Film Production Accounting

This post has been well received ever since I first posted it in 2009. I’m updating now to bring it up to 2014 standards.

There is a professional accounting niche that is little known – Film Production Accounting. I regularly receive queries to my web site, or my blog, about film production accounting and of how to enter this field. Most of the queries used to be from the Los Angeles area, but over the past 4 years there has been an equal number of queries from the Film Tax Incentive States.

FILM PRODUCTION ACCOUNTANT CATEGORIES AND EXPECTED PAY

Production accountants have traditionally fallen into the field without much of any kind of accounting background. I believe that film production is the last industry in the world to hire accountants who don’t have some kind of formal training in accounting. Currently, the field of film accounting is looking more appealing to a wide variety of CPA’s who are looking for something more markets to penetrate – or even to change careers. Most film accountants get into that position through a period of apprenticeship as assistant accountants. The levels usually go from File Clerk, 2nd Assistant Accountant, 1st Assistant Accountant to Key Production Accountant (sometimes referred to as the Production Auditor). Another position that is classified as an assistant accountant is the Payroll Accountant. The Payroll accountant is an expert in calculating complicated union payroll time sheets and is usually too busy to do much else than just that one function. A good payroll accountant can make in the area of $1800 to $2,000/week on the bigger Hollywood productions and are worth every cent.

The File Clerk would start in the range of $500-$900/Week, a 2nd Asst Accountant in the $900 – $1400/Week range, a 1st Assistant Accountant in the range of $1,500 to $2,300/Wk.  usually the accountants get a little more on a big Studio production, and less on a small independent production.

THE SKILLS OF A FILM PRODUCTION ACCOUNTANT

The Film Production Accountant needs to be conversant with every area of film production, if not downright expert when it comes to predicting cost overruns. The rapidity of spending during the production of the feature film, or TV show, is so high that it would be a nightmare for someone who hasn’t been exposed to the usual reporting system. That’s why an experienced Film Production Accountant doesn’t get out of bed for less than $2,500 a week (a 5 day week). Experienced production accountants demand and get at least $3,500/5 day week, and if they go on location ask for another $1,000 to cover off Saturdays worked (even though they don’t need to work many Saturdays).

The Film Production Accountant’s job falls into the same three categories as any other accounting function:

– Bookkeeping: the speed of bookkeeping has to be experienced to understand. Petty Cash is often in the $60,000 to $80,000 a week range.

-Reporting: there are very specific Budgeting and Weekly Cost Report formats which can be a bit of an IQ test until you get used to it. This type of report is used throughout the film production world from Australia to India to Europe to North America.

-Auditing: because the money appears to be spent so helter-skelter it can be abused, mostly by producers and department heads. It’s up to the production accountant to see the signals and prevent it before someone embarrasses themselves. There really are lists kept of those deemed to be A, B or C listed. Those that are B and C listed are almost always because of their inability to control their departmental budgets.

So, if you have an accounting background you can pick it up very quickly, but you really do need some experience first. The fact that you’re intimately dealing with so many facets of the actual film production it’s certainly a challenge and, I have to say after 30 years, tons more challenging and rewarding than working in manufacturing, banking, etc.

MY JOURNEY TO, AND IN, FILM PRODUCTION ACCOUNTING

My own background started out in Engineering in the 70’s. Then, when I graduated I saw that open pit mining wasn’t doing it for me, so I started working with an accounting firm to earn a designation. My original purpose was to become skilled enough to be able to use both Engineering and Accounting to help failing businesses turn around. However, after I got my accounting designation I discovered that I would be taking a steep cut in pay to go back to being a junior engineer so I took a job as a Chief Accountant/Controller at a place with about 15 branches. After 5 years I went out on my own, starting a small accounting practice with a couple of other people. After a couple of years of beating the bushes and working 7 days a week I saw that I could make more money as a Film Production Accountant than I could in my practice, so I dropped my office space, my 2 staff, and started working as an assistant accountant.

STEPPING STONE TO FILM PRODUCING AND PRODUCTION MANAGING

Like other industries, after spending many years accounting for and auditing the money, including advising producers and production managers, you start to get the idea that you can do as good as, or better job, at producing. There are many production accountants who have gone on to related film production careers – although, funnily enough, they often keep quiet about it. I presume because they want to distance themselves from the infamous “Blue Suit” – the much maligned Big Studio Exec. (Not a job for me – man, talk about pressure).

THE DOWNSIDE

A downside to Production Accounting is that you don’t ever have a JOB. You get CONTRACTS which last anywhere from 5 weeks to 9 months (pretty seldom longer than that). I’d say that my average contract on a film or TV production in the $20Mil to $40Mil range was about 6 or 7 months. Honestly, I really liked the fact of working with different people. I have often talked with other people in the biz, and we almost all agree that the independence that brings is worth the stress of looking for contracts. Once you’ve been in the business for 3 years, and if you haven’t messed up, you’ll be on call, especially if you’re willing to travel.

So, there’s the pros and cons to getting into the film production industry as an accountant.

HOW TO BUST IN

I spend some time talking about ways to bust in during the weekend workshop. With the advent of tighter and tighter money I see even more opportunities for film accountants as aides to producers, or even film accountants producing projects on their own. Subjects like Film Tax Incentives, verification of paperwork required during Crowdfunding of “Accredited Investors”, cash-flow schedules, familiarity with equity terms, etc can all be easily learned by film accountants, or by professional accountants and bookkeepers interested in penetrating this market. (If you are interested in how this all fits together see this short video).

Good luck in your career, whatever you choose.

For more about training as a film accountant see this link to film accounting workshops and training online.

John Gaskin

Curbing Film Tax Credit Fraud in Louisiana

Since the inception of the film tax credit in Louisiana there have been about a baker’s dozen fraud charges against local film producers. The newspapers love to rage about the illegal goings-on, of how many years the perpetrators can get in jail and of the madness of Louisiana politics. However, nobody thanks the poor auditor who discovered and ultimately exposed the fraud.

TWO WAYS SUGGESTED TO CURB FRAUD

In an article dated April 6, 2015, the Secretary of the Louisiana Economic Development, Stephen Moret, suggested there were two ways that the state could curb fraud and abuse: regulate accountants who audit the film industry and eliminate related-party payments.

DON’T REGULATE, EDUCATE

I would suggest replacing the word “regulate” with “educate”. Get those CPA’s educated before they even get a chance to audit – that’s what California has done successfully for some time now. It is safe to say that Louisiana already has the most comprehensive set of film audit guidelines for Related Party Transactions in America. However, there seems to be a disconnection between the written rules and the way they’re applied in the Film Industry. Click here to download the 8 page guidelines from the LED web site. See pages 3, 4 and 5.

FILM INDUSTRY PRACTICES

The second suggestion of eliminating related party transactions is like telling Americans not to drive cars because the pollution is killing the planet – it’s true, but just not workable. Simply bring the auditor to an understanding of the internal forms, practices and control points accepted as standard in the industry BEFORE the audit.

THANKS TO THE FORGOTTEN HEROES

So let’s remind ourselves who brought the fraudulent activity to light – the film state tax credit auditor. Okay, sometimes it was found a little late, but found it was … and, here’s a big THANK YOU.

I sincerely hope that you got paid in full before the Producer’s accounts were seized!

Cheers / John

For more information on Film Accounting see my Film Accounting 101 Workshop coming up.

Emerging Producers – Overview of the Film Industry

BUSINESS LANGUAGE OF PRODUCING FILMS

Emerging Producers must separate themselves from the crowd as someone who knows the “Business Language” of the investors, Major Studios, Completion Guarantors, Distributors, etc. You can’t be confused with the clutter of people who “have a great idea”, but can’t express their ideas in a business like manner.

The purpose of this article is to help you take a giant step towards your goal as a Producer, and of ultimately financing for your film.

BUSINESS CYCLE

By breaking down the business cycle of film into:

  • Development (Investor Confidence),
  • Green Light Stage,
  • Production Stage,
  • Post & Audit Stage and
  • The Waterfall

you will be able to more confidently discuss the film and television production business from a business perspective with potential investors and completion guarantors throughout North America.

ONLINE COURSE

This online course takes  about 2 or 3 hours to go through, has 12 videos and a 71 page course content. It also includes a download of a $9Mil professional budget example in pdf format.

See http://www.talkfilm.biz/filmbusiness.htm for more information.Overview-Indie

Cheers / John


John is a working film production accountant who has worked on over 50 film and television productions in 6 countries since 1985. His book, “Walk The Talk”, live workshops and online courses are highly regarded. See http://www.filmaccounting.com for more info.

The CPA and the Film Industry

There are several interesting ways that a CPA can service the Film Industry … IF you can get past the general distrust that the Film Industry has of outsiders.

RESEARCH WHAT INTERESTS YOU ABOUT THE FILM INDUSTRY

Do some research. What sort of accounting services does the Film Industry require from a CPA? What are the industry specific practices, reports and terminology? I hear about the Film Tax Incentives in some States. How does that open the door to new business for my practice? What software is used during a film or television production? I think you’ll find that there is very little, if any, information available online – and most of what you’ll find is authored by me.

WHAT PRODUCERS EXPECT FROM A CPA

Producers and Studio Execs have high expectations of anyone they contract with, especially a CPA who charges out at an hourly rate. They will expect the CPA to be familiar with their everyday terminology and to contribute to solutions. Just a few terms considered common are:

  • Inventory (the current cost of developing and producing “product”),
  • Fringes (government and union benefits),
  • Back-End (final equity available),
  • IATSE Turnaround (penalties assessed by crew when not enough given enough overnight rest),
  • SAG residuals,
  • etc

If you are interested in servicing the Film Industry there are a couple of ways you can learn more.

LEARN THROUGH WEEKEND WORKSHOPS – 23 HRS of CPE

Workshops are always the most fun way to learn. I have another one coming up on May 2nd and 3rd in Tampa Bay, Florida.

For more info see http://www.filmaccounting.com/filmworkshops3.htm

LEARN THROUGH ONLINE COURSES – 2 HRS of CPE PER COURSE

However, getting to the workshop location, and breaking away from the office, aren’t always possible – for you or for me. At the end of each online course qualifying for CPE I ask the student if the “stated objectives of the course” were met. There has never been a “No” yet…. that’s 100% of the time every student has said that the stated objectives were met.

For more detailed information about the online courses see http://www.filmaccounting.com/filmaccounting-cpe.htm

If you would like to see the additional comments made by students who have completed the courses of the courses I have listed them below, along with links to short YouTube videos describing each of the course’s content.

Cheers / John


 

 

Several students also had other good things to say.

A SAMPLE OF ADDITIONAL COMMENTS MADE BY STUDENTS

Course #1. Film Accounting and Auditing – An Overview

  • “Yes. Great introduction of the role the production accountant will play within the overall film production life-cycle.”
  • “Yes – it was pretty much an overview. I feel I have a much better understanding of film accounting now.”
  • “Yes! Very easy to follow. An excellent intro to the industry.”
  • See this short video reviewing the content of this course.

Course #2. Film Accounting and Auditing – The Basics

  • “Yes, great to see the various sample forms. The workflow charts are also very helpful.”
  • “Yes, the detailed explanations of the various forms, as well as the general ledger software, were very helpful.”
  • “Yes, very useful. I now have a sound understanding of the basic principles of production accounting.”
  • See this short video reviewing the content of this course.

Course 3. Film Accounting and Auditing – Intermediate

  • “Yes. Great explanation of the inter-relationships between the various reports and overview of the audit plan.”
  • “Yes. Enjoyed the course and learned a great deal about auditing productions.”
  • See this short video reviewing the content of this course.

For more detailed information about the online courses see http://www.filmaccounting.com/filmaccounting-cpe.htm

 

Film Production Accountants Are Required

John GaskinThe “Film and Television Production Industry” requires accountants just like any other production business. There is a catch, though. You need experience to get hired, and you can’t get hired without experience.

EXPOSURE TO THE FILM INDUSTRY IS LIMITED

The Film Production Industry is isolated, even to the point of seeming to be a closed arena. The production accountants, under horrific time constraints, cannot train new people. The studio finance and accounting personnel must safeguard the privacy of the film budgets, “Cost Reports” and distribution deals. So, how does a person get exposed to the industry specific reports, practices and terminology?

FILM ACCOUNTING 101 WORKSHOPS – CPE 23 HOURS

This practical hands-on workshop of 2 intensive days gives attendees an opportunity to practice all activities associated with being an assistant film accountant, gaining a thorough practical understanding of the entertainment general ledger software and much of the terminology. The immediate follow-up of 6 live on-line training webinars brings you into a senior level of Film Accounting through managing the Film Budget and Cost Report (the financial statements of film productions).

SMALL CLASSES OF LESS THAN 20 PEOPLE

The classes are small and all attendee’s questions are addressed, providing the attendees with a controlled and friendly environment to learn the film production industry specific practices and terminology.

TAMPA BAY – Sat/Sun May 2nd and 3rd – 2015

I hope to see you there. Click here for more info.

 

Cheers / John

 

PS: For more info on the life of a Film Accountant see my article at https://filmproduction.wordpress.com

Film Payroll – SAG Day Performers

BIG DEMAND FOR FILM PAYROLL ACCOUNTANTS:

There just aren’t enough film payroll accountants trained to fill the demand, not only in the new booming production centers of Louisiana and Georgia, but also in the more traditional centers of New York and Los Angeles. Today (March 27th, 2015) I see listings on Emily’s List for payroll accountants in Baton Rouge, New York and Long Beach. Click here to see Emily’s List.

SAG PAYROLL CALCULATIONS ARE BASED ON EXACT RULES

Calculating SAG Payroll is the litmus test of who can actually be a Film Payroll Accountant. It requires an ability to find, read, interpret and apply the rules for payroll as written in the SAG Codified Basic Agreement. The references of what, and how, to pay SAG Day Performers can be confusing, especially without a helping hand nearby. For the first few days doing of SAG payroll it’s like the first day of Trigonometry in high school!

PAYROLL WORKSHOPS AND ONLINE PAYROLL COURSES

After doing quite a few live weekend workshops on film payroll I have re-designed my online course to follow those succesfull actions. Essentially, I have found that my students learn by watching me on the board, and then doing it themselves… repetitively.

How It Works

How It Works – SAG A Online Payroll Course

LOTS OF VIDEOS AND PRACTICE:

So I have made 2 1/2 hours of a slew of video clips, all on the SAG payroll rules applied to Day Performers (called Schedule A performers in the big codified basic agreement).

Have a look at the video describing how it works.

For more info see my web page at http://www.talkfilm.biz/filmworkshops9.htm

Cheers / John

 

52,000 Visits in 2014 – My Thanks to All Who Visited

The WordPress.com stats helper monkeys prepared a 2014 annual report for John Gaskin’s  blog, “Film Production and the Money”.

 

Click here to see the complete report.

Film Financing Series – Don’t Forget the Tax Credit Audit

INDIE PRODUCING – TAX CREDITS AS FINANCING

Most of us in film production have a very strong interest in the process of applying for the various State Film Tax Credits. It is a very real source of financing that can be estimated in the early stages of development, and is a big part of any Indie Producer’s job.

INDIE PRODUCING – PREPARING FOR THE CPA’S TAX CREDIT AUDIT

The Indie Producer can usually find someone to lend the production company up to 85% of the total “Estimated Tax Credit”; however, the lender will hold back at least 25% of the agreed amount (i.e. hold back 25% of the 85% financing) until the final CPA audit has been accepted by the State. The material to audit must be prepared by the film production accountant, with input from the Indie Producer, and presented to the CPA in the format required by the State. This preparation for the final audit is just as much part of producing as is arranging for the initial financing.

IT IS AN AUDIT OF THE COSTS PRESENTED IN THE “COST REPORT”

Effectively, the CPA is auditing the “Cost Report” produced by the production accountant. Additionally, the State may want the costs presented in specified templates, or in a cost report format of their own choosing. Remember that it is not up to the auditor to prepare schedules, or to find material to audit. It is up to the Producer and film accountant to present the appropriate schedules, cost report and original documents for audit. The producer who has not planned for the effort it takes to have the costs presented to the CPA will be over-paying the auditors, loan interest and delaying the final tax credit awards.

A sidebar to this blog is the audit of the Indie Producer’s relationship with the vendors, and of any economic rewards the Indie Producer may have received, even if seemingly legal. This is something that all States are vigilant about, especially Louisiana.

opinionWHAT DOES THE STATE REQUIRE TO SUCCESSFULLY COMPLETE AN AUDIT

(Note: For non-accountants, “AUP” in the picture opposite means “Agreed Upon Procedures” – these are the procedures required to be performed by the CPA before the State will accept the application for the final tax credit). See the video. Each State has its own audit procedures. Some States go so far as to audit the records themselves, without the help of a CPA. I have taken 5 States as a sample and I’ve prepared links to the appropriate schedules required by the State, as well as the audit procedures required. See http://www.talkfilm.biz/statelinks.htm

In addition I have carved up a short intro film, less than 3 minutes, from one of my online courses.

The web page and the film clip will give both Indie Film Producers and CPA’s an introduction to the process of auditing the film production’s cost report. A vital step in the financing of your Indie film.

For more information and coming workshops see my web site at http://www.filmaccounting.com

Cheers / John

California Dreamin’ – Film Accounting For Film Tax Incentives

My congrats to the California Film Commission for publishing the “Expenditure Tracking Tips”. It not only provides film accountants with practical tips to track “Qualified Expenses”, it also provides a framework of understanding for external auditors who have never been exposed to film and television production.

For film accountants who have completed film and TV tax credited productions in other States (and Provinces), the various rules and processes of capturing and reporting the “Qualified Costs” start to meld together, but never arrive at a universal standard. So, it’s really good to see a single document which “nails” the entire accounting process in a clear voice. Even though this was written by the State of California, it applies universally throughout the United States and Canada.

There are a few unique, and very practical, points that make me want to brag about CA’s “Expenditure Tracking Tips”. Here are three:

  1. Production Assets (Page 6): This is the clearest procedure that I have seen on how to define, and to account for, “Assets” when applying for film tax incentives. Most of the other States don’t help you out with such a clear direction.

 

  1. Related Party Transactions (Page 5): When comparing Audit Instructions from Louisiana, Georgia, Michigan, New Mexico, New York and Connecticut, this is the only place I have found which tells you how to address rentals from a crew member. Is a box rental from a crew member considered a Related Party Transaction?

 

  1. Materials for Verification of Expenditures (Page 7 and 8): Pages 7 and 8 list 20 different types of materials which should be provided to the External Auditor. On that list are several film and television industry unique terms and reports that the External Auditor, or emerging Film Accountant, must gain familiarity with.

My next workshop on Film Accounting 101, is in Atlanta in January. In the workshop we drill the practical basics of a film accountant with a 2 day workshop and 6 live webinars of 1 and 1/2 hours each. To learn more visit http://www.filmaccounting.com .

 

Cheers / John

The Film Payroll Accountant and the Payroll Service

John Gaskin

John Gaskin – Blog on Film Payroll

The Film Payroll Accountant calculates the gross amount of payroll due to the employee after calculating the three producer sins – overtime, rest violations and meal penalties. To perform this task the Film Payroll Accountant must know where to find the rules and regulations for each of the guilds and unions in the film production industry. Hmmm. If that’s the case, what does the entertainment payroll service do? Actually, quite a bit…

DEDUCTIONS, CONTRIBUTIONS AND REMITTANCES

The Film Payroll Accountant only needs to have a peripheral knowledge of the multiple government and union deductions, contributions and remittances. All of those complications are handled by the entertainment payroll service. Yup, all of those complicated letters on your W2, as well as all the Union or Guild deductions, contributions and remittances are all taken care of by the entertainment payroll service.

THE PAYROLL SERVICE IS THE EMPLOYER OF RECORD

Per IRS Regulations an Employer must keep records for a minimum of 7 years. Film and television producers do not want a potential problem obligation hanging over their heads for that long. As a result, a demand grew in the 1980’s for a payroll company to take on the legal title of “Employer of Record”. Subsequently the ‘entertainment payroll service’ became the legal Employer, relieving the Producer from all IRS, Workers Compensation and Union/Guild audits.

WHO ARE THE ENTERTAINMENT PAYROLL SERVICES

There are currently 4 major payroll services:

  1. Entertainment Partners, the first and most well established with the Majors
  2. Ease Entertainment, the most modernized
  3. Cast & Crew, has recent change of ownership; still “a contender”
  4. Media Services, well established in the commercial and reality television world.

Each of these entertainment payroll services has developed their own systems to process payroll as the “Employer of Record”, and each has designed their own proprietary general ledger software. The entertainment payroll service supplies their general ledger software for free if the production uses their payroll service. (Note: the general ledger software for each of the major payroll services has a similar look-and-feel.)

FILM PAYROLL ACCOUNTANT’S ROLE

However, and here’s the rub, the payroll service is depending on the Film Payroll Accountant to submit the timecards calculated to “Gross” per the various Union/Guild rules and regulations. And, THAT makes the Film Payroll Accountant the one who must be expert at applying the union and guild rules related to payroll.

We spend a full weekend practicing how to apply the film payroll rules for SAG, DGA, IATSE Area Standards, IATSE National Low Budget and Teamsters. See http://www.talkfilm.biz/filmworkshops6.htm for more information.

 

Cheers / John

Line Producer – Managing Film Budgets and Cost Reports

Film production has a middle management position called “Line Producer” and/or “Unit Production Manager”. This person is charged with the responsibility of bringing 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 shooting schedules through education and on-the-job experience. But, what about managing budgets and the related weekly cost report?

Breaking In As A Line Producer – Managing Costs and Reports

How does a 1st Assistant Director, a young producer, a filmmaker, a location manager, etc bust in as a Line Producer? How do they get exposure to the very confidential Cost Reporting process? In this environment of producing films cheaper-better-faster it’s especially important for Line Producers to understand the “Production Management” of budgets and cost reports.

Confidentiality of the Management of Film Budgets and Cost Reports

The confidentiality of the film budget, and its cousin, the weekly cost report, creates a barrier for emerging Line Producers. Most learn through a series of hard-knocks, easily avoidable with some practical training. However, 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.

The Practical Methods of Managing Budgets and Costs

During a series of 6 live webinars, each 90 minutes long, we will review a $9Mil budget from several angles, learning the practical methods of managing a film budget used by film producers and production accountants everywhere. From that very important step, we practice the essential steps in controlling and reporting the production costs through the Weekly Cost Report – this report is fundamental to ALL media-based productions, and is reviewed weekly by the completion guarantors, the financiers, the studios, etc. In addition you will be introduced to the 6 basic ways that you can use to control the costs before they are spent.

Visit http://www.talkfilm.biz/filmworkshops5.htm to learn more. The next series of live online webinars is every Tuesday and Thursday night starting October 28, 2014. Note that the webinars are recorded for review at your convenience.

Cheers / John

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