Daily Hot Costs – Becoming a “Key” Film Production Accountant

In my last blog I identified 4 barriers to becoming a “Key” Film Production Accountant:

1. Film and TV Budgeting

2. Film and TV Union and Guild Payroll Knowledge

3. Hot Costs

4. Cost Reports

In this blog I will address the barrier of Hot Costs.

WHAT IS THE DAILY HOT COST?

The Daily Hot Cost compares the actual costs of the previous day’s shooting with the budgeted costs for a generic day of shooting. It measures the costs of the on-set shooting crew, cast, footage/processing and catering. I also like to add into the Hot Cost that non-labor costs I know are over-budget, like construction costs, equipment rentals, etc. that may be over-budget.

HISTORY

Hot Costs first started in the early to mid 90’s. It was a quick estimation done manually on the back of the penciled copy of the DPR (Daily Production Report). The departmental costs were averaged out with only a regard for +/- 10% accuracy. Not more than 1/2 hour was taken on it. Within a few years a couple of the Majors insisted on a higher degree of precision. Now it’s often used as a Daily “Cost Report”, even though that’s not it’s original purpose. So, it takes up at least 2 or 3 hours of the Production Accountant’s time each day.

THE FORMAT OF A HOT COST

The Major Studios have one-page Hot Cost templates, where the format is very similar from one to the other. Some Indies use a different looking template, which I generally call the “Indie Template”. Most Production Accountants create Excel schedules to feed to these one-page templates, saving a ton of time trying to get accurate labor costs manually. Even though the Studio Execs, and Indie Bonding Companies, only want to see the one-page Hot Cost, it behooves the production accountant to have schedules of the calculations to support any challenges.

PROBLEM #1 – KNOWING WHAT A PROFESSIONAL HOT COST TEMPLATE LOOKS LIKE

I solve this for you by providing you with a couple of templates common in the film and television industry. I call one the “Majors Template”, and the other the “Indies Template”. The templates automate the calculation of all labor costs based on the Daily Production Report (PR), and this estimated labor cost is compared to the budgeted costs, for:

  • every crew member on the floor,
  • every fixed category of Transpo who worked,
  • every cast member who worked that day,
  • every line-item in the budget classified as “ManDays” (an example, a slug line in the budget saying “allow” 25 man-days without much thought put to it),
  • Background Extras and Stand-In’s

The variance between the estimated cost, and the budgeted cost, is then summarized by department on the On-Page Hot Cost.

PROBLEM #2 – KNOWING THE UNION/GUILD PAYROLL RULES FOR CAST & CREW

If you don’t have a background in Film and Television Payroll, you will need to learn how to manage Overtime, Meal Penalties and Rest Penalties for the cast and crew. It may seem a daunting task to find the Agreements needed, then to find the applicable rules within the Agreements; however, it doesn’t need to be a barrier. I will address this in more detail on my next week’s blog

PROBLEM #3 – KNOWING HOW TO WRITE EXCEL FORMULAS

You do not need to be a genius with Excel, but you do need to know how to write “IF Statements” and “VLOOKUP Statements”. I’ve gone through this with some First Assistant’s who have gone on to be “Keys”, and in every case it was easier than it originally looked to them.

FILM ACCOUNTING 101 WORKSHOP

In the Film Accounting Workshop you will see how I use the Hot Cost in preparing the Weekly Cost Report. I can provide you with Templates at that time.

See http://www.filmaccounting.com to find out more about the Film Accounting Workshop coming up soon in Los Angeles.

In the mean time, have a look at this YouTube Video that I made about the online Hot Cost Course that I have:

Hot Costs

Hot Cost Course

Hot Costs in Film Production

Cheers / John

Film Budgeting – Becoming a “Key” Film Production Accountant

In my last blog I identified 4 barriers to becoming a “Key” Film Production Accountant:

1. Film and TV Budgeting

2. Film and TV Union and Guild Payroll Knowledge

3. Hot Costs

4. Cost Reports

In this blog I will address the barrier of Film and TV Budgeting.

FILM BUDGETING – INDUSTRY STANDARDS

On film and television productions it is normally the responsibility of the Film Production Accountant to prepare the budget in collaboration with the Producers and Financiers. It is expected that the Film Production Accountant knows the usual industry standards, as well as being familiar with the Film Budgeting software. Some questions that I have when reviewing a budget are:

  • Are the headings in the expected format for a professional film budget?
  • Who is it addressed to?
  • Are the union rules applied consistent with the geographic area?
  • Has the local Tax Incentive Credit been addressed within the budget?
  • Does the Production Budget include the Completion Guarantor’s fee?
  • Are the number of days worked consistent with the Shooting Schedule?
  • How many hours of work per day is budgeted for?
  • Is it a standard to allow for contingencies?
  • Are the terms used for positions, tasks, benefits, etc, the same as the Industry Standard terms?
  • etc

FILM BUDGETING – KNOWLEDGE OF UNION & GUILD PAYROLL RULES AND “FRINGES”

The “Key” Film Production Accountant must have a very good working knowledge of of those rules, both to be able to budget and to be able to prepare Hot Costs (that is, comparing the actual labor costs with the budgeted labor costs on a day-by-day basis). I will spend some time on my next blog going over the four major categories of union and guild payroll.

FILM BUDGETING SOFTWARE

When I prepare a budget I almost always start from an earlier budget that I have from previous features or television series. Then I massage it to suit the current shooting schedule/script. That saves an extraordinary amount of time verifying rates for local crew, equipment and sound stages. Once you have done your homework digging out the local rates, then it’s a matter of having a fluid familiarity with the film budgeting software of your choice. Below are 4 of the more common budgeting software that I have been exposed to.

  1. Movie Magic Budgeting: This has become the most popular film and television production budgeting program. It has a look and feel of late early-days database management software; however, many producers, and studios, have learned it over the years, and because of that, it will very likely remain the industry standard in the near future. There are some very good training videos at this link which are helpful. I have delivered many weekend workshops and am available to deliver more on demand.
  2. Showbiz Budgeting: This is very useful for Reality Shows, smaller Indie productions, commercials, etc. It has a full rundown here.
  3. Gorilla Film Budgeting: This is a definite grade up from MMB. There is a comparison between the two budgets on their site. Have a look.
  4. Excel: Good old Excel is still a way to go for most low budget Indie Productions. Actually, it is still used by many bigger productions in Europe. I have a couple of templates that I give away free in my workshops.

Once you get over the what to include in a Film/TV Budget, it’s really a matter of knowing which buttons to push in your Film Budgeting Software. Practice, some guidance, followed up with some experience., is the only way to get over this barrier. You CAN do it by yourself; but, it’s difficult.

We don’t address MMB in the Film Accounting 101 Workshop, but we do thoroughly review a 72 page professional Indie film budget, along with practicing how the accounting functions of a standard film production accounting software relate to the “locked” film budget.

FILM ACCOUNTING 101

If you’re interested in getting started in Film Production Accounting, or just getting some Continuing Professional Education, see www.filmaccounting.com for my next workshop coming up in Los Angeles.

 

Cheers / John

 

___________________________________________________________________________

 

John has worked since 1985 on over 56 different film and television productions, spanning 6 different countries. He has written a book, “Walk The Talk” which is used in some universities. Since 2009, John has delivered numerous workshops in several cities throughout North America, including Los Angeles, New York, Detroit, Atlanta, Toronto, Montreal, Winnipeg, Tampa bay and Orlando. For more information, visit www.filmaccounting.com

Becoming A “Key” Film Production Accountant

How do you get hired as a qualified Film Production Accountant?

THE FILM PRODUCTION ACCOUNTANT

The Film Production Accountant is the person in charge of gauging and reporting the financial condition of the film or television production on a daily and weekly basis. When you read, or hear about, productions going over budget, it’s the film production accountant ‘who blew the whistle’. The position is earned through experience with earnings normally well in excess of $125,000/year.

COLLEGE EDUCATION

No amount college education can contribute towards attaining a career in Film and TV film production accounting. Nor does it help if you have an education in accounting. It’s earned through a series of hands-on experience through the junior levels of File Clerk, 2nd Assistant Accountant, Payroll Accountant, 1st Assistant Accountant and finally, the “Key” Film Accountant. The experience gained at each level brings about a natural progression of promotion from File Clerk to 1st Assistant; however; it’s much more difficult to jump from a 1st Assistant to a Key Film Accountant.

THE CATCH 22 SYNDROME

The 1st Assistant is extremely busy running the accounting functions of the department and can seldom find the time to learn from the Film Accountant; and, conversely, the Film Accountant is far too busy with the budget, and with the subsequent projection of costs as compared to the approved budget, to spend time training the 1st Assistant accountant.

THE 4 MISSING AREAS OF EXPERIENCE

Having trained a few 1st Assistants to become successful Key Film Production Accountants I can say with certainty that the missing areas of experience are:

  1. Film and TV Budgeting: Not only is there a gap in understanding the process of budgeting, there is also the lack of experience in using the most popular budgeting software in the ‘biz, “Movie Magic Budgeting”. In the case of budgeting for episodic television, the Film Accountant needs to understand the relationship among the locked Pattern Budget, the locked Amort(ization) Budget and the Episodic Budgets.
  2. Film and TV Payroll: In order for the Film Accountant to be able to budget for, and to estimate, costs, the Film Accountant must have a very good grounding in film and television payroll. That would entail a good working knowledge of SAG, DGA, IATSE (crew) and Teamsters (drivers). The level of skill does not need to approach the level of a good Payroll Accountant, but the Film Accountant must be conversant with the various Agreements and know the rules for Overtime, Rest Invasion and Meal Penalties.
  3. Hot Costs: The Hot Cost report is prepared by the Key Film Accountant every morning. It is an estimate of the payroll (and other) costs as compared to the budgeted costs on a line-by-line basis. Each Film Accountant has their own Excel spreadsheet which they have programmed themselves, to get through this task efficiently. (Occasionally, the Payroll Accountant does this task for them, but it is considered inefficient to do it that way). This is one of the toughest areas for the 1st Assistant Accountant to get some exposure to.
  4. Cost Reports: The preparation and the reporting of costs is completed in a very specific way throughout the Industry. The report has the practical name of The Cost Report. It is the financial report card of the production and is distributed to all of the financiers and producers. Again, there aren’t many opportunities for the 1st to learn the routines and processes of cost reporting.

TRAINING FOR EACH OF THESE AREAS

I have delivered workshops for each of these areas over the past several years. I will be writing blogs over the next few weeks expanding on each of these 4 elements.

FILM ACCOUNTING 101

If you’re interested in getting started in Film Production Accounting, or just getting some Continuing Professional Education, see www.filmaccounting.com for my next workshop coming up in Los Angeles.

 

Cheers / John

 

___________________________________________________________________________

 

John has worked since 1985 on over 56 different film and television productions, spanning 6 different countries. He has written a book, “Walk The Talk” which is used in some universities. Since 2009, John has delivered numerous workshops in several cities throughout North America, including Los Angeles, New York, Detroit, Atlanta, Toronto, Montreal, Winnipeg, Tampa bay and Orlando. For more information, visit www.filmaccounting.com

The Purpose and Product of Film Accounting

(NY CPE Licensed Sponsor – CPE 14 Hrs)

PURPOSE and PRODUCT of FILM ACCOUNTING

The Purpose of Film Accounting is to help the producers create the best feature film, or television series, that is possible for the money invested. This would be considered by some to be the “Overall Goal”.

The Product of Film Accounting is the “Weekly Production Cost Report” – the financial report card, letting the producers, and investors, know if we are progressing on time and on budget.

REPORTING TO FILM & TV PRODUCERS AND INVESTORS

Whenever you have multiple creative people planning and spending their budgets through short periods of time, there are bound to be tempers flaring and cross currents happening among powerful leaders in the industry. All through that chaos and flared tempers, the Film Accounting Team must predict and report succinctly the financial status to the producers & investors.

CAREER AS A FILM PRODUCTION ACCOUNTANT

Film Production Accounting is the last accounting career of stature, earning very good income, where a CPA Is not a prerequisite. The career usually starts at the bottom of the Accounting Department, where you work your way up through 3 levels to being the “Key” Film Production Accountant. The keener you are, the faster you rise through the levels.

HOW TO GET IN THE INDUSTRY

Get some experience and familiarity with the tools of the trade. Where do you find out about work? What are the skill sets required? Is there a specific general ledger software you need to know more about? All of these questions are answered and practiced in my Film Accounting 101 workshop in NYC, September 15th and 16th, 2018. Come join us in the heart of Times Square at 1441 Broadway Ave for a weekend of learning and sharing.

ABOUT THE WORKSHOP

This is a weekend of practicing the “film studio standards” of film production accounting. You work with all the usual tools, such as a real film budget, cost reports and hot costs, and the commonly used proprietary general ledger software used in the Film Industry. From all the testimonials over the past 6 years, the workshop is fun, effective and has started many careers in the industry.

There are more benefits to doing the workshop. Check them out at http://www.filmaccounting.com

I’m on a production in NYC for 6 months.  I’m rarely in this city. We have a group of professionals attending and have room for a few more.  I hope to see you there

Cheers / John

 

John Gaskin is a New York licensed CPE sponsor.

Film and Television Production Accounting (CPE 14 Hours)

HOW DOES FILM ACCOUNTING DIFFER

Film Accounting has the same elements as any business – Bookkeeping, Reporting and Auditing. However, the rapidity and convention of the film accounting process has to be experienced to believe. There’s “Petty Cash” of $40,000 a week, about 200 to 500 Purchase Orders a week (at least in the last weeks of prep and the first weeks of shooting), etc. The paperwork can trample the accounting system IF you aren’t prepared with a workable system. And THAT’s what separates Film Accounting from any other – the workable industry specific system that’s the same from production to production and which the producers, financiers, crews and the cast have grown accustomed to.

LIFE CYCLE OF A FILM OR TELEVISION PRODUCTION

The production of a film or TV project can be seen as a full-blown dramatization of the life cycle of a manufacturing company. In a few months the crew move into an empty warehouse/studio, rent or buy furniture, equipment, vehicles, props, wardrobe, shoot the ‘product’ for a very specifically locked-in budget, and then  return all the rentals and sell whatever was bought, wind up the bank and leave the warehouse/studio as they found it – empty of everything except maybe the dumpster awaiting pick-up. Most business accountants don’t see the full life cycle of a business – ever. So, the production personnel and production accountants have developed a niche for this kind of thing – especially, given the very specific type of budgeting and cost reporting that is entailed in such a fast life cycle.

UNIQUE PROPRIETARY GENERAL LEDGER SOFTWARE

The film and television production industry uses proprietary general ledger software not available in the market place. In my workshop we work with that software giving you 2 days of practical experience unattainable any other way. We pay specific attention to the general terminology, the film production industry specific accounting practices as well as the general flow of all accounting forms and reports.

FILM ACCOUNTANT: WHAT ARE THE PREREQUISITES

Film Accounting is the only business category on earth which doesn’t require you to have previous accounting training. The assistant accountants usually rise on the food chain with a series of on-the-job clerical jobs (with pay). Of course, you’d be ahead of the crowd if you had accounting and bookkeeping fundamentals, but really the only requirement is a sharp mind and bright attitude.

For all of you CPA’s, I am a “Licensed Sponsor” for Continuing Professional Education in New York State.

Whether your intention is to enter the film industry, or just to get some fun CPE, I hope to see you at our next workshop in September, 2018. If you have any questions, please email HeleneWorkshops@gmail.com

For more information see http://www.filmaccounting.com

Cheers / John

 

John Gaskin has worked in Film Accounting since 1985 on over 50 film and television productions of every size, in 6 different countries. Visit http://www.filmaccounting.com for testimonials and agendas, etc.

 

Feedback From An Experienced Production Accountant

John Gaskin

John Gaskin Workshops

Quite often my workshop attendees go back to their respective cities and towns, get busy, and I don’t hear from them for months/years. Occasionally, I get a feedback from someone else about a former attendee, and that is always very gratifying.

A TESTIMONIAL FROM AN EXPERIENCED FILM PRODUCTION ACCOUNTANT
Here is some very positive feedback about one of my Film Payroll Workshop attendees. What’s particularly validating, at least for me, is that the author is a 26 year industry veteran:
“I’m a production accountant and I felt I had to write to you.  I’ve had several people ask me about your classes and unfortunately I could only tell them that I didn’t know anything. Of course, in this industry getting outside training was never there for many of us back in the day.  We learned as we went.  
I needed a filler for my payroll accountant on a series I’m currently working on – I found LaVeda Lewis thru a friend.  She came in needed no help and got a hefty load of payroll, new starts & SAG completed beautifully (week before shoot starts).   I asked her who trained her since she had only worked on a few projects.  It was you!  
So just wanted to say – I will now be able to tell people to take your classes with confidence that they will learn things the right way.  Thank you for what you do – the next generation will be off to a great start because of it! 
Have a great weekend!”   – Shari Sontag, Production Accountant, May 25/17  (See Shari’s 26 years of experience by clicking here).
We have another payroll workshop coming up in August. To learn more, click here.
Cheers / John

Film Payroll Workshop – Testimonial

Here is an email that I received on May 25/17. It’s a great testimonial, from an experienced production accountant, encouraging me to carry on with the Payroll Workshops:

_______________________________________________

“I’m a production accountant and I felt I had to write to you.  I’ve had several people ask me about your classes and unfortunately I could only tell them that I didn’t know anything. Of course, in this industry getting outside training was never there for many of us back in the day.  We learned as we went.

I needed a filler for my payroll accountant on a series I’m currently working on – I found LaVeda Lewis thru a friend.  She came in, needed no help, and got a hefty load of payroll, new starts & SAG completed beautifully (week before shoot starts).   I asked her who trained her since she had only worked on a few projects.  It was you!
 
So just wanted to say – I will now be able to tell people to take your classes with confidence that they will learn things the right way.  Thank you for what you do – the next generation will be off to a great start because of it!”
 
-Shari Sontag, Film Production Accountant, May 25, 2017
_______________________________________________

The two-day live workshop will concentrate on the actual calculation of gross payroll for each of SAG, DGA, IATSE (Low Budget Agreement and Area Standards).

The emphasis is on the practical application of the guild/ union payroll rules according to each Agreement.

This practical workshop is vital for anybody wanting to work as a Film Payroll Accountant, or as a Line Producer who must understand the various union /guild agreements for budgeting purposes.

Cheers / John

The Trust Barrier Facing Emerging Film Producers

BREAKING THE FINANCING BARRIER – GAINING TRUST

Once an Emerging Producer has a trusted, working script the major roadblock to overcome is financing. The concept of financing has been fraught with Ponzi schemes and false promises since money was first invented.  Is it any wonder that there is a general distrust of anyone asking for financing? … Let alone someone with little experience and  gaining the trust of investors, studio exec’s, casting directors, completion guarantors, experienced line producers, etc.

The purpose of this article is to help you break down the barriers to financing your film simply by educating you on the terms and processes taken for granted by film industry professional film producers. Watch the short video and you’ll see what I mean.

THE FILM INDUSTRY BUSINESS CYCLE

The best way I know to understand the film industry business cycle is to break it down into the basic functions of the full business cycle. The practical categories used by Producers in their everyday work are:

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

ONLINE COURSE – AN OVERVIEW OF THE FILM INDUSTRY

This online course takes  about 2 or 3 hours to go through, has 12 videos and a 71 page course content. I have priced this for Emerging Producers at just $39.95.

It also includes a download of a $9Mil professional budget example in pdf format.

 

 

 

For more information see  http://www.talkfilm.biz/filmbusiness.htm 

 

Cheers / John

Media and Entertainment Market Expected to Reach $771 Billion by 2019

HFILMACCOUNTING101ere’s what SelectUSA.gov.com has to say about the U.S. media and entertainment (M&E) industry:

“The U.S. media and entertainment (M&E) industry is comprised of businesses that produce and distribute motion pictures, television programs and commercials along with streaming content, music and audio recordings, broadcast, radio, book publishing, and video games.  The U.S. M&E market … is expected to reach $771 billion by 2019, up from $632 billion in 2015, according to the 2014 – 2019 Entertainment & Media Outlook by PriceWaterhouseCoopers (PwC).”

WHAT WOULD THAT MEAN FOR YOU?

That should be good news for anyone working on the periphery of the film and TV industry, but it should also be a wake-up call for CPA’s looking to expand their practice. Regardless if you’re interested in Film Production Accounting, or in working as a Line Producer, you’re probably wondering how you would fit into the M&E Industry. If I were you here are some of the immediate questions I would ask:

  • What does the Film Accountant do that supports and is parallel with what a Producer needs to know?
  • What qualifications does a person need to start working in film accounting? (Answer: surprisingly little)
  • What are the industry specific accounting practices, reports and terminology that the film accountant prepares and the Producer must be able to supervise?
  • How can an understanding of film accounting help me generate new business from Film Tax Incentives, and help the Producer access funding?
  • How would an understanding of film and television production open the door to new business for my CPA practice?
  • What level of billing or wages are usual for the film industry?
  • What accounting, budgeting and scheduling software is used during a film or television production, how can I get familiar with it?
  • How do I find contacts in the film industry?

Do some research. 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.

LEARN THROUGH WEEKEND WORKSHOPS – 14 HRS of CPE

Your questions will be answered in a weekend workshop, Film Accounting 101. I have another one coming up on May 6th and 7th in Chicago, IL. Learn by actually doing in a controlled environment. I keep the workshops less than 20 people so that we can have lots of one-on-one time.

 

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

 

Cheers / John

 

 

 

 

 

Producer Tasks Often Overlooked – Cashflows

I recently stumbled across a Filmmaker’s Checklist by Jason Brubaker. I really liked it! Normally, those kinds of lists just annoy me; however, Jason’s list of 65 items all ring true from my 30 years of experience in production. It’s prepared for the small Indie Producer trying to emerge into this very competitive film industry. By all means check it out.

CASHFLOW OF THE PRODUCTION BUDGET

Without taking away from Jason’s excellent list, he missed one vital step – the Cashflow of the Production Budget. This schedule is KEY to arranging financing. Without it the financiers will not know how much is required on a week-to-week basis, making the financing seem like one big blob.

PREDICTION LOWERS THE RISK FOR INVESTORS

Remember, no-prediction = high-risk. Investors want you to show a week-to-week prediction of cashflow requirements FOR EVERY NUMBER IN THE BUDGET. Some of those numbers may be a guess, but it really does give the bonding company, the banks and the financiers a lot of comfort that the Producer is at least attempting to reduce the risk for the investor. See the video clip below.

CASHFLOW OF THE BUDGET WITH ALL KNOWN FUNDING

CashflowsAnother schedule which potential investor’s love to see is a match-up of all budgeted costs with the known funding – sometimes called the “Loan Analysis Schedule”. This is a schedule which matches the budgeted costs with the arrival of any and all funding, whether it be loans on Tax Credits, Equity funding, loans on any Pre-Sales in foreign territories, etc. See this video clip to see what I mean.

FILM PRODUCTION ACCOUNTANT

Yes, this might be the duties of a film production accountant; however, if you are an emerging producer you should have this task as one of your skills when raising financing early in development. Once you have the templates it really is quite easy to master.

See the following links for more information about film accounting courses and film production courses for emerging producers.

 

Cheers / John

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