ENG - Learning Unit 3 - AR by AKETH

EVENT PLANNING AND DESIGN CONTENTS ANALYSIS

EVENT BUDGET ELABORATION - LEARNING UNIT 3

Learning Contents SUBUNIT 1: Financial Literacy and Money Management SUBUNIT 2: Budgeting SUBUNIT 3: Budget Control SUBUNIT 4: The Relationship between Strategic Management, Strategic Planning and Budgeting

Learning hours:

Workload:

This project has been funded with support from the European Commission. This publication reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

Unit Objectives Actions / Achievements To develop a budget for a specific event Knowledge

Comprehensive on event financial control Fundamental knowledge of basic budgeting rules Specialised knowledge on budget elaboration specific to different event types.

Skills Distinguish different concepts to include in budget elaboration identifying their main characteristics (item, estimated cost, actual cost etc.) Define the right questions to be asked to figure out the requirements of an event in detail. Develop detailed/tailored event budget including each item regarding the specific requirements of an event.

Competencies

Forecast the costs precisely resulting in quite close to real costs Manage others in a line compatible with the budget Autonomously adjusting the budget in accordance with the unpredictable situations/costs Realize improvements in their own work transferring previous experiences into the work in development

SUMMARY The first subunit presents the concept of financial literacy and money management. It explores the extent of financial literacy and underlines the importance of receiving financial education. In the third module 'budget' you will have the areas you need to pay special attention to in the organization of the budget, the financial literacy, the detailed analysis of the budget types and the areas you can act strategically. Budget' part is the most actual problem or leaving a high margin of error part for event management. Once you have mastered all the stages of your organization, from the beginning to the end, well, it is a work that needs to be done. At the same time, it is necessary to work on the internal departments that will be in the organization, or the needs of external institutions to be serviced and after the expense item list is removed. When we look at from another point of view, besides the events, the institutional budget should be ready when taking the first step at the beginning of the financial statement. If the internal expenditure is to be done, it is absolutely necessary to pay attention to this point. You may be confronted with organizations that cannot take place in the other case, cannot stop by, or will not be accepted. It is suggested that you act with a flange (broad) perspective in your budget work with the benefit of step‐by‐step progress. KEYWORDS Coordination, Leadership, Motivation, Communication, Business Communications, Event Coordination

SUBUNIT 1: FINANCIAL LITERACY AND MONEY MANAGEMENT Financial literacy is the education and understanding of various financial areas. This topic focuses on the ability to manage personal finance matters in an efficient manner, and it includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement and tax planning. (Investopedia, 2017) Breaking Down 'Financial Literacy ' Financial literacy also involves the proficiency of financial principles and concepts such as financial planning, compound interest, managing debt, profitable savings techniques and the time value of money. The lack of financial literacy may lead to making poor financial choices that can have negative consequences on the financial well‐being of an individual. Consequently, the federal government created the Financial Literacy and Education Commission, which provides resources for people who want to learn more about financial literacy. The main steps to achieving financial literacy include learning the skills to create a budget, the ability to track spending, learning the techniques to pay off debt and effectively planning for retirement. These steps can also include counseling from a financial expert. Education about the topic involves understanding how money works, creating and

achieving financial goals, and managing internal and external financial challenges. (Investopedia, 2017) The Importance of Financial Education Financial literacy helps individuals become self‐sufficient so that they can achieve financial stability. Those who understand the subject should be able to answer several questions about purchases, such as whether an item is required, whether it is affordable, and whether it an asset or a liability. This field demonstrates the behaviours and attitudes a person possesses about money that is applied to his daily life. Financial literacy shows how an individual makes financial decisions. This skill can help a person develop a financial roadmap to identify what he earns, what he spends and what he owes. This topic also affects small business owners, who greatly contribute to economic growth and stability.

Figure 1 (Oddballwealth, 2017)

Financial illiteracy affects all ages and all socioeconomic levels. Financial illiteracy causes many people to become victims of predatory lending, subprime mortgages, and fraud and

high‐interest rates, potentially resulting in bad credit, bankruptcy or foreclosure. The lack of financial literacy can lead to owing large amounts of debt and making poor financial decisions. For example, the advantages or disadvantages of fixed and variable interest rates are concepts that are easier to understand and make informed decisions about if you possess financial literacy skills. Based on research data by the Financial Industry Regulatory Authority, 53% of Europeans are financially illiterate. They lack the basic skills to reconcile their bank accounts, pay their bills on time, pay off debt and plan for the future. Financial literacy education should also include organizational skills, attention to detail, consumer rights, technology and global economies because the state of the global economy greatly affects the European economy. (Investopedia, 2017) Money management, on the other hand, is the process of budgeting, saving, investing, spending or otherwise overseeing the capital usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans. Money management can also be referred to as "investment management" and "portfolio management." (Anon., 2017) Money management is a broad term that involves and incorporates services and solutions across the entire investment industry. In the market, consumers have access to a wide range of resources and applications that allow them to individually manage nearly every aspect of their personal finances. As investors increase their net worth they also often seek the services of financial advisors for professional money management. Financial advisors are typically associated with private banking and brokerage services, offering support for holistic money management plans that can involve estate planning, retirement and more. Investment company money management is also a central aspect of the investment industry overall. Investment company money management offers individual consumers investment fund options that encompass all investable asset classes in the financial market. Investment company money managers also support the capital management of institutional clients, with investment solutions for institutional retirement plans, endowments, foundations and more. Services and Solutions Personal Finance Apps In the growing financial technology market, personal finance apps exist to help consumers with nearly every aspect of their personal finances. Mint is a free personal finance, money management app developed by Intuit. It allows consumers to connect all of their personal

financial accounts, providing a comprehensive dashboard for personal money management. Mint also includes a free credit score as well as resources and tips for managing consumer credit. Acorns is a personal investment app integrated with consumers spending accounts. It rounds up purchases and invests spare change in low‐cost exchange‐ traded funds(ETFs). Top Money Managers by Assets Global investment managers offer retail and institutional investment management funds and services encompass every investment asset class in the industry. Two of the most popular types of funds include actively managed funds and passively managed funds replicating specified indexes with low management fees. The list below shows the top ten global money managers by assets under management ($M) as of December 31, 2016. 1. BlackRock, U.S., $5,147,852 2. Vanguard Group, U.S., $3,965,018 3. State Street Global, U.S., $2,468,456 4. Fidelity Investments, U.S., $2,130,798 5. Allianz Group, Germany, $1,971,211 6. J.P. Morgan Chase, U.S., $1,770,867 7. Bank of New York Mellon, U.S., $1,647,990 8. AXA Group, France, $1,505,537 9. Capital Group, U.S., $1,478,523 10. Goldman Sachs Group, U.S., $1,379,000 (Anon., 2017)

SUBUNIT 2: BUDGETING AND BUDGET TYPES The budget is a financial plan for the upcoming period of time. On the other hand, the investment budget includes long‐term projections targeted by the organization. Both public and private sector organizations deal with budgeting. Governments start with the planning of revenue sources, the number of tax revenues to be collected, the revenue from projects and legal sanctions, based on previously budgeted needs and community print. The public institutions prepare their budgets depending on what expenditures can be made according to their accounting records. The budget is a quantitative plan of operations that ensure that the resources must match the organization's goals and objectives which are pre‐identified. The budget itself includes both financial and non‐financial aspects. It is nothing different from a kind of planning work called budgeting. The budget consists of three divisions; the main budget, the operational budget, and the financial budget. Operational budgets ensure that the pre‐allocated resources to be used for operational expenses are identified. Operation budgets include production budget, procurement budget, human resources budget and sales budget. Financial budget, on the other hand, is specified according to the budgeted operations and expected transactions in the relevant period to ensure that the resulting currency outflows and monetary resources are identified. The budget has varieties such as monthly budget and constantly updated budget. If you are preparing a single budget for the next year, it will be updated on a continuously updated budget, for the next 12 months, at the end of each month or at the end of each quarter. Whether it is the non‐profit organization’s budget or that of a corporation, besides this, in every program or organization that is organized; each step of the program should be detailed. Purpose of Budgeting Budgeting is critical to the business planning process. A business owner has to predict whether the company will be profitable. Budgeting provides a model of the potential financial performance of a business, given that specific strategies and plans are followed. It provides a financial framework for making important decisions. To manage a business effectively, the expenditure must be properly controlled. An example of how budgeting plays a role in decision making is when spending money on advertising. When the budget

allocated for this aspect has been completely used, the decision is likely to stop spending money on it. Budgeting also helps measure the forecast business performance against the actual business performance. It allows a business owner or manager to determine whether the business lives up to expectations through differences between budgeted and actual expenditure. A specific budget provides information on how much a business can spend every month. Moreover, it lets a business owner know how much profit to make to meet all expenses. The usefulness of budgeting depends on the accuracy of available information. (Anon., 2017) If it is looked at the opportunities side rather than strengths, the purpose is simply to get help in the process of capital allocation; because the amount of capital available at any given time for new projects is limited, management needs to use capital budgeting techniques to determine which projects will yield the most return over an applicable period of time A good budget is based on experience and uses this information as a reference, as well as containing detailed and expected expenditure amounts and information about factors that can affect the entire internal and external budget. Budgeting as a Process Budgeting is the process of setting financial goals, forecasting future financial resources and needs, monitoring and controlling income and expenditures and evaluating progress toward achieving the financial goals. Basically, it is making sure that the organisation is spending less than its earning and planning for both the short and long term. A set of instructions used by large organizations to prepare budgets. As organizations become larger and more complex, it is no longer possible for one person to prepare a budget. Instead, budgeting across the enterprise must be carefully coordinated. Financial analysts work closely with each group to collect budget information on a pre‐set schedule and then send data up through higher rungs of financial controllers. (Anon., 2017) The budgeting process should take place as a result of teamwork. Top‐down budgeting is a type of budgeting put into effect by the top management in the organization. This method can be an efficient way to budget preparation, but because employees do not participate, such budgets can cause employees to be stymied and reluctant to lead in solving problems that may arise during work done. Employees do not feel a sense of ownership towards the

budget they are not part of during their preparation. So, there needs to be a regulation or guide to avoid situations such as loosening or exploiting on budgets so that departments can spend less than expected amounts to ensure they look better than they are or to get a set of prizes. On the other hand, very tight budgets can create discouraging and unrealizable situations. It does not matter how an approach is taken, it is important to predict that the future will function as a map or guide the budget. However, the budget must not be seen as a solid and irreplaceable document. If opportunities emerge, conditions change, there is no reason for budgetary obstacles to finding and using the advantages of such opportunities if unpredictable circumstances evolve. Many companies form a budget commission to control the preparation and realization of budgets. The budget can also be seen as a gateway for communicating with different departments. All other departments except the ones that are directly involved in the process, such as sales, production, purchasing, industrial relations, sales marketing, warehouse, data processing, accounting, quality control, can understand their roles and the roles of other departments in achieving the company's goals in terms of budgeting. This participation requires different departments to negotiate and reconcile each other until the budget is finalized. When employees work together with company goals, a harmonious target association is formed in the company. Budgets that do not take into account employees' goals often fail. The budget completion process ends with the assumptions of the relevant departments and the approval and signature of the top management. Budget Types It is possible to classify the operating budgets according to themes, their handling, their purpose, their technical structures, their scope, the nature of their figures and their initial figures. A summary of different classifications is shown below, then come explanations for a selection of budgets. Classification Basis

Budget Type Income Budget

Subject Expense Budget Project Budget Question Handling Term Budget

Stationary Budget Technical Constitution

Comparative Stable Budget Flexible Budget

Scope

Quantitative Perspective Starting Base

Partial Budget General Budget Programme Budget Activity Budget Quantity Budget Amount Budget Traditional Budget Zero‐Based Budget

Income Budget ‐ In addition to the cost‐product relationship of activity, the budgets, on which the forecasting and valuation made in terms of revenue, are called as "income budget". Sales budgets according to the sales types, sales territories and product groups and also ordinary income and profits budgets from other activities can be given as an example for income budget. (Peker, 1988) Expense Budget ‐ The budget on which the result of the activities is evaluated only in terms of the relationship between the products or service and cost of the production, is called an expense budget. This classification of budgets is also closely related to the organizational structure of the business. A department that is organized as a cost centre or an expense centre of the business only subject to the relation between the product produced and the cost. A department which is organized as revenue centre handled the costs and revenue flow as a whole. (Peker, 1988) Project Budget ‐ The budgets aiming to complete a certain project as a target are named as the project budget. (Bozkurt, et al., 2001) Completing of this kind of project depends on the duration of the project. The project manager may sometimes meet the need for personnel and other resources from various functional departments within the enterprise. In such a case, the project budget includes the budgeted amounts of the corresponding department. Therefore, while preparing the budget, the project is consistent with the budget department of the budget itself is extremely important to provide resources. (Anthony, et al., 2004)

Term Budget ‐ The budgets that include estimates and valuations for the periods determined by the management of operating results are called period budgets. (Haftacı, 2010) The budget may be prepared at intervals of six months, three months, monthly or less, depending on the requirements of the period budget. Programme Budget ‐ The program budget includes the basic programs that the operations management foresees for the upcoming period of operation. Every activity the operations management has undertaken to realize their plans is a program. In this case, each product or product group is a program, and activities such as research and development activity, an educational training, an advertising campaign also programs. All income and expense figures for this type of budget are specified by the program. When a business that produces liquid and powder detergent is considered, liquid and powder detergent groups are taken as separate programs. The research and development work to be done by the same company on the topic and the advertising campaign to organize are also programs.

SUBUNIT 3: BUDGET CONTROL Activity Budget When it is needed to mention about the event management, having a successful event is achieving all the goals that are targeted. This requires strategic planning, implementation, and evaluation of the event. The success of the event planner goes beyond budget limitations, ending the event without encountering surprises. How will such an event be charged? The event planning company seeks profit maximization while the customer tries to keep costs down. Charging is done in various ways in the events. Some of these are mentioned below. A commission percentage over the activity cost ‐ the cost of the consultation fee, calculated on a percentage of commission over the activity cost, typically ranges from 10% to 20%. Event planner companies do not apply the same percentage per activity or per customer. This rate can vary depending on the type of the event, the number of participants, the relationship with the customer, the bargaining situation, the needs of the customer, and the time constraints. Type of the activity determines the percentage charged. Fixed Rate ‐ in some cases, a client or planner can settle on a fixed consultation fee instead of setting a percentage. If a fixed consulting fee is being worked out, it is important that both the client and the planner be clearly defined. Package price ‐ event planners can also choose to offer a package price. In other words, the event planning firm can give the entire activity content at a single price, including the consulting fee, in a simple manner. In this method, all the activity contents are detailed while the costs are not detailed. (Babacan & Göztaş, 2011) The rate of time ‐ if self‐employed persons are also needed in the project, a charge can be made over working hours. Even the organisation has already paid in the form of hourly wage and payment, there remains an unknown factor that is how long it takes to complete this task. (Babacan & Göztaş, 2011) In order to develop a good budgeting scheme for the event,

even the most primitive expenditures need to be identified and listed. If possible, budget plans used in previous years must be used. Expenditures to be covered by any institution or person must be included in the list the exact time when the expenditures are determined. Sponsors who would provide support for expenditures must be added to the list under the income section. The revenues must be listed and after‐the‐expenditures figures must be calculated with a 10% interval for the sake of trial and error. On the other hand, the budget for spending can be categorized under following headings. Functional / production‐oriented expenditure – costs, directly and indirectly, occur to ensure that the personnel works effectively, and expenditures for security, permits, construction, construction insurance, and administrative support. Expenditure for the event space ‐ event space rental Expenditure on promotions ‐ handbills, advertising costs, public communication and promotion expenditures for different channels of communication Spending on participants – costs originated from whom join the event as a guest, artist, actor etc.

SUBUNIT 4: THE RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT, STRATEGIC PLANNING AND BUDGETING Strategic planning is a vitally important support to strategic management and it is a major process when the process of strategic management is conducted. According to (Wagner, 2006) the importance of strategic planning can be explained from four points of view including environmental scanning, strategy formulation, linking goals to budgets and strategic planning as a process. The strategic planning process begins with the setting organizational goals. The linkage between strategic planning and organizational performance needs analysis to get a better understanding of how strategic planning is applied in practice and to improve performance. For strategic planning to be effective and useful, there must be commitment and involvement across all levels of the organization, overcome inherent problems such as; rivalry among departments, projects, resistance to change, resource requirement, resources allocation and so on. The strategic initiatives and directions set up by firm management in the form of mission and vision statements and targets for cost saving, debt/equity ratios embodied as argued by (Grant, 2003) a framework of constraints and objectives that bounded and directed strategic choices. Strategic planning has been embraced by business enterprises, the public and private sectors as an important avenue that can be utilized to lead effective organization performance. Strategic planning is the first phase in the strategic management process and sets the basis for the other phases (strategy implementation, evaluation, and control). (Steiner, 1979) argues that strategic planning system provides the framework for formulating and implementing strategies. However, it is argued that for strategic planning to translate into results, a facilitative internal environment and culture must be present. (Ansoff & McDonnel, 1990)) notes that environment is constantly changing, and so it makes it imperative for organizations to continuously adapt their activities in order to succeed. In order to survive in this very dynamic environment, organizations need strategies to focus on their customers and to deal with the emerging challenges. Strategic planning introduces changes that sometimes encounter organizational resistance. (Thompson & Strickland,

1989) add that galvanizing organization‐wide commitment to the chosen strategic plan is critical for effective performance. Financial contingency planning is the ultimate reason why strategic budgeting and important piece to add to strategic planning going forward. Contingencies must be provided at all times. Assumptions regarding income are to always be qualified with suitable and realistic alternatives to guard against problem periods. How many “back up” plans are appropriate? How much money should be held in case of a financial emergency? When is it appropriate to hold higher levels of reserve funds? When can risk be increased for a larger benefit down the line? In the current financial environment, losing track of the perspective brought on by the aforementioned questions can place an organisation’s future at risk. (Terrance, 2014)

EXERCISE Assume that you are organizing a music festival, the festival will take 3 days and 3 nights on rock songs. At the same time, you have to implement a 3‐year program together with a platform which supports the breast cancer women. Perform the following budget activity for the festival that will take place in the capital of your country.

Revenue Entries Main sponsors Support sponsors Donations Souvenir sales Stand rentals Entry fees Ticket sales Various supports Miscellaneous income Total Income Expense Entries Management related spending Salary to be paid to employees Insurance fee Expenses related to official permission Expenses for prizes Expenses on souvenir gifts Expenses on events Charge for use of the event space Expenses for Ceremonies Expenses for the evaluation of the event Expenses for places to stay Promotion and marketing expenses Spending on the event schedule Spend for advertisement Market research surveys Spending on Posters and Posters Printing and printing fees Expenses for show

1. Year

2. Year

3.Year

Expenses on commercial property Expenses for directional signposts Uniform expenses Expenses for catering Expenses for event recording Charge for internet use Payment for transportation and driving Charge for photographing Expenses on security Payment to be paid to the communicati Miscellaneous expenses Total Expenditures NET INCOME Probability Adjustments (10%) NET INCOME After Adjustments

Please take a glance at the following as if it is a checklist while preparing your budget.  Probabilities should be considered when preparing the event budget.  The budget should be very clear, easy to understand and assess.  When preparing the budget, it should be realistic  Each income and expenditure item must be recorded in the event budget.  The complexity of the budget relates to the size and nature of the activity.  If there are doubts about the budget, a financial expert should be consulted.  Ticket sales revenues should be reasonable.  The budget should be checked continuously.  Only one person needs to plan, control, revise and direct the budget.  All financial information for the event must be recorded and stored.

FURTHER READING AND BIBLIOGRAPHY Anon., 2017. Investopedia. [Online] Available at: https://www.investopedia.com/terms/m/moneymanagement.asp [Accessed 1 12 2017]. Anon., 2017. Investopedia. [Online] Available at: https://www.investopedia.com/terms/b/budget‐manual.asp [Accessed 1 12 2017]. Anon., 2017. Reference. [Online] Available at: https://www.reference.com/business‐finance/purpose‐budgeting‐ c4af22bc867f1e70 [Accessed 1 12 2017]. Ansoff, H. I. & McDonnel, E., 1990). Implanting strategic management.. 2 ed. London: Prentice‐Hall. Anthony, R. N., Hawkins, D., Merchant, K. & Anthony, R., 2004. Accounting: Texts and Cases. 11. ed. s.l.:McGraw Hill. Babacan, E. & Göztaş, A., 2011. Etkinlik Yönetimi. 1 ed. Ankara: Detay Yayincilik. Bozkurt, N., Hacirüstemoglu, R. & Ümit, A., 2001. Muhasebe Denetimi Uygulamalari. s.l.:Alfa Basim Yayim Dagitim. Grant, R. M., 2003. Strategic planning in a turbulent environment: evidence from the oil majors. Strategic Management Journal, 5(24), pp. 491‐517. Haftacı, V., 2010. İşletme Bütçeleri. In: İşletme Bütçeleri. 6. ed. s.l.:Beta Basim, Istanbul, pp. 36‐37. Investopedia, 2017. Investopedia. [Online] Available at: https://www.investopedia.com/terms/f/financial‐literacy.asp [Accessed 1 12 2017]. Oddballwealth, 2017. Pinterest. [Online] Available at: https://tr.pinterest.com/pin/104216178856789250/ [Accessed 1 12 2017]. Peker, A., 1988. I.Ü. Işletme Fakültesi Muhasebe EnstitüsüModern Yönetim Muhasebesi, Issue 53, p. 368. Steiner, G. A., 1979. Strategic planning. 1 ed. New York: Free Press. Terrance, L. C., 2014. Strategic budgeting instead of strategic planning. The Bottom Line, Issue 27, p. 50. Thompson, A. A. & Strickland, A. J., 1989. Strategy formulation and implementation. In: Tasks of the general manager. 1 ed. Homewood: Irwin. Wagner, R., 2006. Conversation on planning: Investigating the relationship between strategies, actions and performance. Doctoral dissertation, University of Minnesota.