Lecture 5. Managing the finances of a live project
Once the budget has been signed off and the project has been funded the next challenge is to manage the income and cost and adapt to any unexpected circumstances or surprises that may arise during the delivery.

1. How much can you set in stone at the start?

The more you can fix at the start the fewer the opportunities for surprises to catch you out. This means good contracting of suppliers and a clear plan for the earned income elements of the project with as high a level of pre-sales or ‘early bird’ income as is realistic.

1.1 Managing costs

The advantage of strong contracts with suppliers is that you know what they are going to do and what it will cost so instead of an open-ended set of costs which are simply billed as incurred you have effectively put a cap on the amount you will spend on any contracted element.

One way to keep an eye on the fixed versus variable elements of your budget is to colour code them – green for contracted and pre-agreed elements and orange for areas of spend which have variability in them e.g. travel expenses or food and accommodation bills.

For these elements what your budget tells you is what the maximum spend is. Your job now is to keep track of the expenses as they are incurred and make sure you are not over-spending. To do this you need to set up a process by which people involved in the project submit expenses forms (Template 4) with receipts. You need the receipts to prove that the costs were actually incurred. You may only need to prove this internally or you may need to prove it to a grant funder. For EU funded projects there are set templates which you should be using to ensure you an provide a full audit trail if required. There may also be rules and regulations about what costs are ‘eligible’ – can you spend grant money on alcohol at a dinner? Can you claim for a tip that you give a waiter? Usually an organisation or a funder will have already decided what their standard approach is. You just need to know it and convey it to anyone who is spending money which they will seek to claim back from the project budget!

Who signs off on the costs? A single individual needs to be responsible for approving invoices and agreeing that they can be paid. Internally you need to agree whether this is you as the project leader or the head of the finance department. Again there will often be a process for this already set up in your organisation you just need to know what it is and use it!

Another top tip is to ask suppliers who may be working across multiple projects to specify which project their invoice (or if necessary individual line on an invoice) refers to. This will help you ensure that where only part of an invoice belongs to your project that you do not end up footing the bill for the rest of it!

What you want to end up with is a process which enables you to:

  • Set the maximum expenditure for an area of cost and know what the deliverables are that this budget line is covering (that should be in place from your budget)

  • Check this planned set of deliverables and costs against both the contracts set up at the start of the project and the invoices for the variable elements which will come in during the course of the project

  • For those variable costs such as travel, accommodation and subsistence your process for receiving an expenses sheet and approving it before it is paid by the finance department is what ensures that you don't end up incurring costs you weren’t expecting or haven’t agreed.

  • Make sure you know how quickly variable costs are known after the month end – you want to avoid a situation whereby a member of the team hasn’t submitted expenses for several months, you think you have an underspend and re-allocate the funds only to discover there is an expenses bill to pay after all!

  • Stick to agreed protocols for the maximum costs for hotel stays, dinners out etc

As time passes through the project you need to reconcile expected spend against actual spend. This is the reason you have not only a budget but also a cashflow.

The question is how often do you need to update the cashflow so that you change expected spend into actual outgoings and know the real live state of things? In a long term project with fairly slow and predictable activities it may be sufficient to update your cashflow from predicted to actual once a month. If you are right in the middle of a highly intensive period of activity you might want to update your cashflow weekly or even bi-weekly.

This need to track the difference between predicted and actual is the reason that there is a variance column in the cashflow sheet in Template 1. This column will tell you if you are over or under-spending on each line. So if you predicted that you would spend £200 on insurance in January but at the end of January you discover that the invoice has not been paid then the January actual is £0 but you also need to adjust the cashflow so that the £200 is paid in February when the invoice becomes due. In this case the money will be spent just not in the month predicted and the overall variance will be zero if you simply move the spend from Jan to Feb.

However if you planned to spend £500 on hotels in January and when you look at actual spend based on expenses claims from members of the team who are working on the project in fact you only spent £471 then the variance column will show an underspend of £29 in January. Assuming you delivered all the activities you needed to for this lower spend then hurrah and well done for your cost efficiency!

One way to make cost tracking easier is for your project to be set up in the book-keeping system your organisation uses. If you work for a large organisation this is something your finance director can set up. If you work for a small organisation then you could check with your Director how project finances are tracked and whether your book-keeping software can help you do this? Most online book-keeping systems such as (which is designed specifically to meet the needs of small creative companies) have this facility as standard.

1.2 Tracking and maximising earned income

Many cultural professionals find the predicting of earned income far harder to do accurately than to budget for the costs of a project. It is in reality a separate skill but one that you need to acquire particularly as you take on larger projects and more senior roles.

Take consolation from the fact that one of the oldest marketing adages is that ‘only half of marketing works (in delivering sales) … I just wish I knew which half!’

This is not to say that marketing is guesswork, far from it! Simply that you will probably need to work with your marketing team/agency/freelancers in order to both predict and track how marketing spend is turning into ticket sales and other forms of earned income. In this sense marketing and sales are beyond the remit of this e-learning course but they are important skills which you need to either acquire yourself or find a source of.

We are not looking at marketing in this course but you particularly want to track the first few days of sales after a launch of tickets as it is your most keen customers who will buy first. If they don't buy as expected you may need to revise either your sales expectations or your marketing budget as you shouldn’t expect it to just get better later!

1.3 Politely side-stepping invitations to corruption

If you work in this field long enough there will come a moment, perhaps regularly, when you are asked to participate in corruption of one form or another. How can you avoid participating in this whilst keeping your project on track and protecting your budget for the activities you want to commission and deliver?

At the risk of sounding overly simple (it never is) I recommend the strategy of making sure you contract all the activities you want delivered as tightly as possible and only pay invoices for contracted and delivered activities with associated (and agreed) expenses. This may mean that you have to agree things like the maximum cost for an overnight hotel stay or the allowance for meals and travel; or specifying economy class tickets not business class. It will almost definitely mean agreeing precise deliverables in any contract with a supplier and if this involves a tangible product (as opposed to the contracting of time) then you may need to specify the quality level of the product you are buying so that you can compare specification against the object that is delivered and billed for.

The good news is that once you gain a reputation for being pedantic and not allowing corruption you should see the requests and invitations reduce in number. Conversely if you participate in it in small ways or allow it to happen on projects you manage the likelihood is that you’ll be expected to continue in this vein and the scale of the corruption will increase.

So now you can:

  • Set as much in stone at the start of the project as possible

  • Update your cashflow regularly (weekly or monthly depending on the level of activity)

  • Track the income that is being earned, compare it to your initial expectations and adjust your marketing budget or sales expectations as you progress through the project

  • Obtain updates from the finance team on variable costs spent in a month

  • Enable project staff to submit expenses forms so that you can manage these types of costs carefully

  • Politely side-step invitations to participate in corruption

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