Legal and Accounting Considerations When You Need to Pivot Your Event

Posted on August 6, 2020

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Part 2: Accounting

By Matt Tremback

Pivoting an event date to a later day, month, or year will have some costs associated to it. But hopefully you can turn money paid to vendors and jurisdictions into credits or refunds, as opposed to them becoming sunk costs. Know where your money is! Similar to closing down an event after the event occurs, one should know exactly how much money was spent and where it went. A comprehensive list of expenses is a great place to start. Here are some questions you should be asking yourself:

  • What signed vendor agreements do we have for this event?
  • Was money paid out to any vendors after a contract was signed?
  • Did the vendor incur any sunk costs?

As mentioned in last week’s post about legal considerations, a Force Majeure should be included in vendor contracts to protect you from the unexpected. If something out of your control forces an event to be postponed or canceled, you should not be required to pay a vendor for a service not yet provided, and a clause in the contract should limit sunk costs. If a contract is signed but no payment was sent, you should contact your vendor partner to let them know of the pivot and ensure no payment is due.

Some vendors require payment (partial for full) to secure their services for the event date, so you should take your expense list and narrow it down to vendors who received payment. Once this list is compiled, start reaching out to your contacts about the event postponement/cancellation and start requesting refunds. Start by asking for money back for any payments made. Although we are going down the path of less physical cash in our day-to-day lives, the adage of ‘cash is king’ still rings true, and a refund is better than a credit.

Some cash-strapped vendors may not be able to refund money paid and will offer a credit to be used for a future event. If this is the case, request formal credit memos from vendors and file them appropriately. A credit memo is great if you utilize the credit in the future, but do not rely on the vendor to track your open credits. Be responsible for your money.

In some cases, there will be an amount due for out-of-pocket vendor expenses. Work with your vendors to ensure you agree with the vendor’s assessment. If funds were sent to the vendor, sunk costs should be removed from the refund/credit memo. But do not forget about vendor agreements that did not require a deposit, as these costs may sneak up on you down the road. Contact any vendor with a signed agreement to ensure no amount is due. In all cases, don’t ‘forget to keep proper documentation, which can be as simple as saved email communication.

 

 

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