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.
________________________________________________________________________________
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,
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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'.

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