Take 10 - Best Practices for Event Budgeting

Thank you to everyone who participated in the Event Budgeting webinar on January 28th. The online comments, questions and feedback was too valuable not to share with everyone! Thank you SO much for making this a wonderful learning opportunity for all of us. Sincerely, Loretta Lowe.

What budgeting tools do you utilize?

Early in the seminar, we asked participants to share what software tools they are using for their budget creation and management. Overwhelmingly, webinar participants posted that they used Excel. However many used other tools in addition to Excel and some suggestions on how they use Excel:

• “Google Docs for Sharing”
• “We use Excel, but also track our budgets on Cvent, our registration system”
• “Google Drive and Quickbooks”
• “StarCite Budget, but I prefer Excel”
• “I too use Excel. I have multiple tabs that cover each expense category -- Marketing, Travel, Hotel, F/B”
• “Excel sheet and then for registration revenue use Active Networks- RegOnLine”
• “For budgeting we use Excel. We do use QuickBooks but the meeting is a one line item”.
• “Excel and sometimes Cvent's budget tool”

Two event managers suggested more robust software programs:

“Procim. Still getting training but it is insanely detailed and a lot of CYA”

“I use a very valuable and affordable service called ETouches. This service offers a number of modules, including e-budget, that I don’t use because of our university accounting system, but I do use the registration service, site building, e-mobile and marketing. They custom built a payment gateway to tie to our system for secure credit card transactions, and I get great summary reports and data about my enrollment, breakout headcounts, etc.

I use Excel internally, and because my organization reports to a University our budget reporting uses the coding you talked about, so I have to track more detailed expense categories, just as you described!” 

Presenter’s comment:

One topic we did not talk about during the webinar is the importance of being PCI DSS compliant if you are in the position of taking credit card payments for your meetings and events: http://en.wikipedia.org/wiki/Payment_Card_Industry_Data_Security_Standard

An excellent way to handle this is to work with a 3rd party registration vendor that handles secure online payments.

What budgeting mistakes have you made or challenges that you recommend other event managers look out for?

It is always helpful to learn from other’s trials and tribulations. Many of the webinar participants shared theirs. Reading through these might make all of us realize that we are not alone in our budgeting challenges!

Below are planners' comments, with some input from yours truly, in italics.

• “My nightmare was not understanding about currency exchange rates while managing my first international conference. Oh, rest assured, I understand it now!” (Several event managers mentioned this challenge. Typically, I will add a column to my budget spreadsheet with the foreign currency amount. Some expenses may be in U.S. dollars and others in a foreign currency, so I have to be careful to attribute each expense to the correct column. Then, I will set up an Excel formula to auto-calculate the conversion to U.S. dollars and use a higher-than-normal currency exchange rate to allow for expected currency fluctuations).
•  “Fees for using credit cards to pay!”
•  “Remembering gratuities for hotel service team”
• “Program expenses and volunteers are the most difficult for us”
• “DRAYAGE! OY! Always upsets me.”
• “The problem I've encountered: Too many 'bosses' on the planning committee approving expenses and not enough chain of command to approve them in a streamlined manner. We have made changes accordingly but it was a learning process. :)”
• “On-site labor costs”
• “Staff who change their airline ticket at the last minute. Changes in fees in air fare.” (Several event managers commented that accurate airfare budgeting was a challenge for them. Wish there was an easy solution for us all!)
• “One budgeting mistake I've made is not asking how long a quote is valid for; I budgeted for an amount then when I went to confirm, the price jumped up.”
• “I use custom hotel keys and some hotels charge a marketing fee to distribute your custom keys instead of their own. I always check on this during negotiations.”
• “Not paying attention to the deadlines to place orders for tradeshows and getting hit with higher costs on services/ products needed for a booth.” (I have had luck, sometimes, in going to the tradeshow exhibit service company and begging for mercy to allow us to pay the pre-deadline rate. It would depend on how far off you missed the deadline and how generous they are willing to be.)
• “Need to be mindful of whether the service charge is taxable and or if there additional administration fees that are often not mentioned in the hotel contract.”
• “Last-minute attendee increases”
• “Red flag: Not putting any keynote speaker AV requirements into account (one of ours needed a special microphone and projector). Read those contracts!”
• “Internet cost if you provide the agenda only online you need to have free Internet for all attendees.” (If you are using a mobile application it your program agenda on it, be sure to select a mobile app provider that has a “native” application, instead of a cloud-based or web-based application. That way, once your attendees have downloaded the application, they should be able to read it without a live Internet connection.)
• “In-house AV charging for Podiums, AV oversee for outside companies.”
• “Entering the formula in Excel incorrectly--UGH!”
• “I plan events for a University and my biggest nightmare is when another department, like custodial or facilities, change/increase their service fees, after the initial quote, without notifying me. Since I don't get to see the final bills (my college's accounting gets those), the bill will get paid and I won't learn about our negative balance until it's too late!” (I feel your pain! One challenge I deal with is payments getting miscoded by other departments to my event account. This is one reason it is a good to perform an additional internal audit.)
• “I have an outdoor dinner and they just advised I need to pay for lighting and power. No mention ever made of that!”
• “I added the local folks who had not registered based on the client’s department numbers. Many did not attend and we were over 150+ which caused added expenses to the budget. This group had a history of people that were local just showing up. (Especially since travel expenses were not necessary). I learned with this group to hold back as long as possible before providing the final guarantees.”
• “Unplanned weather impacts (of course this comes from Boston!)”
• “Forgetting to plan for outlandish Wi-Fi charges!”
• “Forgetting to add tax to service charge when applicable”
• “Don't forget the ++ in airfare (bag fees, seat fees, etc.)”
• “Watch out for budgeting per cabin instead of per person on a cruise.”
• “Custom fees” (Thanks for mentioning this one. I, too, have been dinged with high, unanticipated custom’s fees!”)
• “Corkage fees: That's always one we try to negotiate into a contract (bring in the chairman's wine and get dinged $25 per bottle).”
• “Changes in tax structure!”
• “CEO challenge: His/her decision to add something else to the program after the budget has been formulated. Pay a speaker more than we had budgeted for or last minute adding 'more bling' to the stage.”
• ”Budget whoops... On-site printed costs have snuck up on me in the past- and I underestimated huge on what last minute print costs might amount to. I travel with a printer now and have save $1,000's to date. Just need to make sure it's a printer that is fast if hundreds of documents need to be printed! :)”
• “Budget buster: When the current president of your association decides to extend the length of the open bar (on-site)!” (Great example of why the on-site signature on an “approval of budget increase” document is useful. Especially, if the president is in an altered state of mind!)
• “Bar minimums not met” (Often when bar minimums are not met, there is a bartender service charge that you may have not counted on paying.)
• “Attrition!...and then they get angry later when you are over budget!” (Ah, the bane of our existence! The key is to make sure that management realizes the risks involved in hotel contracting. Most of the time, executive management will not bother to read a full contract, so before getting approval to sign an agreement, I give them a “shorthand” version that explains “If we don’t get “X” many people to register, then we will have to pay ‘Y.’” That way, they cannot say they did not know about this potential overage.)
• “A recent budgeting mistake...adding on an extra day to our program that included chartering a dinner cruise and planning/contracting fireworks. My budget went ka-boom!” (Thanks for this illuminating example!)
• “Budgeting ‘too close,’ hidden fees and forgetting service charges”

Editor's Note: See Page 2 for Loretta Lowe's Take 10 responses.

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Webinar questions and answers:

There were so many great questions during the webinar that we did not get a chance to answer all of them. Please find the presenter’s comments below:

1. Will an e-mail noting changes to a budget be good enough? (e.g., for approving increased budget expenses), or should we actually have a document that the client signs off on, or addendum to the contract?”

An email or text should be equally valid proof. The key is to have some sort of verification that the client approved an additional expense that is not in the approved budget.

In the seminar, it was suggested that a “contingency fund” should be placed into the budget to allow for surprise expenses:

2. Should the contingency be a flat fee or a percentage? What formula do you use?

Ideally, I love to have a flat amount in a contingency fund in my event budgets. However most accountants (and auditors) balk at seeing an expense line item in your budget that is entitled either “miscellaneous” or “contingency,” so I tend to put in a percentage “mark-up” in each budget line item to allow for the cushion that is needed to cover any surprises. I don’t have a hard core formula for this. Would love to know what others do! Roughly, I would say that I try to build in about 5 percent.

3. When you build in the 5 percent, do clients ever say, “Why does this cost so much?” Do they catch the inflated costs?

Well, in my experience, the clients ALWAYS ask why things cost so much, regardless if there is a built-in contingency or not! If they question the price on something, I will let them know that I have a small “cushion” built into the estimate, then start citing any number of the items that could come up as surprise expenses. I will also explain that my goal is to come in under the estimated budget. It gets a little easier when you prove yourself to a client over time.

4. Would your boss say you always over estimate your budget if you are always under budget?

They might, but I haven’t experienced that yet. To be honest, I’m not ALWAYS under budget. The aim is to be, but sometimes those little surprise expenses come up. It is important to explain in the event expense report where the discrepancies are and, if you did save money, to indicate how you got so lucky to make that happen.

5. Some of my clients don't consider me a "hero" if I come in under budget. They see that as me not forecasting accurately, and feel that is money that could have been spent elsewhere.

Good point! I made the mistake once of saving too much money on a conference when I was an association planner. (The boss needed me to get him out of a $50K overall budget deficit). Guess what happened to budget allotment the next year? It is a fine balance; my ideal goal is to land right on target for the overall quarter spend.

6. What is the best way to account for in-kind donations in the budget?

I encourage event managers to build out those costs as if they were actual expenses, and then deduct the value of the items in the income section of the budget. It is always good for the clients to see the value of what was donated and what it would have cost if the item had to be purchased.

7. What do you do when people ignore deadlines for hotels or flights? I handle conventions with qualified direct sales distributors and some go past deadlines.

Wish I had a magic wand to solve this one for you! For hotels group blocks, I will often submit “placeholder” names that can be swapped out up until just before the meeting. For speakers and presenters, we have often contracted an “airfare not to exceed rate” that puts the onus on them to book early or they pay the difference in price. With large groups, traveling from the same point of departure, it is sometimes possible to get group excursion fares from the airlines and give the actual names at a later date. (Southwest has been good for us at this.) With hosted corporate meetings, we will sometimes give them a deadline date in which to self-book and make it clear that if they miss the deadline, we will book their air for them. Then, if they wish to make any changes, they are responsible for any change fees.

Sometimes nagging works: I will send an e-mail out the entire sales team thanking the ones who booked early (positive reinforcement) and remind those who haven’t booked that the costs escalate the longer they wait. It seems to work for my group…. Albeit, I can NEVER get the CEO to book early and just have to budget for his excess. Good luck!

8. What are your thoughts on advertising the per-person break-even number to attendees who balk at the price, or do you think that opens you up to criticism on choices?

I think it is a great idea! The more people realize what things actually cost, the more they appreciate the challenges we face. Typically, on corporate meetings, I will not only give the bottom line cost, but also show the executive management the per-person cost. This helps tremendously if they want to hold the same meeting in the future, but with a higher number of staff. Rather than saying “We spent $250K on that meeting, I will say we spent $2,500 per person on that meeting. However, this year we have 100 more people, so it will likely cost $500K.”

9. What about when your registration numbers are too low and you still need to meet your F&B minimum and have too much food at an event?

Unfortunately, the F&B minimum is a contracted pre-set amount that you will be required to meet, so you will want to make sure that you have at least that amount in your expense budget. If the lack of revenue will result in a financial loss for your event, then it is critical that you be proactive and communicate to your stakeholders in advance (clients, boss or board of directors), so that they are not surprised. One way to mitigate the potential loss is to look at opportunities to sell sponsorships. Rather than having too much food at any one particular meal function, see if you can “bump” up the creative touches and get sponsors it.

For example, add a “champagne sponsorship” or have someone sponsor room snacks or energy drinks or some such. It could be a win-win.

10. It's so hard to track staff time spent on an event so we don't include it in our event budgets. Is there a quick and easy way to do this without tracking hours?

I suppose it depends on the relationship between your staff and the client. If you are a third-party, then you (and your staff) really have to track your hours for billing (or set a flat fee for services). However, if you are event staff within a corporation, then, typically, your salary comes out of a different financial “bucket” (staffing headcount) than your event budget. As a contract independent planner, tracking hours is one of my least favorite things to do. At the end of each month (billing time), I will go through my emails to get an idea hours spent and tasks completed. Advance estimation on a project time is always difficult; it all depends on how many meetings we’ll sit through, how many changes and revisions will be made, and “scope creep.”

Editor's Note: Move on the Page 3 for even more bonus questions and additional suggestions!

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BONUS QUESTIONS

11. If you have a vendor show that sells out each year, do you think it's okay to raise the price for a booth since demand is so high but space is limited?

Absolutely! It’s the law of supply and demand (and the need to cover rising expense costs). You’ll want to be careful not to make too huge a leap and scare off all of your vendors.

12. How do you suggest protecting yourself in situations where a client wants to decrease estimated (i.e. well-researched, sufficiently cushioned) variable costs in a proposed budget for an event/event series?

It is the clients’ money; it ultimately is their decision on how they want to spend it. If your concern is that the event quality will suffer because the client wants to spend less, I certainly empathize. Sometimes, it is our job to protect our clients from themselves! The trick is to take personal longing out of the decision-making process and make a strong business case for your recommendations. I will often use terms and descriptions they will understand. For example, “Well Mr. CEO, since these ARE the top clients in your customer database coming to this event and they tend to have ‘champagne tastes,’ do you really want to serve hot dogs and beer?” or “Gee, Mr. CFO, I know you want to hire cheap agency X to lead your sales training program but would you really want to have a high school football coach training your National Football League team?”

If you are worried that upper management questioning the choices of your mid-management boss, the best thing you can do is document those choices. For example,in the “notes” section of the budget, I might comment about the budget decision made by the client.

13. How do you research competitor fees? Venues will not be forthcoming on what other groups pay, will they?

Competitive research is so much easier with the internet these days! One way to research is to include search engine keywords: “Hotel X” and “Conference 2014,” and you might see other conferences have been held at that venue in the last year. Some people just call up the front desk and ask what groups are in-house. Another resource might be to join an event manager online discussion group, like Meco (www.meetingscommunity.org) where planners all converse online. While pricing discussions are not allowed “on” list, there are many “off list” discussions taking place.  

14. Do you have experience using the Cvent budget application?

Sorry, I do not. I have used Cvent’s registration tools, but never the budget application.

15. Do you have a preferred template in excel that you use?

Yes, that template was provided in the webinar slides, which you should be able to download from the Meetings Focus Webinar Club page for this webinar.

16. Do you find that potential clients will often provide a zero-based budget so they can use it negotiate costs down or not award a piece of business to a third party as they are "over" budget? How to best tackle before this happens? (For those not on the webinar, a zero-based budget is one that has no prior history.)

There may be some truth in this. Most are very afraid of over-quoting a budget figure and have concerns that the third-party will use every cent of it, and then some. It is a very unfortunate fact some of this concern comes from bad past experiences. I have been on both sides as a meeting planner buyer and as a third-party (with a DMC). I understand how a client may not want to “show all of their cards.” Sometimes the client needs some of that budget for other things, sometimes the client has a difficult boss, sometimes there are variable that are difficult to explain to the third-party. It is often true that third-parties will add in cushion to there is negotiation leeway. We could have a whole philosophical discussion on this topic!

One of the best ways to proceed is to ask some key questions: “What sort of event did you do last year?” (You don’t need to know hard numbers, but if you have an idea of where it was, what kind of food and entertainment they had,  you will have a good idea of what they spent.);  “Would you describe your event as having a beer, fine wine, or a champagne and caviar budget?” (This will give you an idea of what type of event to propose). Lastly and most importantly, give your client a range of prices to pick and choose from. I am a big fan of “menu pricing” for events so the client can decide what their spending priorities are. The more you give them control and options the more likely they are to trust you to handle it for them.

17. Before you used to have a room fee waived if you spent so much in F&B. Now I am not seeing this as much in my local area. How do we negotiate this?

My guess is that we are seeing this more because hotels often have separate profit centers. Each department is expected to earn target revenue goals. Additionally, some of the government meeting regulations have changed the pricing landscape. The government will not pay for a high food and beverage rates, so the hotel needs to make up the revenue loss by having a higher meeting room rental fee. In negotiations, it is very helpful to learn what the other side’s target goals are and then work together to get a win-win. Maybe you won’t be able to negotiate away a room fee, but perhaps you can get something else for equal value.

18. Do you negotiate Wi-Fi with the hotel or audiovisual provider?

Typically this is negotiated the hotel’s third-party IT provider.

19. How do you go about negotiating a flat fee for alcohol?

I am not always successful with this. Some venues already have flat rate (hourly) prices for reception-type events. It never hurts to ask if they will do this and, possibly, show them some samples of how other venues do it.

20. Accounting and finances is not my strong suite. I can, however, balance my checkbook. How crucial is this for the CMP test?

The CMP exam is multiple choice. It does involve a few calculations. However, if you can balance your checkbook, you should be fine!

Other Helpful Comments:

Several webinar participants had some excellent additional suggestions:

• “I'd add that you should consider your fixed costs when calculating exhibitor space.”
• “I would share that setting regular budget meetings helps to address decisions needed to keep financial goals.”
• Totally agree--using formulas for calculations saves tons of time! I even have a summary tab to view the overall budget in a snap shot per main category.”
• We book all costs, and then offset donations as separate line item credits of donation value, so management understands what things really cost if we don't have the same donations in future years.

Editor's Note: If you enjoyed the 'Best Practices for Event Budgeting' webinar, or found the follow-up info useful, spread the word to other planners!