DRAFT BUDGET 2016

[Karl Matthews]

I have been playing with some numbers and this is what I have come up with, attached below. This is a rough draft with all the wish list items that have been suggested. As has been the case in previous years this will be a live document pretty much until the event next year. However we will need to come up with a final draft by (?). 

First off, I would like to make a proposal that we increase the amount of first tier from 200 to 250. This seems like a natural step as we look likely to increase in population again. This will mean a slight hit in revenue if we only hit 0% growth but it is a hit we can absorb. I have prepared this budget according to this but it can be easily changed if there is resistance to this. The reason that the predicted first tier number is over 250 (283) is to account for crew sales.

There are a couple of notable differences in this years budget spread sheet. I have added the percentage beside all the expenses in relation to the overall expenses. Also I have done away with the 'Gate' price ticket, making it 'fourth tier' instead.

My reasoning behind the fourth tier prediction is we actually sold 63 tickets after the start of the event last year (37 online & 26 Gate). I have made this our baseline prediction and adjusted the other columns accordingly.

Now I will run through all of the increased expenses. These are in  green.

• Art Grant disbursement - +$2,000 ($8,000 - $10,000) This will mean around 7% of the budget for any growth rate, which to me seems fair. All of the grant money was given out this year and it is likely that we will be in the same position this year. 

• Effigy/Temple - +$500 ($4,500 - $5,000) Just a small increase, but it seems fair considering the quality of work the has been produced. I would like to keep increasing every year and would be open to a larger increase.

• Kitchen - +$500 ($5,000 - $5,500) Another small increase to bring the budget up to what was actually spent last year.

• Ute + Fuel - +$2,800 ($2,800 - $5,200) I have just doubled this line item to bring in the possibility of a second ute as requested by MPW.

• Miscellaneous - +2,000 ($2,000 - $4,000) This is to have more budgeted in reserve for unforeseen expenses. These will become larger as our budgets grow. I have only added this for the growth columns. 

• Medics - +1,825 ($5,675 - $7,500) Paul suggested tat the summit that they will need to grow their team to cover for the extra workload. I'm not sure that his will even cover it but it is my best guess.

• Toilets - + $2,500 ($10,000 - $12,500) This is actually closer to what the toilets cost last year ($12.051). All I have done in the spread sheet is add the % of population growth to the $ amount in the 0% growth column to get the projected extra cost. This can act a a rough guide.  

• Security - + $4,750 ($5,250 - $10,000) We spoke at the summit about hiring a professional security company as well as the fire vollies. I have just chucked this in to see how the numbers would stack up.

There are other slight adjustments in there but nothing to dramatic. The only other ones that really should get a mention is MPW who will move from $1600 - $2000. This will bring them more in line with their actuals this year. Also Artery will get a small on off boost to $750 to cover start up costs.

All up this is $18,025 in added budgets! 

Now to look at New expenses in Blue.

• Power equipment (leads and plug boxes etc.) - $500 - This will complete our sets and make us independent from having to hire any equipment.

• Centre Camp Marquee - $4,000 - I have only added this into the growth columns as it would be a big ticket item at 0% growth. There was a big movement not so long ago to look into this so this can leave the door open to a bit more research.

• Crew Training - $1000 - Seems like a logical one and had support at the summit. I have added an extra $500 in the growth columns.

• Golf cart/other site transport option - $1000 - Much needed for stie managers and what not. Pull this number out of my arse.

• Provisional tax - $2100 - Because we had an end of year tax burden of over $2,500 for the first time last year ($4,200), we will be required to pay provisional tax by October 28 this year. However if we have a reduced tax burden of under that amount next year we will be entitled to a tax refund.

That is another $8,600 Right there.

So all up we are looking at about  $26,500 in extra spending. This is not across all budget columns but it it a significant amount. HOWEVER even with this we are still looking alright.

We must also keep in mind that a majority of this extra spending will be in operational costs and not fixed asset/capital expenditure costs. Ant capital expenditure over $500 counts as a fixed asset that will be depreciated and not count towards our end of year tax claim. This will put us in a slightly better position.  

At 0% growth we will be looking at total expenses of around 135k. This is up about 13k on last years expenditure. This is a little risky and will require us to dip into our cash reserves if this were the case. This would mean our net cash movement would be almost -6k dropping our cash reserves to around 25k. This is a reduction but would not be a total disaster.

If is perceived to be to much we can work to reduce spending in the 0% column as there are a lot of expenses that could be cut out of there.

The 10% growth column will see a slight positive net cash movement of about $200. This will see us maintain a very similar cash reserve.

At our capped capacity we are looking at a significant increase in our net cash movement to almost 15k! This will greatly increase our cash reserves and tax burden. I would like to build a second budget that we all agree upon before the start of the 2016 event that we can set in motion in this scenario. This will decrease that amount of discussion and confusion post festival. This will come later though.

Phew! That took longer than I thought it would! I really hope that all makes sense to you.

Again as I mentioned at the start this is only a starting point to our finished draft. If you have any further things to add please post them here with an explanation as to why you think it should be included. Also if you think the 0% budget should be cut than we can work to do that too.

The budget spread sheet itself will probably change slightly as the finance team makes adjustments to it to make our prediction modelling systems work better.

Cheers,

[Karl Matthews]

And of course I forget to attach the spread sheet!

Here you go, in Excel and Open office...

[Isa Ritchie]

Looks fine to me, but I'm not clear on why Tier 1 should necessarily increase - is it supposed to be based on percentages? What is the purpose of Tier 1, exactly, other than encouraging people to buy tickets early...?

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[Karl Matthews]

Tier one only accounted for 15% of our income this year and would be slowly reducing as the event grows bigger. I feel we should allocate a higher % of income towards it, but that is only my feeling.

If we sold out at 1200 this year the % of income would still be around 16%.

The purpose of tier is to encourage people to buy early, give lower income people an opportunity to get a cheaper ticket and to make our revenue stream more predictable.

This will probably have to be a separate discussion on another thread requiring a vote but I would like to have it.

  

[Isa Ritchie]

The reason I ask about the reason for it is because those two reasons don't really match up well - to give lower income people a chance we would be better off having a separate 'austerity' process where people could apply for cheaper tickets, as lower income people often don't have the luxury of being prepared early with money.

If it is just to encourage people to buy early, then it does it's job (as we have been selling out in a few days), but if that's the reason then I don't see any need to raise it.

If capping the tickets put a rush buying them, we may end up with less income unless we have a cap on Tier 2 - do we have a cap on Tier 2?

[Karl Matthews]

Moving to new thread.

[Pete Wyatt]

awesome work Karl

[Wendy]

That looks good to me Karl.  

On the Marquee - is the idea there that if we put aside that much per year, at the end of 3 years we'll have the money?  As I recall we intended to research this over a period of years to find the best option. I know stretch tents can get expensive so $12000 over three years sounds about right here.  If we were to stretch that to 4 years and drop it to $3000 a year, we could put that extra $1000 towards training, which I think is a more pressing need and can get expesive too.

Thank you for all your work in making this, finance folks!  ;-)

[Karl Matthews]

That is an interesting point Wendy. I will bring it up with the finance team to see if there is a way to put that money aside without it counting against our end of year bank statement.

I have added $1000 to crew training just so you can see what it looks like.

[Wendy]

Looks good to me Karl, and I'm curious to see what the team come back with regard saving for larger assets.

Can I go ahead and update the Effigy/Temple budgets to $5000 each?

[Karl Matthews]

This has lost a bit of momentum, sorry for that!

Finance team has been discussing the best way to save for larger assets. There is no real way of separating the money out to reduce our tax burden, meaning it would just count as a profit for that year and we will just keep it in the interest bearing savings account. 

We do think it is a good idea to be starting to develop a longer term plan for a large asset spending, and we feel it is worth the extra tax burden to save for it if it is something that makes sense to save for. We are discussing strategies around how to re work the budget spread sheet to better reflect this.

There will also be more work put into the spreadsheet in the coming weeks to refine the tax prediction systems to better reflect what our tax bill will actually be. None of us have know how to do this yet so stand by.

I think an asset we should consider saving for is a trailer mounted fire appliance that we can keep on site all festival.

I have made some adjustments to the spread sheet to reflect Kathy's suggestions and some other thoughts floating around.

- I have changed the growth projections to 5%/%15/%26

- I have added the dome at $4500

- I have split 'Capital items' into two sections - 'Capital items over $500' and 'Capital items'. This is because something like a new depot will not be classed a a single item that will need to be depreciated over time, it is the combination of many parts to make one thing, so it has different tax implications. 

- I have taken 'New Artery' out and added it to to services as a rented Marquee at a guess of $750.

- I have added 'Kitchen/MPW/build marquee' meaning Dre's Marquee that was used as a dining area and shade area for build then moved and used for centre camp under services as well.

I'm just throwing around ideas here.

What I found was that at 5% growth we will be dipping into our cash reserves by almost 5k. This could be offset by cancelling the summit if we felt it was necessary or if we knew we were in trouble early we could cut spending like the new depot which would be nice but we could probably survive without.

We are due to pay $2,335 in October, and in this scenario we will be entitled to some if not all of this back. This is part of what we will need to work on when we are further developing our predictive modelling with the budget.

So we will still be close to breaking even.  

JD has said we can work out a payment plan for the dome. Maybe we could offer her half now a deposit and the other half when we fell we are in a strong enough position to pay it.

In the other two growth columns we are cursing.

Anyway just some food for thought!

[Wendy]

Wow, thanks for that Karl!

Just to clarify, does this mean that at 5% growth we would eventually be close to breaking even on this budget, but our cashflow may suffer in the meantime until that tax return came in?

Also, I agree that we ought to be considering and budgeting saving for long term asset purchases, and certainly a trailer mounted fire appliance sounds like a sensible thing to consider.  I guess my question here is quite broad - is there a place where this type of suggestion is recorded, and when would be a good time to bring this issue up for discussion?

[Hippie Tim]

As always I'm uncomfortable with a projected loss with 0% growth but I think I'm the only one who ever feels that way.

Looks great, thanks for all that hard work team!

[Karl Matthews]

I think that is totally valid and I will do some work to produce an amended budget to reflect a scenario where we would not have to dip into cash reserves. As I say this is a live document and I am just playing around with different scenarios.

Wendy - Yes we will have to take a hit in cash flow until we can receive the tax refund, with the reserves we have and being able to properly predict it we will be able to take the hit.

I have a lot of work still to do on this, and there are still some errors that have to be fixed up in the spread sheet you can all see now. I've been bashing my head against it for a half an hour now and I cant coerce my brain into working so I will look at it again tomorrow night. 

[Pete Wyatt]

and remember that next year there is no Luminate festival to take participants away from us so I am happy that we will see our projected growth

[Hippie Tim]

Update on a couple of things:

With the exchange rate being down and the fact that we are aiming at 1200 people this year (meaning we will order 1500 rather than 1200 as usual) wrist bands will come out about $100 more (so $600) and we should probably add $100 to the patches budget too, as the exchange rate will off set things.

[Pete Wyatt]

would it be possible to increase paddock lighting from $500 to say $1000, if ticket sales are looking good

[Karl Matthews]

It might have to be dependant on growth but i'll see what I can do.

Sorry for the delay in getting a new spread sheet out to you guys. I will hopefully have something to you in the next couple of days.

[Karl Matthews]

Please find attached the latest version of the budget.

There has been a lot of work put into this over the last few weeks to get it where it is now. Brendan, Kathy and I are pretty happy it looks right.

There have been a couple of changes to the way it is formatted. 

- The columns now reflect 0%/'break even'/sell out. The break even number reflects what % growth we need to cover our costs as the budget sits.

- We have changed the GST paid on revenue calculation to 12% from 10% to give us a a better reflection on what we are paying.

As you can see we are still have to be very tight on our spending. The 0% budget I have had to take the summit and many other items out just to make it work. 

This budget is is also working on the assumption that we will cap tire 2 a 350 tickets. As you can see we will only hit that is we hit our cap. I will discuss more in the other thread but I really think we should do this as a precaution. We are largely basing  this budget on our historical data. After going over a few different scenarios we have decided that this is the best course to take. We are unsure about how sales will react to a population cap but this is the best way we can model it. A cap will give a bit of an insurance policy against an unexpected surge in tier 2 sales we cant afford.

Please take a close look over this document and bring up any issues you have with it. I would really like to get this signed off by the AGM.

Cheers

[Pete Wyatt]

big thanks to Karl and the team..... am lovin it

[Hippie Tim]

Thanks guys, great job!

A couple of things.

As per our contract with Rathmoy the summit expenses will be a minimum of $640.00 as we are contracted to hire the lodge for "2-3 nights lodge rental at the cost of $320 per night plus $70 per person per night for over 2 people". Probably makes sense to put that in there instead of $0.

Both the patches budget and wristband budget will need an extra $100 due to changes in the exchange rate, as requested above.

That said, I think a loss of ~$3000.00 is an acceptable risk at 0% growth.

[Karl Matthews]

Good calls Hippie, I have adjusted to suit.

And remember a 0% growth we will get a tax refund on our provisional taxes so that will almost cover our short fall.

I would be pretty surprised and more then a little disappointed if we didn't grow at all this year though. 

New budget attached.

[Wendy]

Looks good to me. Thanks Karl and Brendan!

[Karl Matthews]

Hey guys!

Sorry this has been such a long time coming but I have had a chance to throw around some numbers and see what these crazy ticket sales have meant for us.

I know some of you are not keen to discuss raising the cap yet so just pretend the third column doesn't exist for a week and I wont talk about it right now. If you are interested take a look at what that would mean for us financially and start to turn that over in your heads. Mostly I have already done the work to change it and can't be bothered changing it back.

First off we are now sitting at 739 tickets sold. At this stage we are looking at a sell out some time in December even being conservative in our predictions. I have however kept a column as a conservative at 16% growth. 

I have gone through and added all the extra budget items at 16% except the summit and we are still looking at a positive net cash movement. This column is extremely conservative considering we would only have to sell another 366 tickets to get there.

I have added another $1000 to the kitchen budget across all the columns to cover the extra spending they will have to do to add the extras for build and buy food during the event. 

I have also changed the toilets column to indicate the high quote given to us from hirepool which sound likely to reduce.

I have changed the sell out caps to indicate selling over the cap for crew tickets, also accounting for selling 0 forth tier tickets on the sell outs.

With all this we will comfortably be able to build on our end of year bank balance keeping our cap at 1200.

If we extend the cap... I'll let you do the maths, but be sure to not look if you would like to wait!

[Karl Matthews]

We sold another bunch of tickets over the weekend and now wet are sitting at 757, passing or 2014 population.

Interestingly we also have almost $92,000 in cosmic. If we pulled half of that now we would almost have all our pre festival costs covered, with the bonus of not having to really spend it for a couple of months.

In comparison we withdrew $33,000, half of what we had, at Christmas last year which was enough.

We could have it in the savings account earning interest, which would be a nice little earner.

I would like to double check with cosmic that we can withdraw twice but if we can I would like to make the first withdraw tomorrow.

[Oliver Macro]

KB savings account? Would be pretty cool to eventually be able to fund some sort of community something based off of savings interest.

[Wendy]

I'm not fussed about when the money is withdrawn/spent, as long as it's all hunky dory.

Can I assume we'll be able to pay JD for the dome before the event?

[Karl Matthews]

I'm my opinion we can safely go ahead with all additional spending including posting for the dome in full.

Give me a couple of days to confirm that though.

[Wendy]

Righto.

[Pete Wyatt]

good thinking Karl

[Brendan]

My first impressions are that the updated budgets look really good. With ticket sales going the way that they are our realistic worst case would be a manageable hit to the bank balance after the festival (that's including authorising the dome etc). If we can draw from Cosmic more than once before the event then let's do it and start spending.

I would like to take a much closer look at the budget at some stage but am swamped at the moment, working overtime and with other commitments. I might be going bush this weekend too so not sure if I'll get an opportunity until next week. That said, I'm not concerned with what we've discussed so far.

Regarding interest on a savings account, interest rates are extremely low at the moment. Earning is better than not earning but I wouldn't expect much and I would think that it would just go to our general coffers to balance out some administrative overheads.

[Karl Matthews]

I have had a little play around with the budget, and my gosh we are looking nice and healthy!

Even with our remaining ultra conservative budget column we are looking good. With the money we are going to save from the toilet pump outs we can approve $6,000 for the summit and still come out with only a slightly negative net cash movement.

Now with a sell out at 1200 we are looking at an almost 7k net cash movement. This would be a really nice amount to build our bank account up with.

I have changed the third column to represent an increase of 100 tickets to the cap, making it 1300. This would give us a net cash movement of almost $20,000. This could potentially need some strategy as to what we are going to do with all that profit.

If we kept it all we would be looking at a huge tax bill come April. I know there is still a lot of water to pass under the bridge until we actually decide to raise the cap but I think it would be a good thing to put on everyone's radar. If we do decide we would like to raise the cap we will need to spend some of that money post festival, so we should start a separate budget for that spending and decide exactly how much we would like to keep to grow the bank account.

Also I would like to draw attention again to the extra $1000 I have added to the kitchen budget. As Wendy says we will need to vote to approve the extra spending. Now that we have saved all that money with the toilets it makes even more sense to add to that budget.

 

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[Hippie Tim]

We're looking good :)

Before we vote on any changes can we see a bullet point list of what has changed in the budget? Would be easier to understand all of the changes in a simple form.

[Brendan]

Thanks for continuing to look at the budget Karl. It's exciting times alright. Keen to see what happens with ticket sales and come to a collective decision about the cap.

Re: "If we kept it all we would be looking at a huge tax bill come April."

I had this discussion with the finance team earlier but it's worth repeating here for the wider audience. I don't think that we need to be concerned about income tax.

For the record I'm not against having a tax strategy to reduce tax generally - so this isn't a philosophical "we should pay tax because civic responsibility" argument or anything like that.

I think that we should look at any extra spending (expenses) that are good value and of genuine benefit. Beyond that we shouldn't spend more just to avoid income tax. Here's why:

1) Retained earnings are awesome.

The only ways we have for raising money for the long term (beyond one year) are: Borrowing, Grants, Owners' Contributions, Retained Earnings. We obviously want to avoid borrowing. Owners contribute by purchasing tickets, no other appropriate avenues to raise funds there (whereas public companies might sell shares, for example). We get zero to little from grants at the moment and that's a whole other discussion (charity etc). That just leaves year-to-year profit to fund growth. As we grow we need more of a buffer in the bank and will need to spend more on capital items and infrastructure.

There's so much that we could do with the money in the long term. I'm sure that you all have your ideas. We have our wishlist from the Summit including vehicles and structures. There's lots of volunteer training that would be awesome in an ideal world. Personally I'd like to eventually have an accountant review our bookkeeping to ensure that we're compliant and to see if there are ways that we can improve. We could set aside $10k to cover next year's tax (if we make a profit) or any shortfall if ticket sales suddenly don't go as well as expected next year. There's no need to rush to make these spending decisions - it can wait for next year because...

2) It's false economy.

Imagine if we were looking at a $20k profit this year (for example). We decide to authorise some marginal extra spending (including the Summit) but the date for the Summit falls after the end of the tax year leaving us with $20k surplus on balance day. Again this is just an example for nice round numbers. The tax at 30% would be $6,000 which sounds like a lot. That leaves us with $14,000 after tax to grow the bank balance. But if we reduce the bank balance in future years through net spending, then we get that tax money back...

If we then spend that money on expenses the next year (eg if the Summit was after March, crew training etc) then, all else being equal, those expenses count against our income for that year and reduce our tax by the same amount. All we've done is pay next year's tax early.

If we save the money and buy assets, then the cost price of those assets is depreciated over time. Depreciation is a tax deductible expense so it also reduces our tax payable in future years. Again, we're paying tax early (this year) but the equivalent tax reduction / benefit is over a longer time scale.

In conclusion:

If we're going to make a big profit then that's fantastic and let's talk about extra spending. Let's not talk about it in terms of reducing income tax though - just calculate the right amount, ensure we don't accidentally spend that amount, pay it when it's due, and move on. This should lead to better spending decisions in the long run. 

[Karl Matthews]

Hello all,

I have been working on the budget to take into account all this sell out business and extra ticket voting but haven't quite finished before bed time. I will have something to you all by Wednesday night.

We have a couple of budget increases to vote on and maybe we could look into some extra capital spending now we know that we will sell 1300 tickets.

Its quite a nice position to be in really. Much nicer then last year when I had to wait till during the event to know that we weren't going to be fucked.

without a spreadsheet to give you I can say we are going to have plenty of cash and will be really nicely placed to pay lots of tax and build the bank balance for the coming years.

Sorry for being slack treasurer and not updating you all as much as I should be. I didn't realise it had almost been a month. 

Thank goodness you will have Brendan soon :-)

Cheers,

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[Isa Ritchie]

Greeters also needs to have its structure extended to provide shade. I don't think this should come out of its general budget. I also have no idea what this will cost but Poppy may have an idea?

[Karl Matthews]

Here we go.

I have changed things around to reflect that we will sell 1300 tickets. I think we can all safely agree we will sell the extra 100 right?

There are still 3 columns but they now mean different things as you will see when you look at the spread sheet.

Budget Increases

Kitchen - $7500 --- An increase of $2000

Town Hall - $1200 --- An increase of $600

Paddock relief - $1000 --- An increase of $400

Site office build - $3500 --- An increase of $1000

Fluffers - $1000 --- An increase of $200

New Items

10 Year pin - $500 

Site survey/Parking - $500

Greeters structure - $750

Is there anything else anyone 

The third column is for anything that that you can think of that we could get as a capital item that would help us long term. Maybe a helicopter or a hoverboard?

 

[Wendy]

Just fyi I will probably ask everyone to vote on the 10 year pin separately since there's not consensus.

Likewise anything else tha's a new item and not a budget increase for existing items should probably get its own vote - like a helicopter.

Is there room for an increase for cleanup? I'd like to get some of those rubbish grabbers and some fadges if we don't already have them. Can price out today.

[Karl Matthews]

Hell yeah there is. How much you need?

[Pete Wyatt]

which is the latest spreadsheet ?

[Karl Matthews]

They are the same.

I do it in open office and excel. I've been doing it this way for over a year.

[Karl Matthews]

Hang on.

It didn't attach did it?

Sorry!

[Karl Matthews]

My computer was acting fucky last night I'll get it up asap. Just on my way to the airport now.

[Karl Matthews]

Ok this time.

[Isa Ritchie]

Hi. Just trying to find where the new depot structure is listed in the budget and can't find it. Is it in there... or has it been confused with the site office?

[Wendy]

I had assumed it was site office - my understanding was that the Depot would get a new structure and the old one would be site office. But I could be wrong about that.

[Isa Ritchie]

The old one has already been offered to the medics.

[Hippie Tim]

Can someone remind me what the $2,000.00 increase for kitchen is for?

[Wendy]

Feeding people from the first day is at least part of it.

[Poppy Norman]

Feeding people for pre build and clean up. Increasing the per person per day amount from $5 to $6. More money for equipment. Feeding up to 70 people for that long for that much is actually really quite cheap FYI.

[Karl Matthews]

Burning Seeds kitchen was $16.50 per day fyi. We have been underfunding or kitchen for to long. We need to take some pressure off.

[Karl Matthews]

I have had another play around with the budget to include a new Depot and new container.

Last year we spent just under $3000 on the new container including delivery. I have run with that estimate again.

We figure a new Depot structure will const about $2200 to build.

So even with these added we are still looking at a net cash movement of over $10,000, assuming that we will sell the extra 100 tickets.

[Isa Ritchie]

Cool. Is this for the Depot being the size we discussed?

[Karl Matthews]

yes

[Karl Matthews]

Well that was interesting.

Now that we know we have oversold by 153 we can understand what that means to us financially.

The extra 153 tickets we sold beyond our 100 we made about $24,000. 

Our revenue has now gone beyond $200,000.

The good news is we have a chance to increase some budgets to handle the extra burden that we will face in some areas.

This is the update of the budget spreadsheet without any of the extra spending that we will have to do. As you can see in the third column we will have a net cash movement of over 27k with the extra tickets sold.

We will need increases to;

- Security

- Toilets

- Site survey/parking

- Medics

We still only have vague ideas of how much this will all be but we will be working hard to have more precise numbers to you as soon as possible. 

When we have these I would like to have an urgent vote to approve any extra spending in one hit. Either that or we have a vote to agree to any extra spending now and live with how much it turns out to be later. I know that is an unprecedented move but these are extraordinary times.

For now I'm going to have a couple of strong drinks and look at this fresh again tomorrow.

Thank you for all of your work today everyone! Turns out we are a big regional now.

Time to relax a little and enjoy your Saturday night.