Now that film and television production has been locked down and everyone is at home, it would seem to be an ideal time to encourage producers to pick up some refresher courses online.
LINE PRODUCERS HAVE BEEN RELINQUISHING THEIR RIGHT TO COLLABORATE ON COST REPORTING
It’s been my experience, as an old-time Production Accountant, that Line Producers have been relinquishing their right to collaborate on the presentation of costs – in both the Daily Hot Cost and the Weekly Cost Report. I believe that this trend is a result of the Major Studio demands for rapid information presented in very particular reports. In the hustle to get things done, the responsibility for controlling costs has been shifting from the Line Producer to the Production Accountant. That’s only a good thing if the Line Producer has an experienced accountant. If not, well, ….
SIMPLE ONLINE REFRESHER COST CONTROL COURSES FOR THE LINE PRODUCER
There was a time when the Cost Reports were supervised by the Line Producer, and the Accountant really had a secondary role. I’m not recommending that we return to that status; however, I do feel that some Line Producers could better protect themselves by brushing up on the fundamentals of production cost controls, as well as on the cast and crew payroll rules, since that forms at least 70% of all productions costs.
DURING THIS CORONA VIRUS LOCK-DOWN IS A GOOD TIME FOR REFRESHERS
Now that we are all home it’s a perfect opportunity to get those refreshers.
FOUR CATEGORIES OF SIMPLE ONLINE COURSES – TRIED AND TRUE
There are four categories of online refresher courses on my web site. These have been tried and tested over the past 6 or 7 years:
Online Film Payroll Courses – Excellent refreshers on payroll rules for SAG Day Performers, SAG Weekly Performers, DGA (UPM and AD’s), IATSE Area Standards, and IATSE Low Budget Features – see this web page
Each of these online courses have downloadable Power Points, Excel files as reference for each topic covered, practice participation and all have well received videos that explain every step with clarity. By visiting each of the web pages you can click on short videos of how the online course works, how practical the course is, and what you can take away from the course.
Cheers / John
John Gaskin has worked in the film and television production industry since 1985 on over 55 productions of every size, in 6 different countries. He has helped many get into his field with numerous workshops and webinars throughout the USA and Canada for the past decade. To learn more visit filmaccounting.com
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 knowing Cost Reports.
THE FILM PRODUCTION’S WEEKLY COST REPORT?
The term, Cost Report, is innocuous on its own. However, anyone who has worked with it knows that it is a career “maker or breaker”. The format and title name are similar, if not exactly the same, throughout the free world. The completion guarantors, producers, financiers and studio exec’s all review the Cost Report hungrily. This confidential report communicates to those people how well the production is progressing.
THE CONFIDENTIALITY OF THE COST REPORT
There are always any number of rumors about films and television series that are in production. Not only about cast, but also about potential cost overruns, who may get fired, which producers are the meanest, most coked-up, nicest, etc etc. As a result, anything to do with the Cost Report is kept strictly confidential. All of that confidentiality makes it difficult for assistant accountants to participate in its preparation, and downright impossible for other department heads to even see a full cost report.
THE FORMAT OF A WEEKLY COST REPORT
The Cost Report usually has 10 Columns. The most important Column is the “Estimates-To-Complete” This is where experience comes in. If that estimate is too little, then the Producers are not aware that they will need to find more money. If the estimate is too high, then the Producers have squandered an opportunity to use that money to enhance the picture. It is truly a tight line to walk.
It takes a lot of experience, not only with the costing involved, but also with knowing how to collaborate quickly with the other production department heads, the unit production manager and the producers – while also straight arming any anxious investors, financiers, bankers and/or studio exec’s.
HOW TO GET THAT EXPOSURE
The best way to get a good concept of the workflow of producing Weekly Cost Reports is to find a friendly Film Production Accountant, who is not only willing to show you, but also has the time WHEN you have the time. It’s always possible, but not likely.
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.
Today, while delivering a 2 day workshop on Movie Magic Budgeting a young Producer, an active Art Director and an experienced Assistant Director all told me that they wanted to understand the workflow between the Film Budget and the Cost Report – actually, the Art Director and the AD, had never even SEEN a Cost Report.
FINANCIAL REPORT CARD
The film production’s very confidential Cost Report is the financial report card issued weekly to the Studio Exec’s, Completion Guarantors, Executive Producers, Tax Credit Auditors/CPA’s, etc. Understanding the workflows behind this document is a fundamental requirement for anyone interested in advancement within the film industry.
MANAGING FILM BUDGETS AND COST REPORTS
I have been doing a series of 6 live webinars for a few years now. It directs the attendee’s attention right to this area of Managing Film Budgets and Cost Reports, disclosing tricks of the trade which just are not available anywhere else. The attendees will review a $9Mil budget from several angles, learning the practical methods of managing a film budget, and it’s immediate cousin, the Cost Report (note that I use the Managing, as opposed to actually manipulating software).
PROFESSIONALS ACTIVE AND INTERESTED IN THE FILM INDUSTRY
The live webinars are not only addressed to professionals working in the business, but also to emerging producers, Certified Public Accountants who would like to understand more about the film industry, and for anyone who wants to “break into” the film industry.
LIVE WEBINARS – RECORDED FOR YOUR REVIEW
Each live webinar is 1 ½ hours long, with voluntary quizzes and lots of interaction. For you CPA’s the live webinars qualify for 9 hours of CPE. Each webinar is recorded for review by the attendees for as long they wish:
– # 1 of 6, THE FILM PRODUCTION BUDGET INTRODUCED
– # 2 of 6, INTRODUCING FILM INDUSTRY LABOR UNIONS
– # 3 of 6, THE CONCEPT OF FRINGES & LABOR HOURS WORKED/PAID
– #4 of 6, INTRODUCING THE WEEKLY COST REPORT & THE SIX BASIC COST SYSTEMS
– # 5 of 6, THE COST REPORT – ESTIMATING COSTS TO COMPLETE – EXAMPLES
– #6 of 6, THE COST REPORT – ESTIMATING IN FILM PRODUCTION
In the final webinar we also discuss some common ways of breaking into this very insular industry.
John is a 30 year veteran of film production working on over 50 film and television productions in 6 countries. His workshops and book “Walk The Talk” have been well received with many testimonials. See http:///www.filmaccounting.com
As in most businesses there is a particular report which is considered “vital” to investors of any film or television production. As you may expect, the industry has developed its own very distinct financial report for any production. The income statement, balance sheet and profitability/ liquidity ratios are all ignored. The primary, and very confidential, report goes by the innocuous name of “The Cost Report”.
THE COST REPORT IS CONSIDERED CONFIDENTIAL
Seriously, I wish that more creativity had gone into the name; something which reflected the career breaker-maker nature of the report. Within the ‘Biz it’s so protected, and kept so secure, that not even Variety Magazine nor the Hollywood Reporter even refer to it.
COST OVERRUNS ARE LEARNED VIA THE COST REPORT
It’s not uncommon to hear in the news about a wildly Over-Budget movie like ‘Titanic’ or ‘Water World’. In reality, there aren’t many films that get that far out of hand. With only two or three exceptions, most of the films that I’ve worked on have been produced for amounts in close proximity to the Approved Budget. Indeed, it’s a career breaker not to have foreseen those Over-Budget costs, regardless of very good reasons offered up by the Director, Producer, Production Accountant, Department Head, etc. why they didn’t know.
The whole reason for a Weekly Cost Report is to give the Studio Execs, Producers, Bonding Company, etc. enough time to correct for any projected over-budget costs (that is, to find ways to cut the costs in the remaining time of shooting, or to find more money, etc).
DETAILS OF A COST REPORT
Now let’s get down to the nitty-gritty of this little known, but key, film production report.
The first thing to understand is the simple arithmetic of the report. First, have a look at the picture above , or click here to see a clear pdf page, and then follow each of the columns as described in the next paragraph.
When examining the 10 columns, keep in mind the following simple arithmetic:
Col. 1 and 2: are the account number and description of the account.
Col. 3: The numbers here represent the costs PAID THIS WEEK only.
Col. 4: The numbers here represent the costs PAID from inception to the current date.
Col. 5: The commitments are Purchase Orders committed but not yet paid.
Col. 6: Total Costs = Col. 4 (Cumulative Costs PAID) + Col. 5 (PO’s not yet paid)
Col. 7: Estimate-To-Complete = Amount of money needed to complete the production.
Col. 9: The Final Approved Budget (sometimes called the ‘locked’ budget).
Col.10:Variance: the difference between Col. 7 (Budget) and Col.6 (EFC’s)
TRICKS OF THE TRADE
A working knowledge of costs reports and the data behind them is a prerequisite for any CPA to be able to audit the Cost Report for State tax credits; it’s also vital that any emerging producer have a working understanding of Cost Reports.
There are several ‘tricks of the trade’ in reading a Weekly Cost Report. They’re available in my book,“Walk The Talk”.
Visit http://www.filmaccounting.com for more info on the book, week-end workshops, self-study courses and live webinars.
Cheers / John
PS – If you are curious about film production accounting as a career see this article.
Once you have the project sold, and the budget is “locked”, the business of film, television and animation production is all about managing costs. Cost overruns during production and post-production are hyped in the news, but in the vast majority of projects – it doesn’t happen because it CAN’T happen; at least, not if you want to work in the industry anymore.
THE 6 BASIC FUNCTIONS OF FILM ACCOUNTING
There is a simple trick to managing the production costs. You need to put into place the 6 basic functions of film accounting, know the workflow of the few “usual” accounting forms and keep an eye on the locked budget.
The “art” of managing the costs is knowing when and where to allow cost overruns by having in your back pocket under-budget line items to offset.
LET THE FORMS DO THE WORK FOR YOU
But, I’m getting ahead of myself. Let’s first look at the 6 basic film accounting functions:
As you can see each function has a form, or in the case of payroll 2 or more forms, each of which require approvals before processing. Simply by getting yourself on the approval line, and having a good understanding of the budget, you are (bingo) managing the costs as they happen.
The art of managing is in the report which crunches all the numbers into the “Cost Report”.
The simple name “Cost Report” doesn’t convey the weight of this career maker/breaker; however, say the word “Cost Report” to any producer and he/she will immediately focus all available attention units in your direction.
About 2 or 3 times a month I get a comment on this blog asking me if I can send a copy of a Hot Cost. From the tone of the request I sense that I am the last resort and the Hot Cost is a matter of getting the job as a key accountant or not getting it. I always oblige, but with a cringe because I know that without the background understanding of film and television payroll the Hot Cost won’t mean a whole lot to them.
Anyone who has been working in film production accounting, or as a Unit Production Manager, knows that “Hot Costs” exist, and they may have seen them. But it’s the key production accountant who prepares them. They’re a bit of a pain to set-up; however, once in place they’re easy to maintain.
I have written only one other blog about Hot Costs, mainly because it requires a pretty good understanding of payroll, as well as Excel, to really understand the background of it all.
For those of you who missed my earlier blog, I’ll start out by defining, in my own words, what a hot costs is:
– The Hot Cost is essentially daily report which compares the actual variable labor costs with the budgeted labor costs for every person on set. A few other variable costs are compared to budget on the topsheet of the Hot Cost, especially if it’s easy to measure them on a daily basis – like the costs of catering, or, if shooting in 35mm, the cost of raw stock, processing and work prints. Since 35mm is seldom used anymore, that’s gone by the wayside.
Boiled down, the, the Hot Cost is really all about measuring the daily cost of labor (Cast and Crew) with the budgeted amount of daily labor.
The Ivory Tower:
The Film Production Accountant prepares it, and usually the assistant accountants are too busy to get involved – or, if they have some time, the key accountant is too busy to show them. This task is seldom allocated to an assistant (unless the film production is obscenely huge). It is the one task which mystifies most assistant accountants, simply because they are seldom involved directly in preparing it. Another drawback that I’ve noticed with assistant accountants in the last 10 or 15 years is a tendency to specialize in one area, such as running the general ledger duties, but ignoring the payroll duties; or, being pigeon-holed as a payroll accountant only, and not understanding the cost report duties. I have had some pretty nervous requests to explain Hot Costs as a 1st Assistant starts to reach toward being a Key Production Accountant, mostly because of their continuous specialization, rather than understanding all facets of film accounting.
The Daily Production Report (DPR):
Each day the Assistant Director’s prepare a “Daily Production Report”. The In/Out times, as well as the lunch break, is recorded on the DPR. Every person who worked on set is named along with their title. In addition, the DPR shows all the times related to each and every actor, the number of lunch plates, the page count shot (per the Script Supervisor),any notations of accidents/delivery of major equipment/illnesses, etc.
Click on the link to see an example of the front and back pages of a DPR:
Once you get a grasp the union rules you’ll start to wonder what all the fuss was about. No matter what union contracts you’re dealing with, each Union has broken down their rules into the following 4 categories:
1. The “Basic Day” and Overtime Rules
2. The penalties associated with “Rest Violations” (also called “Turnaround”).
3. The penalties associated with violating Meal Periods (called “Meal Penalties”).
4. The various circumstances associated with Travel – whether to a “Distant Location” (i.e. staying in a hotel), or travelling outside of a defined “Studio Zone” (also often referred to in each locale as “The Circle”).
For those of you newly exposed to Screen Actors Guild, the various IATSE (crew) Locals and the Teamster (driver) Locals, it may seem a little too much, it’s MUCH easier than learning to use Excel – so, have a little patience, do a lot of practice time cards, and you’ll have it.
Conversely, for those of you who have had to hide behind being a Payroll Accountant, but never had exposure to the Cost Report, have no fear. It’s much easier to learn than the other way around (check out my blogs that begin with #1 of 7 through to #7 of 7).
The Excel Task:
Once you have a grasp on the SAG and crew payroll rules, the task ahead of you is to set-up a hot cost format that can quickly estimate the cost of labor for the day and compare it to the budgeted cost per day – for each and every person working on the set. Kind of a tall order “right out of the box”. If you’re using Excel, the only efficient way to do a Hot Cost, you should be able to copy paste the previous day’s time out, enter in the In/Out times of the day your analyzing (i.e. yesterday) for each person, then have the Excel formulas do the rest.
The Payroll Solution to Understanding Hot Costs:
The solution to understanding any Hot Cost is to find a central source of contracts for SAG, DGA and IATSE then summarize the four rules mentioned above. Then have someone show you their version of Excel formulas which comply with these central rules. At the risk of shameless self-promotion, I have done that, one union at a time for each of SAG, DGA, IATSE National Low Budget (any feature or TV production in North America less than $13Mil) and IATSE Area Standards (any feature or TV production greater than $13Mil outside of the Los Angeles and New York zones). I have a general Teamster contract for the non-LA/NY areas, but, honestly, it’s child’s play to understand after learning the above. Actually, it is not a problem for me to say that if you understand SAG, DGA, IATSE Low Budget and IATSE Area Standards you can work anywhere in America or Canada – it would only be necessary to get a copy of the local contracts in those higher production centers and you’d be ready in a day or so.
The Training and the Practice:
I’ve found that a full weekend practicing the film and television payroll rules, followed up by on-line links to all the materials, is plenty for your average person to learn how to calculate the union/guild payrolls to “gross” (i.e. to the gross amount of pay due before union and government benefits/deductions). I also supply templates (yes, with the formulas) which are “helpers” ad which you can use to develop your own Hot Costs, no matter the circumstances. I leave you with on-line links to all of the materials – see this link to get an idea of what I mean.
Film Production and The Money 