GUESTS
- WHEN PEOPLE COME TOGETHER, MAGIC HAPPENS
- Enhancing your events bottom line through the VAT reclaim process
WHEN PEOPLE COME TOGETHER,
MAGIC HAPPENS
By Hugo Slimbrouck,
Director Ovation
Leaders of the global meetings and event management industry have gathered again in Barcelona in early December 2008. With an industry that has been affected, both in the public and private sectors, by the recent downfall of the financial services industry in the US, event planners (both corporate and association) as well as their procurement agents are confused. Corporations are cancelling events or putting them on hold at a time that they should actually do the opposite! So what are the options for the people working in The Meetings Industry? What are the alternative options for the CEO’s of the corporations and associations who are their clients? Shall we all go fishing, go sailing, hike in the mountains, merge or consolidate, look for other clients, change in our specialisations or just give up? Do we need to change our image? And what about our noble causes: CSR and the greening of the meetings and events industry?
So what is the value that meetings generate in terms of professional development, knowledge transfer, investment 
generation, technical progress and all the other areas that define why these events happen in the first place?
In reality, meetings, conventions and exhibitions are primary engines of both economic and professional development – key vehicles not just for sharing information – something that in many cases can be done just as effectively on the internet – but building the kind of understanding, relationships and confidence that can only be achieved on a face-to–face basis.
The importance of this factor is well understood by marketeers, association leaders and corporate leaders, who consistently rate meetings, conventions and exhibitions as primary tools for advancing their objectives, and who continue to invest accordingly. As the world begins to face new, and inevitable, stages of economic and political challenges, their importance will only increase.
What we as a meetings industry should all do when dealing with our clients and prospects, is to showcase the importance and value of face to face meetings, travel and motivational programmes. Incentive travel and motivational meetings in particular have the power to reward higher performance, ensuring effective communications to customers, staff and distribution channels. Motivational programmes and meetings show high improvement in customer services and spur innovation through enhanced collaboration between employees and channel partners. This is exactly the communications tool that corporations need in this time of trouble.
What can we do, in our relationships with our clients and business partners, to safeguard business in 2009?
Here are some thoughts:- Define the business value created through improvement of product and services knowledge. If corporations cut events and meetings, what impact will that have on their internal and external communication? How does this affect the motivation of their staff and distribution channels that need motivation and education now, more than ever? Those who continue now to motivate and communicate better will be the survivors of this recession and will be ‘lean and mean’ at a time when business picks up again.
Show how to improve selling performance through live training and motivation modules. Communication experts around the world have seen this shift to live communication happening in the recent past. If you can live through an experience, the quality of the message is stronger than through any other means of communication, because it speaks to the heart of the people as well, not just the mind (the left brain/right brain story).
Businesses need to survive and win through to the other side. There will be downsizing, hence the need to outsource more to teams that can deliver on specifics. Customers will be under massive pressure to deliver results with less. Organisations will need to energize people to keep their heads high and drive forward. Cultures need to adapt to a new winning styles and high value talent will need to be retained and re-trained. -
Establish clear measurement criteria that show the ROI (Return on Investment) or ROO (Return on Objectives) of meetings & events. Which brings me back to the most important question we should ask any client or prospect: why do they plan this event? Because that is the ultimate goal of the communication exercise and it defines the desired outcome, but also the investment that one wishes to make in order to make this happen.
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Share success stories: by aligning, measuring and reporting business results of meeting and incentive programmes across the entire organisation, its channels and its clients. Use personal references from your clients more than ever. Use the industry awards that set you apart from the rest.
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Communicate the value, power and profile of our meetings and events industry to all stakeholders, including the public, regulatory bodies, employees and channel partners. A fine example of this is to point out that the scope and size of the tourism, business and events industry in the UK is bigger than the agricultural sector, or the pharmaceutical sector.
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Show more transparency in the investment, services and pricing models that are accountable for business
results. Corporations are very much under scrutiny now with procurement taking on a bigger role in purchasing. Corporations want to spend smarter and save money. In making our pricing models more transparent we will create trust and win business. Never before has trust been a more crucial asset or a more career-critical skill for organizations than it is right now. Trust, more than euros, pounds, or dollars, is the new currency of business. -
So what will become of CSR (corporate social responsibility) in these difficult times? Surely we should believe that CSR is part of the solution. CSR can help you make events affordable by cutting out the extra fat and focusing on the core purpose of the deal.
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In general, emphasise a greater personal commitment to business goals. Where relationship marketing was very much under pressure from the procurement side, it will play an increasing role if we want to be successful in a down economy. Go out there and sell! Not just the sales people in your organisation but also your management team. Include staff that normally work on-site because this is a valuable experience for both parties. Your staff will learn more and better understand the thinking and negotiation process of the prospect/client. For the client it means greater value brought in through the know-how of non-sales staff. Bookers will work with tighter budgets and the input from operations staff on how to deliver the same service but at a lower price will help you win the business. The advantage will have a double effect: it will result in a creative approach to a more transparent pricing model.
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Improve efficiency. Take another look at the way you organize things, both externally, by looking into which business has been key to your results in the past, and internally, by looking at how you can improve organisational set-ups. Time to clean out the office and review your filing systems, pick up forgotten ideas and analyse why you lost clients or specific pieces of business. There is a great deal of value in your client data. Instead of leaving this filed away, use that data to revive old contacts or to follow up, better prepared, when calling on clients. Emphasise to your staff that even a short call for information can become a confirmed piece of business, so make sure that they give every call the attention it deserves.
Time as well to analyse how quickly you can reply on RFP’s. Because the business will be much more short term which will also mean short term negotiations. And follow up pro-actively, do not just wait till the client calls you back, make it happen! - And above all: stay in touch with your clients, suppliers and prospects. Strengthen industry partner relationships. Educate and certify. Maintain your visibility at the top of the list by being in touch with your prospects and clients. It is time for you to host a client event or even a supplier event. Focus on new and emerging markets or client segments too. The reasons why they meet and create events has not gone away just because there is a recession. That basic need still remains and needs fulfilling.
Of course we will have to cope a little bit longer with low demand, event cancellations, budget restrictions and over-capacities. During times of economic turmoil, the need for personal communication increases; but regardless of this there will be a push and pull between quality and sustainability on one side and price and speed on the other. The crisis is not something we brought upon ourselves but nonetheless we are experiencing its consequences and the 
situation may last for another couple of years. The use of time within an event and the use of resources (financial and non-financial) will be at the core of every negotiation of a live communication event.
But it is a perfect opportunity for upgrading our internal and external efficiency. Business opportunities remain the same and healthy ongoing business will remain in some quarters. Re-structuring and consolidation of organisations will create new opportunities for face to face meetings, education and motivational events. In the current circumstances, an organization that does not see their events department as a core activity, will outsource their business.
We are committed to helping make things happen for our clients. Let us be thought leaders that aspire to do better business than we all expect in 2009. But you, our clients and prospects also need to tell us how we can help even more in the planning of your events, meetings and any other forms of live communications.
So how is our group coping with the storm? I questioned our president Roger Tondeur during the MCI Group annual conference in Granada just a week ago and here are his views:
- MCI suffered, as most of its colleagues and competitors, from project cancellation and many projects were postponed. The top reason cited for the change in plan is “perception” and no specific business reason is cited.
- We believe that strong brands will continue to work with strong brands, therefore MCI feels very confident with its competitive positioning.
- MCI sees meetings and events as a key strategic communication tool of organizational strategies. Our message is that meetings and events budgets should NOT be cut and are of critical strategic importance in volatile times. This is why we went ahead with the Granada conference, gathering 400 talents from all over the world.
- With the headcount freeze in place at some of our client organisations, we see a potential for companies and associations to outsource more programmes than in the past.
One of the most inspiring quotes I have read in the last few months comes from Kevin Roberts, CEO of Saatchi, who said that traditional forms of marketing are dead and that brands now need to focus their attention, investment and strategies on relationship building, live experiences and face to face marketing.
Live events are the future! So says one of the gurus of marketing, and so say all of us...
Hugo Slimbrouck
Hugo.Slimbrouck@ovationdmc.com
www.ovationdmc.com
Enhancing your events bottom line through the VAT reclaim process
The legal importance and potential benefits
By Anne-Sophie Snyers,
Director of Finance, MCI Brussels
We all encounter Value Added Tax (VAT) in our day to day life and whenever we purchase something for personal use but it is surprising how many associations and organisations don’t choose to take advantage of the possible returns when organising an event in the EU.
VAT is a sales tax automatically charged on virtually all goods and services sold within the European countries and an increasing number of non-EU countries worldwide.
VAT can add up to 25% to your bill but the average is around 20% in Europe. When organising a large event, VAT can therefore add a significant amount to your expenditure.
The good news is that it is possible to reclaim a large chunk of that figure, if you work with an experienced PCO with expertise in tax reclaim and who can take you through a difficult process across language barriers and countries.
The European Commission revealed in 2004 that “80% of SMEs surveyed have in the past failed to apply for foreign VAT refunds due to the complexity of the process”* while a European legislation was adopted in the 1990s to allow companies to reclaim VAT on eligible overseas business expenditure.
Common reasons for the failure to reclaim VAT includes being unaware of the possibilities, language and location barriers and the long and complicated process that can bog down finance personnel.
The Legal Situation
The European Council Directive** on the common system of value added tax states that it is compulsory to charge VAT in the country where a supply of services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities is held.
Associations based outside the European Union context can have difficulties grasping the VAT concept on our shores, as sales tax for example in the United States cannot be reclaimed and is commonly much lower.
Many US based organisations choose to work “under the radar” and ignore the legal obligation to charge VAT on registration fees, exhibition and sponsorship packages and other sources of income.
As an association, you are taking on a lot of risk if you choose to ignore European legislation, and as we’ve seen with likes of the Microsoft case, the EU is not afraid to levy serious fines on businesses which as a non profit association could be enough to cripple your organisation.
Becoming legal in organising an event in Europe for a non European based organisation means to have legal representation in Europe as well as freezing a large amount of money in the country of the event as a guarantee to the local administration that they will pay what is due at the end of the event. A good PCO will avoid this by organising the event for your organisation under their name.
How VAT Works - A simple Case Study
| Scenario: | Event Income | = € 2,000 |
| Event Expenses | = € 1,000 | |
| Assume VAT percentage | = 20% |
| Event | LEGAL (registration) | ILLEGAL (not registered) |
| Income received | € 2,400 (2,000 x 20% VAT) | € 2,000 no VAT applied |
| VAT paid to Authorities | € -400 | € 0 |
| Expenses | € 1,200 (1,000 x 20% VAT) | € 1,200 (1,000 x 20%) |
| Bottom Line: | € 800 | € 800 |
VAT declaration due to administration:
| VAT received on reg. | € 400 | € 0 |
| VAT paid to authority | €-400 | € 0 |
| VAT paid on suppliers | € 200 | € 200 |
| € -200 | €-200 |
The Event pays €200 of VAT on the supplier invoice AND can reclaim it in case the first scenario:
| Bottom Line: | € 800 | € 800 |
| VAT reclaimed | € 200 | € 0 |
| TOTAL Bottom Line: | €1,000 | € 800 |
The process seems simple enough when shown as such but there can be a number of hurdles in getting that end result that associations will first need to cross.
The VAT Application and Reclaim Process
In order to charge VAT and to recover VAT on purchases, the PCO – under the name of the association - will have to register with the local administration to obtain a temporary VAT number that will identify the event (if the country is one used regularly it may be worth obtaining a permanent number).
An experienced PCO will be able to contact the local fiscal authorities and produce a detailed “memo” or snapshot of the event that summarises the event for the government, this will contain primarily the budget and estimated revenues and expenses.
The PCO will then have to follow a strict criteria set by the local authorities to ensure all invoices issued are correct and all local invoices paid are correct. It is important to note that VAT is only reclaimable on suppliers that the event 
planner hires in the country of the event. For example, working with a French Audio Visual company in Spain will mean that the VAT will not be reclaimable on Audio Visual expense as the VAT will be paid to a different country, not the country where you have a VAT number and event registered.
The criteria as with the rate of VAT can vary from one country to another. For example in Czech Republic and Poland all invoices issued must be in dual language (Czech and Polish).
It is imperative that all invoices issued contain the event’s local VAT number and all the invoices paid locally have the correct legal entity under which the PCO is registered. This can often be a time consuming process as it is necessary to ensure that the PCO doesn’t pay an invoice for a local service without 100% correct information.
The PCO will then be legally obliged to report each month to the local authorities on how much VAT is raised on the income and pay the corresponding amount.
Following the financial closure of the event, the PCO will have to produce another “memo” of the event that details the final results and using an experienced PCO you can expect any VAT reclaim to arrive within 6 months to a year of that date.
It is always possible for an association to act independently of the PCO and go through the VAT application and reclaim process themselves, but with the time spent and difficulties an association can encounter working with many different regimes and countries, it is a better option to work with an experienced partner which will advise on every step of the way.
*European Commission, Tax survey 2004
**Article 52 of the European Council Directive 2006/112/EC of November 2006
Founded in 1987 and with offices in Abu Dhabi, Amsterdam, Barcelona, Belfast, Berlin, Brussels, Buenos Aires, Dublin, Dubai, Geneva, Gothenburg, Lyon, Madrid, Mumbai, Paris, Petersfield/London, Prague, Rome, Shanghai, Singapore, Stockholm, Stuttgart, Tokyo, Vienna and Zurich, MCI is the foremost global association, communications and event management company. MCI are thought-leaders in building community around brands, products and services for companies and institutions. MCI employs close to 750 people and its budget under management by year-end 2007, was 181 M€.
www.mci-group.com
As the Finance Director of MCI in Brussels Anne-Sophie Snyers leads a team of 9 professionals responsible for both MCI’s corporate finances as well as financial matters relating to MCI’s association, congress and corporate clients – such as accounting services, VAT registration, regulation and submission and overall financial management.
She particularly focuses on, and has developed an expertise in European VAT regulations, and frequently advises MCI’s clients in this complex matter.
(anne-sophie.snyers@mci-group.com)
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