING-COST
CONTROL CODES
 The description in the form of a report could
be generated from software as simple as
spreadsheet or as complex as a high-end
project management system software
 EVENT PROJECT LIFE CYCE
(CASH FLOW)
 Scheduling the cash flow is significant part of
the cost control procedures
 The cash flow schedule shows when and
how much cash is coming in and going out
over a period of time
 The timing for incoming cash may not
coincide with the outgoing cash
 PROBLEMS IN THE AREA OF
COST
 Lack of product detail
 T he performance of the good or service contribute to the
success of the event
 Account delay
 Normal delays in accounting procedure make event
management misunderstand the current financial situation
 Score creep
 The amount of work needed to create the event can
expand without the knowledge of the event management
until it is too late to take action
 LEASE,MAKE OR BUY
 The decision to hire, rent, make or buy
resources for event depend on:
 Return on investment
 Legal and other aspect considerations
 Schedules
 Quality assurance and change
 Future used and storage
END OF CHAPTER 9
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