Workshops – Los Angeles and Toronto

Just a quick reminder to all of the Film Accounting 101 workshop this weekend in Los Angeles. If you’re interested in Film Accounting and would like to get a full understanding this is the time, as I won’t be back in LA for a while. Next ti Toronto on June 2nd and 3rd.

Best to all / John

Just to catch u…

Just to catch up with you all. Last spring I started wto work on a David Cronenberg picture, “Cosmopolis” starring Robert Pattinson and Paul Giamatti, then about last August I started working on a Guillermo Del Toro feature called “Mama”. He hand picked a young Spanish director, Andre Muschietti – it’s in post now in Spain. Now I’ve started an NBC-Universal bigger budgeted tv series called “Defiance”. It’s a very cool script, futuristic – I can’t say much about the script because of the confidentiality, but it’s very cool, and character driven.

A word about the effects of Enron – I’m going to write an article for my blog about this because it’s very interesting how the newer, fully enforced SAS rules are now affecting the big television studios right done in the trenches. Film accounting is still there at it’s basics, but there are several major differences, and in each case I can trace it back to the enforcement of SAS’s at the grass roots level.

There’s also a big change in paper waste. Huge drop in the use of files.

More to come. Once I finish the article I’ll have to get permission to write it – the big studios are big on confidentiality.

All the best to everyone!

-John

2010 in review – 18,000 Visits

Thanks to all who came to my blog in 2010, and may you all Flourish and Prosper in 2011. I received the notice below from WordPress showing that I had 18,000 visits to my blog in 2010. That’s an incredible amount for me, as I never really intended this very niche part of the film industry (film accounting and budgeting) to generate so much interest. Here’s what WordPress said – and thank you all for your visits:

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The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

The Blog-Health-o-Meter™ reads Wow.

Crunchy numbers

The average container ship can carry about 4,500 containers. This blog was viewed about 18,000 times in 2010. If each view were a shipping container, your blog would have filled about 4 fully loaded ships.

In 2010, there were 20 new posts, growing the total archive of this blog to 43 posts. There were 2 pictures uploaded, taking up a total of 166kb.

The busiest day of the year was September 20th with 145 views. The most popular post that day was Line Producers, Unit Production Managers and Cost Controls.

Where did they come from?

The top referring sites in 2010 were linkedin.com, talkfilm.biz, en.wordpress.com, twitter.com, and ehow.com.

Some visitors came searching, mostly for production accounting, production accountant, film production accounting, film accounting, and production accountant salary.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

Line Producers, Unit Production Managers and Cost Controls April 2010
2 comments

2

Film Production Accounting February 2009
30 comments

3

About John January 2008
20 comments

4

Section 181 – US Federal Film Tax Credits March 2010
23 comments

5

Train To Be A Film Production Accountant April 2009
13 comments

Accounting Software For A Web/Video Startup

I received an email from someone in Florida who is working with a young web/video startup company which also aspires to produce projects. He asked me about production accounting software and if Quickbooks, Peachtree, etc could work. Here’s my response to him.

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Hi, Jim. It sounds interesting, although I know you can’t discuss.

The production accounting software generally used is owned by the 4 major entertainment payroll services. Each of the production accounting softwares are industry specific for film productions and for the subsequent cost reporting against the approved budget for the project, but is severely limited in preparing Balance Sheets. So, there is also a need for a good Corporate Accounting Software, like Quickbooks, especially during the development process.

Production Accounting Software

Entertainment Partners, Cast & Crew, Media Services and Ease Entertainment have all designed their own proprietary general ledger software (in truth, they are all quite similar where Ease is the most recently developed) – in all cases the general ledger software developed by each of them is licensed to the production for no charge to the production PROVIDED you use their payroll service as the “Employer of Record”.

Corporate Accounting Software – Quickbooks, etc.

Independent film producers, particularly when starting out, need to have a usual accounting package, like Quickbooks, then when the production of a film/TV project is financed and ready to be produced, create a single purpose company just for the purpose of producing the project, and use one of the payroll services as “Employer of Record” to save the production any problems with local State and Federal tax problems. At the same time have the payroll service company set you up with the production accounting software to be used by the single purpose company – I recommend Ease, but they all work. (Also, don’t forget to create an “Assignment” of the rights to the creative work to the single purpose company and make the director/cast/crew contracts with the single purpose company.)

Two Types of Accounting Functions

So, we have two functions going on:
1. Maintaining the company books, particularly during the development phase of various projects. When I’ve worked with independent film producers in the past I used Quickbooks to maintain the company records, although AccPac, Peachtree, etc all could do the same thing – I found that Quickbooks was the most flexible in letting me make changes, re-allocations, etc as I learned the best way to present the various project costs.
2. Producing the film/TV/documentary/etc project using industry specific production accounting software.

As a side note – during the development stage the costs of each project should be set up on the company records using Quickbooks (or other software) as an “Asset”, usually the “Inventory” section of the Balance Sheet, not as an expense in the Income Statement. That would include allocating to the various projects the costs of promotional trips and meetings with prospective investors/distributors/producers/etc. These costs can be written off to the Income Statement when income is generated or when the project is “abandoned”. Consult with your tax accountant towards the end of the first taxation year to make sure you’ve declared the most appropriate way you want to treat it for IRS purposes.

Development Costs Are “Inventory” Costs

If your film/TV project is quite small and you want to skip the payroll deductions altogether (not recommended, but I’ve seen it happen), then I’ve seen some productions set up a Cost Report on an Excel spreadsheet, export the Quickbooks assigned accounts to csv, then import the actual costs to the Excel Cost Report. This works if the actual cost accounts exactly match the budgeted cost accounts. In addition, you would have to add the “Commitments” column manually to your Excel cost report. I’ve seen this work for small productions, but requires a lot of double-checking and can get messed up pretty quickly – maintaining a fixed set of cost accounts and using tested macros helps to eliminate any blunders.

I hope that helps.

To answer your question about Orlando, I certainly hope so. I really love Florida. I’ll keep you posted.

Best regards,
John Gaskin

Line Producers, Unit Production Managers and Cost Controls

Film production has a middle management position called “Line Producer” and/or “Unit Production Manager” (or, just “Production Manager” in Canada). This person is charged with the responsibility to bring the production in on time and on budget – really – and from the ground level. Most Line Producers and UPM’s learn their ability to manage film budgets and costs from the proverbial school-of-hard-knocks.

Who Becomes A Line Producer?

In this environment of producing films cheaper, better, faster it’s especially important. How does a 1st Assistant Director, a young producer, a filmmaker, a location manager, bust in as a Line Producer? How do they get their scripts budgeted and cost-controlled?

Some Say It’s Not Creative

Some might say it’s not creative! Do it for a while and you’ll see it’s about the most creative job you could have on set (outside of actually being the Director). For those of you with a love of the set, the balance of confusion and order is a tight rope, and central to it all is – Bring it in on time and on budget – or get out of the way!

How To Become A Line Producer?

The only way I know is to get some training. There just isn’t any time on set for an active Line Producer to apprentice someone. It’s too fast and too late. The only way to learn this very important aspect of the film BUSINESS is to train in a controlled environment.

Visit my website at http://www.talkfilm.biz for workshops on “Managing Film Budgets and Production Costs”. I have done workshops in Toronto, Los Angeles, New York, Detroit, Winnipeg and Florida. The next one is in Toronto on Oct 9th and 10th. Visit my website for an agenda. See also that this will be also delivered as a series of Live On-Line Webinars in late May in order to accommodate those of you who can’t make it – note that the webinars are recorded for your review at your convenience.

See my web site at http://www.talkfilm.biz for the agenda and the when/where for a workshop near you.

Regards to all,

John Gaskin

Veteran of 45 film and television productions of all sizes in 5 different countries. See IMDb for credits.

Link with me on LinkedIn to see announcements of workshop events.

Film Accounting – Training

The person wanting to break-in to Film Accounting as a profession has a very hard time of it. The film producers don’t budget for “training” – they want somebody to walk into the position and GO-GO-GO. Meanwhile, there are several States, like Louisiana, Michigan, Georgia, etc that have a plethora of productions but need to bring in film accountants, and their assistants from out-of-State (primarily Los Angeles and New York).

Is Film Accounting That Different?

It’s not that film accounting is particularly difficult. It’s the same principles as other industries, like construction for instance. The big three functions of Bookkeeping, Auditing and Reporting are true for film accounting just as they are for other industries. The biggest difference is rooted in the old “apprenticeship” mind-set of the film industry. Most film accountants aren’t certified accountants in any other field. They are simply smart people, not allergic to fast pace and long hours, who have apprenticed into that position. The apprenticeship system still works, but when more and more demand is put on film producers to produce faster, cheaper, better, there’s less and less room for an apprentice.

Who Can Apprentice?

Any accountant or bookkeeper would find it a fast rise to the top, provided they can fit in with the industry – that is, their personalities don’t clash with the rough and tumble scene of filmmaking – long-ish hours, good pay, contract work, some travel, etc.

How To Solve This Quandary?

The only way I know of is to train film assistant accountants in the film industry specific practices, terminology and systems in a controlled environment where practice at a slow pace is permitted and then more practice brings the pace up to a standard acceptable by film producers. Do an intensive workshop, like the one I’m doing next in Louisiana on May 15/16, 2010.

See my website at http://www.talkfilm.biz for more details and when/where. I have done workshops in Los Angeles, New York, Detroit and Florida.

Link with me on LinkedIn for workshop announcements in your area.

Regards to all,

John Gaskin

Veteran of 45 film and television productions in 5 different countries. See IMDb for credits.

An Introduction to Film Budgeting

After my first Live On-Line Training session (Tues Feb 23/10), I had a few very good questions from an attendee. The purpose of the 1st on-line session was: “An Introduction to Film Budgeting” and her questions are relevant to anyone not used to film budgeting, so I’m sharing it here on my blog.

Below are her questions, in italics, and my answers.

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Thank you for tonight’s class.  I am learning so much!

You mentioned you were giving out the EP Budgeting file for “No Big Deal”, could you send that to me too?  I have EP Budgeting.

I have questions from Class 1:

1.  Which title is standard – UPM or Line Producer? And what is producer doing during production? Is there always a Line Producer and a Production Manager on every large project? What is the difference between a production manager and a production supervisor?

The Line Producer and UPM are very often the same person. The status of Line Producer is senior to UPM, but the UPM must be a hired position because it’s a DGA requirement. So I’ve often seen where a UPM is hired and registered with the DGA, then that same person calls themselves the Line Producer. On a large show, like “Shall We Dance” there was both a Line Producer and a UPM, but on anything smaller than that the two roles are folded into one – probably because of the overlapping of so many of their functions.

2.  How do you budget for holidays if you don’t know the time of the year when the shoot will be?

When doing a budget you have a stretch of time in mind and can estimate the number of holidays that will be coming up. I did one budget for Walden Entertainment where they weren’t sure when they would be shooting it, but because it was a 60 day shoot they advised me to just budget for 2 holidays. Once Prep starts, of course you know the shooting schedule and you can enter the exact number of holidays that will fall during the shooting period.

3.  You mentioned a line item “interest charges of several hundred thousand dollars” – interest on what?

That would be the interest charges on any bank loans. Almost all independent films need to get a loan from some kind of lending institution to put together their financing for the film production. For example, depending on the type of Tax Incentive program offered by the State where you are producing the film, it’s very possible to go to the bank for a loan against the expected Tax Incentive. It’s common to put all of the financing charges into that film production’s budget.

4.  Resales and tax incentive returns are considered bonuses – where/to who does that “reimbursed” money go?

The reimbursed funds always go to the shell company set up to produce the film in that particular State, and the shell company is owned and controlled by the Independent Film Company who are also putting together the financing for the film – the financing is usually pulled from various sources, including a bank loan against the future State Incentives. (Not sure if you know this already, but a shell company is created for every independent film production with the intention of using that shell company as a separate entity to capture all the costs associated with that film production).
- While doing the budget in Prep an estimate will be made of the State Tax Incentive and that estimate will be used to raise financing (the rules of what can be financed vary from State to State). I have seen smart Line Producers and UPM’s recalculate the Tax Incentives during the production to update the Tax Incentive estimates. If the Tax Incentive estimates go up, then the Line Producer says – “Mr. Independent Film Company, you’re getting more money back than we thought so we would like to spend that additional amount and go over the locked-budget accordingly”. The producers and financiers hate that kind of thing because there’s still a lot of uncertainty in estimating things like that, such as audit fees, State disputes over the rules, any bank loan interest charges, etc, as well as their own overheads to cover.

5.  Deferment – you made an entry for the exec prod’s $400K but not for the lighting package, why, doesn’t it need to be noted?  And how can you keep deferments from muddying the water in your variance column when you are trying to balance the budget day to day?

I was making an entry to the budget to update it just to show how the producer’s fees were deferred. I wanted to show that it could be in the budget but not in the cashflow – so, all would could see that deferrals are always put in the budget, but may, or may not, be in the cashflow, depending on when the deferred amount had to be paid. (Note: the cashflow worksheet is used by the Independent Film Company when arranging financing for the production so it’s important that payments that are put off until the post period are noted on the cashflow for when they’re due, or if the deferral is right off the map and not due until some cash in excess of loans and costs start happening.)
- To answer your question on how to the variance column – normally the deferments are already in the locked budget, so there would be no additional entries to make, thus no problems with the variance column.

Thanks a lot for your Q’s. I’ll share them with the other attendees.

See you in tomorrow night’s class.

All the best,