A Key Film Accounting Task – The Hot Cost

One of the daily tasks of a Film Production Accountant is to prepare a “Hot Cost”.  It’s a major task that would seem to be impossibly grueling, unless you knew the system of things that is behind the Hot Cost.

As an exercise, recall your favorite movie scene, then try to imagine what it would take to estimate the costs of all that scene’s cast, extras, crew  of every kind, as well as the various gun battles, sinking ships, etc etc. Well, that’s the task assigned to the Production Accountant on a daily basis. It can be a challenge, especially since the Film Accountant is expected to send out the report by lunch time the next day.

How is that even possible?

In my opinion the task becomes not only possible, but routine for four reasons:

A well drilled and standardized reporting system unique to the industry.

The daily film and television production reporting system has been perfected over the last century. It could even be described as militaristic. The primary tools are the Shooting Schedule, the Call Sheet and the Daily Production Report as well as the SAG cast report called an “Exhibit G”. The Production Accountant knows how to pull off the information needed to prepare a Hot Cost within 2 to 4 hours.

A working understanding of the Union and Guild Payroll Rules.

In addition to the well known guilds (SAG, DGA, WGA) there are several different union locals under the IATSE umbrella (International Alliance of Theatrical & Stage Employees). The cast and crew regularly work in excess of 12 or 13 hours, resulting in numerous penalties that requires a familiarity with union and guild rules, so a thorough understanding of those agreements.

A hands on familiarity with all costs as they occur 

The Production Accountant works with a team that processes purchase orders, timesheets, credit card/petty cash reports, etc. and every document is initialed or signed by the Production Accountant. All of the costs flow into a unique general ledger software system used throughout the film and television production industry. 

A thorough grounding in the line-by-line items in the Approved Budget

 Once the costs are gathered together they need to be compared, line-by-line, with the Approved Budget for that particular production. The Production Accountant not only is a major contributor to the preparation of the Approved Budget, but he/she and the team of assistant accountants use the Approved Budget every day as they code costs to be entered to the general ledger system.

In summary, a working understanding of each of those four categories provides the Production Accounting Accountant with the ability to comfortably pull off the Hot Cost in less than a few hours.

If you’re interesting in taking the first step towards each of these categories above, come to our Film Accounting 101 Weekend Workshop, coming up in Chicago in May, 2018..

 

To find out more, check out http://www.filmaccounting.com

Cheers / John

 

 

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Line Producer – Managing Film Budgets and Cost Reports

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.

Cheers / John

Crossing Over From the Film Budget to the Cost Report

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.

For more information visit this web site: http://www.talkfilm.biz/filmworkshops5.htm

Cheers / John

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

Crossing Over to Film Accounting – “The Cost Report”

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”.

costreportTHE 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. 8:Estimated-Final-Costs = Col. 6 (Total Costs Paid/Committed) + Col. 5 (ETC’s)

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.

MAKING IT in Film Production

Do you, or do you want to, work on film productions? If you want to expand in your career in film, this article will help you make it!

BECOMING A PRODUCER

Why aren’t there more Props Masters, Sound Mixers, Costume Supervisors, Key Grips, etc. becoming Line Producers, Producers-For-Hire or UPM’s? Why aren’t more crew reaching the level of Department Head? Why aren’t more film school students finding work? I’m sure there are lots of reasons, but take a quiet moment to really look. Let’s see…. It’s not competence – most crew disappear pretty quickly if they’re slow witted and incompetent. Film students who graduate have shown they’re smart and creative. It’s not a lack of drive – again, for the same reasons. Wouldn’t you agree that the biggest hurdle is getting the opportunity? Well, that’s true and not true. The biggest hurdle is MAKING the opportunity.

How do you increase the odds of landing a contract as a Line Producer, a Department Head (if you’re not one already), or even a UPM on a small independent production? Lots of film school graduates are ready to burst with ideas to get their scripts into production; how do they get to produce their scripts?

CREATING CONFIDENCE

First you need to get the confidence of the person in front of you. That single person in front of you needs to believe that you can control your sphere of work so effectively that he/she can get on with creating their vision.

If you’re already a working professional in film, you can easily convince someone that you can control the heck out of your area of expertise. But, if you want to upgrade, what do you know about the relationship of your department to all other facets of film production? You need to be able to convince others that you understand the common denominator of all filmmaking. Nobody denies that you need to have a creative bent in film productions. But let’s lay it on the table:

THE DRIVING FORCE BEHIND FILM PRODUCTION IS MAKING A PROFIT!

By the time we, as working crew, start working on a film production, our creative bent is totally bent by the amount of MONEY available to us. We want to get the best product we can out of every buck. Like it or not, your performance in film production is measured, to some degree, by how well you control the money. It’s like ‘Directing’, only you’re ‘Directing the Money’.

THE LANGUAGE OF DEALMAKING

Do you want to get that upgrade? Then, learn the language of DEALMAKING – or, more loosely interpreted as, learn the language of ‘Directing the Money in Film and TV Production’. To my way of thinking, that’s the only way to be taken seriously.

Here’s the deal – you need to show them, with attitude, that you will provide them with a controlled environment from which they can create their vision. The only way I know of to do that is to graduate to a ‘Director of Money’. From that position you can be the go-to Line Producer, Producer-For-Hire, Department Head, UPM, etc.

LET’S PRETEND

Let’s pretend for a moment that you’ve met a hot new Director, Actor or Executive Producer, etc. with a script. Whoever you meet, they’ll be very excited to talk with you about it. After the first ½ hour or less, how do you segue into being their Line Producer, Producer or UPM?

Here’s some real questions that would knock their socks off and show that you’re the one to ‘Direct the Money’ while they get on with creating their vision:

1. Do you need help with the budget? (Don’t agree to build it from scratch – but know someone who can; find out what you can about the script breakdown)

2. Do you have an idea of the Above-The-Line costs budgeted? (Cast, Director, Writers, Producers)

3. What kind of bottom line do you have in mind for the final budget?

4. Who needs to approve the budget? Will it be an independent film or studio driven? (If it’s studio funded, you’ll need all of his/her backup, and if it’s an independent production, find out which bonding company is involved.)

5. If union crew are planned for, find out how many shooting hours a day are planned for? (Insist on at least 13 worked hours per day, as well as a storyboard artist)

You get the idea. You need to know the ‘lingo’ of budgets and you need to understand that those budgeted numbers need to be directed. You’ll also need to inspire confidence in the Financiers, or the Bonding Company, that you know what the weekly financial report card is all about (that is, the universally standard Weekly Cost Report).

Most of those questions, with a little imagination, can also apply to anyone who wants to upgrade to a Department Head. A Production Manager would be completely blown away!

SO HOW DO YOU BECOME A DEALMAKER?

So how does a crew member get familiar with the language of Budgets and Cost Reports? I’ve been a Production Auditor for more than 20 years and I’ve NEVER shown a crewmember a Final Budget or a Weekly Cost Report (the universally standard financial report card issued to the Financiers and Producers every week) in that entire time. They are considered sacrosanct by Studio Executives, Financiers and Bonding Companies everywhere.

Well, I’m about to tease you with some relevant articles that will open the door enough to let you walk through. They’re written for the complete novice, so be patient if you’ve already been exposed to budgets and cost reports. You can find them on my web site at http://www.talkfilm.biz/filmarticles.htm , or sign-up, FREE, for 7 weeks of articles at makingitinfilm@aweber.com . Remember, the articles are techniques on being FAMILIAR enough with budgets and cost reports to be able to ‘Direct the Money’.

Written by John Gaskin – With 20 years experience in the Film Industry as a Production Auditor, John has managed over 40 major films all over the world. John has worked with some of the industries top professionals including academy award winning producer Ron Howard, Brian Grazer, Joel Silvers, etc…See more  “About the Author” at www.talkfilm.biz .

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