Whether you are negotiating with the management team to get more budgets, or working with your hotel salesperson contract, it is important to know your budget jargon.
Here are 10 budget terms that must be understood:
1. Balance point
This is the focus of equal total expenditure and total revenue in the budget. The event has not lost money or made money yet and the expenses are still within budget.
2. Cash flow
“Cash flow” is the total amount of money that will be invested and exited when taking into account revenue and expenditure.
3. In black
This is what you want to be the goal of all your budgets. When the event is “in black”, it will make more revenue than the host costs.
4. In red
The opposite of “in black” is “red”, which means the cost of the event exceeds its cost.
5. Total budget
The “total budget” is the total revenue the activity will bring before deducting expenses. This number can be used as a calculation of expenditure, also known as “total expenditure”.
6. Net budget
The most important thing about a net budget is to measure the profitability of an event. After paying for all expenses, it is made.
7. Fixed cost
Each event has overhead or cost of existence and is not dependent on employees. For example, if you have a fixed fee for venue rentals that do not depend on the number of guests you have, that is a fixed fee. Other fixed costs include AV, office space and room setup fees.
8. Variable cost
Variable costs are those that are not fixed and fluctuate by the number of employees. For example, food and beverage and printing are variable costs because they are based on the number of attendees. The calculation of your fixed and variable costs will incur your total event cost.
9. Contribution margin
Contribution margin is the amount that can involve a fixed cost after the variable cost is met.
10. Profit ratio
Profit margin measures the total amount of event ticketing sales, sponsorships, exhibitor sales and other sources of revenue exceeds the cost of the event.
