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Forecasting

The idea of forecasting is to estimate when the income or expense for each budgeted activity will be incurred or received (usually by month or by quarter). Forecasting enables actual spend to be tracked against budget.

The budget and forecast should be updated on a periodic basis (usually by month or by quarter), as many factors can impact upon the event’s financial activities. Income and expenses will become more certain as both planning and procurement of goods and services progresses.

 

Reforecasting

There are three main reasons that make a reforecast necessary:

  • Timing changes
    This is where an expected income or expense is now expected to occur in a different period to when it was originally forecast. This may ultimately have little or no effect on the overall event budget (though it may impact upon cash-flows). A timing change may point to an issue with planning (i.e. if a cost is going to be incurred later than expected it may mean that the project plan for the event has also slipped).
  • Change in value of an activity
    This is where the value of an activity is expected to change (either increase or decrease).
  • A new activity
    This is an activity that was not included in the original budget, but is now expected to occur.

Any change in value or timing of an activity needs to be identified and incorporated into reforecast as soon as they become known.

In addition any changes that have a material impact on the overall budget should also be included in the risk register.

 

Reporting and measurement

Given how crucial finances are, event organisers must ensure that appropriate financial reporting is provided to the management team and board. Ideally a financial board paper will be submitted ahead of each board meeting, outlining all areas of financial operations.

Important financial reporting areas include:

  • Reforecasts
  • Budget tracker (original budget v updated budget)
  • Actual v forecast / reforecast
  • Cash-flows
  • Investments
  • Procurement.

The main purpose of reporting is to highlight potential financial impacts on the budget. Highlighting these impacts before they occur provides the management team and board with an opportunity to make an informed decision about the best way to deal with the activity.

The actual income and expenses for each budgeted activity should be measured against the forecast (or reforecast) on a periodic (monthly or quarterly) basis. Any variances should be analysed and explained.

Recording and reconciling each of the projected variances to the budget and reporting this as part of the financial board paper helps provide the board with the appropriate information in order to make informed decisions. This information can be presented in a number of ways but a simple reconciliation is usually the best.

Events which have MEDF funding are required to provide explanations on budget variances over five percent.

 

Financial and budget management systems

It is essential to have a good financial management system to facilitate strong and accurate record keeping and detailed management reporting.

Factors to consider when determining the most appropriate financial management system include:

  • the corporate structure of the event
  • the length of the lead-in to the event
  • the size of the event budget
  • the complexities of the event.

Types of system can range from a simple set of excel spreadsheets to sophisticated accounting software such as SAP or Navision.

 

Last updated 21 April 2016