Definitions and Terms
Before we talk specifically about financial management as it relates to the convention and meetings industry you must understand the key terms used in managing finances. Although there are many similarities in processes and financial reporting requirements between the profit, and not-for profit sectors, there are some differences to be aware of. Financial management and accurate reporting for your convention or meeting is critical for success of the event and the well being of the organization.
Profit vs. Not For Profit
The Canadian Institute of Chartered Accountants (CICA) is the regulatory body which establishes accounting guidelines for both Profit and Not-for-Profit organizations. Although, both Profit and Not-for-Profit follow GAAP (Generally Accepted Accounting Procedures), financial processes, and subsequently financial reporting between the two sectors does differ.
Revenues and Expenses
Revenues and expenditures reflect transactions that have occurred during a specific period of time (e.g. month or quarter)
Revenues are the amounts recorded by the organization associated with the meeting or event. (e.g. attendee registrations, sponsorship, exhibit registration, ticket sales, etc.)
Expenses are the amounts spent on the meeting or convention, the amount required to produce the meeting. In some cases it may include indirect expenses (e.g. salaries, rent and office supplies).
Net Revenues (or “Excess of Revenues over Expenditures”) is the difference between total
revenues and total expenditures. It is also called surplus or in the for profit world.. profit.
Accrual Accounting vs. Cash Accounting
The Accrual and Cash Accounting methods each determine when a transaction is recorded.
Accrual accounting records transactions when they occur, regardless of when money actually changes hands between the organization and third parties. An example might be a sponsorship, negotiated and invoiced but payment has not yet been received.
Cash accounting records transactions only when there is an exchange of cash. Under this system, the sample transactions above would not be recorded until the payment is received.
Accrual accounting provides a more accurate record of financial activities because it records the transactions, whether or not cash has been received or paid. Your organization’s accounting department will decide what practice is used.
More Terms to Keep in Mind
Fixed Costs are costs that remain the same regardless of the number of attendees
Variable Costs are costs that vary depending on numbers attending, eg. Food &Beverage
Cash Flow income vs expenses – usually calculated monthly – to find out if + or -
Break Even Point the point where your income equals your expenses for the meeting
Direct Costs costs specifically and directly identified with a particular meeting
Indirect Costs not identified with any particular part of meeting – salaries/wages of Ex Dir, Pres, Legal Counsel – not doing duties they are normally paid for (sometimes these are included – depends on your organization’s policies)
Statement of Income and Expenses a comparison of transactions accumulated over a period of time (based on accrual or cash accounting principles). Includes actual income and expenses with the budget column so one can see where the income and expenses are over or under budget
Functional Budget This type of budget lays out the various sources of revenue and expenses