Making the numbers add up to avoid Festifail (by Nick Lawrence)

19 Jun 2014

Whether it’s next weekend, or three months on Friday, festival organisers should be well on top of their financials, with clear sight of cashflow, profit and loss and projections.  Monitoring systems for ticket sales, merchandise, concession arrangements and artist contracts should all be in place and being constantly reviewed.  If this is already making queasy reading, then the next job on your ‘to do list’ should be calling the AIF to get some expert help. 

Regardless of size, weekly forecast updates are essential for any festival at least three months out from F-Day. Daily updates should be kicking off in the final month.  These reviews should pick up any problems or discrepancies in time to do something about them.  Financial projections are there for a reason – they give you a view of what could be (or needs to be) achieved to keep the Festival afloat.  They can then be compared with the current state of ticket sales and other income against expected outgoings.  While this may inject a healthy dose of reality, it does mean that action can be taken if the wheels are starting to come off.

The fact is, it’s too late for strategic planning for 2014 events.  From here on in, everything is tactical.  If sales are going well and projections are indicating a healthy profit, even if the heavens open during the weekend, then it’s simply a matter of constant monitoring and minor ‘tweaking’ of outgoings and marketing spend.

However, if the bottom line is starting to indicate the wrong end of a heavy loss, there is work to be done, but it’s not too late.  The most important task is re-balancing the budget to direct as much as possible towards marketing spend.  This might mean allocating less for the ‘nice to have’ elements –luxury toilet hire or that extra grass cut – in order to give more to social media campaigns or some tactical local TV or radio advertising. In the final analysis, it’s tents on the ground that will make the difference between success and failure.

It’s also vital to minimise the number of ‘informal’ contracts between the festival in its suppliers.  Set up a purchase order system that is integrated into the rest of your accounts. A PO is a binding contract between a supplier and client so you’ll know exactly what you’re getting billed, when and what for.

There may still be time to re-examine the sponsorship situation as well.  If ticket sales are looking promising, but immediate cashflow is presenting a challenge, seeking new sponsors can bring additional money in to boost the bank balance. The same is true for existing sponsors who can be offered additional incentives such as more prominent branding, larger concession stands, or additional advertising opportunities.

Digital systems and cashless technology are certainly changing the way events are managed, but most festivals still rely on cash as the currency for survival.  This, more than anything, makes the threshold between success and failure hard to predict.

With cash involved, it can be very easy to lose control (and even physically lose the money) and it can happen very fast.  So, minimising risk by reducing the number of contracts or concessions that involve cash payments is essential, as is restricting the number of staff allowed to handle cash before, during and after the festival.  While it may be too late for this year, becoming almost entirely cashless can have massive benefits.  According to co-founder of UK-based IVS, Paul Pike:  “Cashless payments mean event owners can have an ‘audit trail’ of payment transactions.  Information can be in ‘real-time’ so that event organisers can view the status of sales at any time. There are also stock control benefits too.”

Having said all of that, the level of pre-planning and on-event monitoring can often have the most impact.  Find an accountancy system that’s portable – cloud-based is best – and gives you real-time access to the really important financial information.   Make sure any members of the team with financial responsibilities are trained and well-used to interrogating the system long before things get busy.

Whether the champagne corks are popping at festival HQ as the final punters drag themselves out of the gates, or you’re sitting behind a burger van with a plastic cup of flat lemonade wondering where it all went wrong, post-event learning is critical. There will be a ‘next year’ provided you build on the strengths of 2014 and learn from any mistakes.

Finally, it certainly pays dividends (often literally) to have experienced accountant and business advisors sitting alongside you throughout the process.  They can help you make sense of the numbers and spot the potential issues before they become crises.  They’ll even work with you to maximise your profits and minimise your tax bill.  But then, I would say that, wouldn’t I!

Guest piece by Nick Lawrence – CEO of NWN Blue Squared, specialist accountants for the music industry.