“Hot Costs” – a big part of a Film Production Auditor’s Job

As of Sept 2, 2013 I finished an online Hot Cost Course.

For more info see this short 2 minute YouTube Video:

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Original Article:

I wrote a longish email to a young man who wanted to know  a few things about my workshops and one of the things he raised was the Hot Cost – a daily comparison to budget done by the Production Accountants. I spent some extra time describing it because I don’t include it in my workshops (yet, anyway) and I wanted him to understand why.

I decided to post my answer to him on my blog for all to see. Here it is:

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The principle of a Hot Cost in film production accounting is to compare the actual costs of the previous day’s shooting with the budgeted costs for a day of shooting. The Hot Cost is meant to be measuring only within the scope of the on-set shooting crew, cast, footage/processing and catering. I like to sneak things into the Hot Cost that I know are over-budget, like any equipment or off-set riggers, etc. Although, that’s not it’s true purpose.

In the early days, say early to mid 90’s, the Hot Cost was meant to be just that – some quick calculations done manually on the back of the penciled copy of the DPR (Daily Production Report). The UPM and I would sit together and quickly round out an average labor cost for the Electric’s, an average labor cost for Grips, etc right through the list of on-set departments per the DPR, with maybe a little more of a cost accounting schedule for Transpo and Cast. It really only took about 1/2 hr. Then, a couple of the Majors  started getting fussy and insisted that the Hot Cost results go into the Cost Report BEFORE I had any meetings with the Line Producer/UPM. That’s when it became more of a precision thing because Producers will always challenge an over-budget line item, and the Studio gets upset if you miss an over-budget line item. Now, you’re right, a chunk of the Production Accountant’s day goes to fussing with the Hot Cost, simply because so many people use it as a crutch – now it’s often used as a Daily “Cost Report”, even though that’s not it’s original purpose at all – and indeed is an impossible purpose given the scope of the Hot Cost.

If you have a “usual” hot cost front page, like the ones that Disney and Universal use, then you can build Excel worksheets that feed that. This saves an enormous amount of time for the Production Accountant during the shooting period, but it means that you need to be an Excel junkie. Sometimes the studios only want to see the front page without the supporting schedules, and sometimes Line Producers/UPM’s refuse to believe the Hot Cost without supporting schedules, so you need to have it all.

So…. I guess what I’m saying is that the Hot Cost has become an Excel series of side schedules prepared every day by the Production Accountant.

I have developed a series of said schedules that I massage for every show – for the different chart of accounts and for every geographical location (needs lots of prep time or I end up working until midnight several nights in a row right before the first day of shooting). It has a worksheet for just about every function related to labor and each worksheet feeds the lead page. The intention is to automate the estimated pay hours, and compare the resultant cost with the budgeted cost, for:
-every crew member on the floor,
-every fixed category of Transpo who worked,
-and cast member who worked that day,

-every line-item in the budget classified as “ManDays” (sometimes called “Dailies” a slug line saying 25 man-days without much thought put to it),

-Extras, Stand-In’s

Then do a variance calculation as compared to the budgeted day.

Remember to keep in mind that there are 2 kinds of variance:
– Hourly variances worked (also in this type of variance would be the person who was budgeted at one hourly rate then is being paid at a different hourly rate – rare, but it happens)
– Volume variance (i.e. more crew hired on for that particular line-item)

You can imagine that if you had to do all of that with a calculator every day, it would be a difficult task on anything over 50 to 75 crew and a few cast. Note that most feature films have double that on an easy day.

Throw into the mix an inexperienced AD (assistant director) team who aren’t promptly getting you the in-out times of the crew/cast and you are up the proverbial creek.

It’s a big job to teach someone a course on “How To Make A Hot Cost”. Not only is there a lot to learn about payroll (understanding SAG, DGA, IATSE in different circumstances in different geographical areas), there’s also a lot to learn about Excel. In your case, because you have a background in payroll accounting, it should make sense very quickly.

Are you familiar with Excel? I’ll attach the working example that I have for a feature film I just finished up in Toronto for a budget over $20Mil. Have a look at it, and if you can change the formulas to calculate pay hours for an IATSE International Low Budget  feature I would much appreciate a copy. (I haven’t landed on one of those yet).

To get back to the workshop – come to the one on March 6th and I’ll answer your Q’s and work with you towards your goal. There will be a few times when we’re going over material you already know, but that’s cool – I’ll get you to help answer the other attendee’s Q’s :))

Best,
John

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About filmproduction
I have worked in the film production industry since 1985, working on over 50 different productions of every size in 6 different countries. My self-published book, "Walk The Talk" is written in an easy to read manner for film students and working professionals who haven't had the chance to learn how to 'Direct the Money'.

29 Responses to “Hot Costs” – a big part of a Film Production Auditor’s Job

  1. Mark Santora says:

    I would love to get a copy of your working example. I’m a Line Producer that needs to semi-detailed hot costs but haven’t come up with a good template. Any help in getting me on the right path would be much apprecitated. Thanks.

    • Sure, I’ll email you a template. You’ll have to re-jig the formulae, as I have it for East Coast IA.

      -John

      • Ricke Pangan says:

        I learned a lot from your explanations. Please send your working template so I can appreciate more the intricacies of the matter. Thanks so much.

      • I’ve been up to my teeth in a film production and am just getting back to my blog. Just wanted to say thx for your post!

        I can’t tell from your post which blog you were looking at. Was it the Hot Cost or the Film Budget template? Let me know what the purpose of the template is and I’ll send something along.

        Best
        John

      • Jeff says:

        Hello,

        I would love to get a copy of your template! i’ve been stuck in reality world and want to learn about hot cost during my downtime.

      • I’ve been up to my teeth in a film production and am just getting back to my blog. Just wanted to say thx for your post!

        To answer your question, the whole area of feedburners and RSS is a mystery to me. I know that you can sign up within this WordPress Blog to get notifications of my next blog – is that RSS? Really… I’m not sure. But now that I’m getting back into the workshops and the big press is almost done on my current contract, I’ll be posting more blogs. I’ll also look into Feedburner.

        Best
        John

      • I’ve been up to my teeth in a film production and am just getting back to my blog. Just wanted to say thx for your post!

        I’ve had a couple of requests to send along a worksheet, but I can’t see which blog you were looking at – or I’m just not smart enough to trace it back 🙂

        Let me know what kind of template you’re looking for, and the purpose you have in mind, and I’ll send something along.

        Best
        John

  2. Huriyyah Muhammad says:

    Hi John, thanks for a very informative post. I would also love to get a copy of the excel sheet you mentioned if you are willing to share. thanks much and keep posting interesting reads.

  3. Dan Atchison says:

    John,
    Ran a google search looking for an excel spreadsheet for hot cost report. Never had to do this before and the investors are requiring it on this one. It’s a good habit to get into I guess and just looking for a place to start. Would you mind shooting over your template. Would be super helpful! Thanks!
    Dan

  4. David Jones says:

    Hi there John,
    I normally work on TV productions but have just branched out onto my first feature with Fox. I would love to have a look at your hot costs model. Would it be possible for you to send me an example.
    Thanks
    David

  5. Larry McFadden says:

    This is an excellent post. Please send me an example of your hot cost report. It would make my life so much easier.
    Thanks,

    Larry

  6. Cara says:

    Hi John,

    I would love to see a sample of your spreadsheet if you wouldn’t mind sending it to me. I’m trying to learn more about the details of hot cost reports and I think that would be a great start.

    Thanks so much!
    Cara

  7. Ian Herman says:

    Hey John,

    I’d love to be able to take a look at your hot costs template as mentioned in your article. I worked for a line producer on a feature and I would like to learn some more.

    Thanks a lot,
    Ian

  8. Karl says:

    I would love to receive a copy of your templates. Thank you very much. – Karl

  9. Hi Ian,

    Just found your site. Would love to get a look at your hot cost template. Would you be able to forward it on to me.

    Sincerely,

    Kevin

  10. Liz Walker says:

    Hello John,
    I too would love to see a copy of your hot cost template. Many thanks, Liz

  11. dana Brancato says:

    John,

    Are you able to email me a template for your hot costs? I am starting to learn the art of producing and any help would be wonderful!

    Dana

  12. Dave says:

    Hi John,

    I’ve started learning about hot costs on my current production and it is definitely a bane of anyone existence. May I also have a copy of your template in approaching hot costs?

    Thanks,
    Dave.

    • Hi, Dave. Sorry for the late response. I am catching up today. I’ll send you a couple of templates. It seems like I really should invest in a recorded series to be able to do Hot Costs. It’s really a matter of getting a template, knowing Excel and understanding payroll rules – all a little overwhelming when you first start out.

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