Budgeting & Financial Management Flashcards

When collecting registration fees via credit card, which additional cost must an event planner account for in the budget?

Answer: Merchant processing fees (typically 2–4% of transaction)

Payment processors charge a percentage-based merchant fee on each credit card transaction, which directly reduces net registration revenue.

A hotel's attrition clause states that 90% of contracted room nights must be filled or penalties apply. The event books 80% of rooms. What is the financial consequence?

Answer: The organization pays for the 10% shortfall in room nights at the contracted rate

Attrition clauses require organizations to pay for a percentage of unused contracted rooms, so a 10% shortfall means the group is billed for those unfulfilled room nights.

Which document outlines the detailed breakdown of all anticipated revenues and expenses for an event before it occurs?

Answer: Preliminary pro forma budget

A pro forma budget is a forward-looking financial projection that estimates revenues and expenses before the event takes place.

An event planner needs to demonstrate ROI to a corporate client. Which formula correctly calculates event ROI?

Answer: (Net Profit / Total Investment) × 100

ROI = (Net Profit / Total Investment) × 100, which measures the return generated relative to the money invested in the event.

Which type of budget approach adjusts forecasts on a continuous basis by adding a future period as the most recent period is completed?

Answer: Rolling (continuous) budgeting

Rolling budgets continuously extend the planning horizon, dropping the most recent completed period and adding a new future period to maintain a consistent planning window.

A planner is evaluating two venue proposals with different cost structures. Proposal A has lower fixed costs but higher per-person fees; Proposal B has higher fixed costs but lower per-person fees. At what point does Proposal B become more cost-effective?

Answer: When attendance exceeds the crossover (break-even) point between the two cost structures

The crossover point is where total costs for both options are equal; above that attendance level, the lower per-person cost of Proposal B makes it more economical.

Which internal control best practice helps prevent fraudulent vendor payments in event financial management?

Answer: Requiring dual authorization — separate approvers for budget approval and payment release

Segregation of duties through dual authorization ensures no single individual controls the entire payment process, reducing fraud and error risk.