Accounting Software For A Web/Video Startup
October 16, 2010 Leave a comment
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.
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.