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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Film Production – Your Daily Report Card

hotcost The Hot Cost measures the daily cost of labor (Cast and Crew) with the budgeted amount of daily labor – along with the page shot compared to the page count planned to be shot that day. It goes to all financiers, studio execs, the completion guarantor, etc – establishing your credentials as a Producer/Production Manager. You could call this your daily financial report card.

A KEY DOCUMENT KNOWN ONLY TO A FEW

The Film Production Accountant prepares it, usually without too much input from the UPM or assistant accountants. Some key film production accountants involve their payroll accountant; however, I have found that unsuccessful – it simply puts too much burden on the payroll accountant. The Hot Cost should be prepared with enough information to be checked by the UPM.

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. From the DPR the Key Film Production Accountant calculates the actual costs of cast and crew for the day and compares it to the budgeted  daily cost.

UNDERSTANDING PAYROLL:

You really need to have a grasp of the cast and crew union rules for calculating payroll in order to effectively manage the hot cost reports. 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; however, 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.

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.

Have a look at this link to a short video of how my SAG on-line course works.

Check out http://www.talkfilm.biz  for live weekend payroll workshops, as well as workshops on Film Accounting.

If you are already a film accountant and would like to learn more about Hot Costs, see this short video.

Cheers,

John

Creating Investor Confidence For Your Film Project

“ACCREDITED INVESTOR” – THE OFFICIALLY WEALTHY WHO YOU NEED TO SOLICIT FOR FINANCING

The “accredited investors” as defined by the new SEC ruling allowing for general solicitation, are officially wealthy, and are accustomed to dealing with basic financial reports and terms.

THE HIGH RISK OF INVESTING IN FILM

Mr. Bucks has heard about the high risk of the film business. You will need to create the confidence with Mr. Bucks that you CAN produce – at a return. So, now, more than ever before, it behooves Indie film producers to understand the basics of the film industry as a business – especially if he/she wants to solicit the officially wealthy who don’t know film.

THE BUSINESS LANGUAGE OF FILM

For those of you who do learn the Business Language of the film industry you will find that doors previously closed to you will open – just a crack , at first, but with some perseverance the Completion Guarantors, experienced Directors and Cinematographers, some Mini-Major Studios, etc. will be impressed and will offer more and more opportunities. Success breeds success, and it starts with generating confidence.

CREATING CONFIDENCE THAT YOU ARE FISCALLY RESPONSIBLE

From my point of view (30 years in the ‘biz) there are 5 or 6 things you should learn more about, and with a little practice, you will have a very good shot at creating the confidence needed by the investor that you are fiscally responsible. You really can’t lose. In my book, “Walk The Talk” I refer to it as “Directing the Money”.

Here are the topics. All are inexpensive online self-study courses. Most of the information is on video. See the Filmmaker page of my website:

1. Learn More About the Full Business Cycle of the Film Industry (From Development through to Revenue Sharing)

2. Have a working Insight Into Film Tax Incentives in America and Canada as a Source of Financing (Including Section 181)

3. Know How to Manage Film Budgets Professionally (not create from scratch, just to be able to manage)

4. Know How to Manage Cost Reports Professionally

5. Know the fundamentals of Creating Cashflows “Out”/”In” for Bank Loan Purposes

6. Understand the Role of Hot Costs During Film/TV Production 

Knowing these topics you won’t be confused with the clutter of people who “have a great idea”.

For more information on the online self-study courses offered see the Filmmaker page of my website

Cheers / John

THE FILM PROFESSIONAL ON-LINE TRAINING SERIES – Part 2

TO START – TWO TRAINING TOPICS

There are a variety of skills to start with. I’ve decided to start with Managing Film Budgets (as opposed to creating a film budget). This is a vital step to any emerging producer or film accountant. It’s the natural precursor to actually licking the tip of the pencil and creating your own budget. In this series you’ll learn what a standard film budget looks like, how the columns are arranged, how to manipulate a budget as a manager, and how to control the processing. In 90% of the professional film projects you’ll work on, the budget will come to you in some kind of form – then you’ll need to massage it, have changes made to it, etc. That is you’ll need to manage it until it becomes “Locked” prior to the first day of production.

  1. Production Managing the Film Budget and Cost Reports – there are tons of experienced people who are ready to produce in some capacity, or who have the ability to Production Manage the physical production; however, many of those same people experienced in physical production of film and television haven’t any experience in managing budgets and cost reports. That’s a recipe for disaster and a short career. It’s also a very limiting factor to assistant film accountants who want to upgrade to the key film accountant. I will offer you a training solution with a minimum of inconvenience to your busy schedule. In this topic, for now, I am only doing the “Managing” series of webinars. Let’s leave the detailed budget preparation for later – also, I first need to ask permission from Movie Magic to use their software.
  2. Daily Hot Costs (Definition: a daily summary of the labor costs as compared to budget for the shooting crew as well as a way to declare other known over or under budgeted cost items; a working knowledge of cast and crew guild/union rules is required).

These vicious little monsters are the bane of every film accountant, Line Producer and UPM (Unit Production Manager). The Hot Costs have become VERY important to the studio production executives and financiers at every level. Not only is it difficult to get it done swiftly and accurately, but it’s difficult for the UPM and Line Producer to explain/defend the Hot Cost to the production executives up the line.

Essentially the Hot Cost is a daily cost report comparing the budgeted costs with actual costs for the cast, crew and background extras (and a few other things, but those other things are minor when compared to cast, crew and extras). The Hot Cost is completed every morning by the Production Accountant for the previous day’s shoot.

The Line Producer and UPM need to understand it and sign off on it before the Production Accountant sends it along to both the Production Executives and the Financial Executives (including the Bond Company if the production is an Indie).

First Level of Understanding: There are definitely two different skill sets we’re talking about here. The first level of understanding is simply to be able to read it and manage it. You’ll need a basic understanding of the SAG Rules, and an understanding of the terms “Worked Hours” and “Pay Hours”. You’ll also need a basic understanding of IATSE contracts in general. This first introductory level is for Line Producers, UPM’s and Producers.

It’s not just the job of the film accountant to know what’s going on with the Hot Cost. The UPM and Line Producer are just as much in the hot seat as the accountant is.

Second Level of Understanding: The second, and more detailed level of understanding, is being able to calculate the Daily Hot Cost. This requires a good understanding the payroll rules associated with SAG, DGA, IATSE and Teamsters. It doesn’t mean that you have to be perfect. But it does mean that you understand the rules. So, I have taken special trouble to provide references to exact clauses in the payroll contracts that refer to:

–         Overtime

–         Rest Periods

–         Meal Penalties

These are what I call the Producer’s Three Sins.

In this series we look at each union or guild, one at a time, until we cover the rules associated with Cast (SAG), Assistant Directors (DGA), Crew (IATSE – especially Low Budget National Agreement) – and Teamsters.

In each case I will provide Excel templates and a pdf copy of the appropriate contract. Unfortunately I can’t cover all of the contracts on the West Coast (there are many Locals in California), but I can give yu a familiarity with the contracts and show you how easy it really is to pull out the payroll relevant clauses. What appears daunting is really only a few clauses that are applicable.

RECORDED FOR PRIVATE UNLIMITED VIEWING AND FILE ACCESS

Note that each recorded webinar has attached to it, through an ingenious web site called Screencast.com, all of the materials used in that webinar and all files are easily downloadable – such as template budgets in Excel and MMB, Guild/Union agreements, vital links, gross payroll calculating templates, actual cost reports, template cost reports, etc.

AGENDA- next part

THE FILM PROFESSIONAL ON-LINE TRAINING SERIES – Part 1

For the past few years I have been doing live weekend workshops – sometimes in a flurry and sometimes spread out over time. The biggest hurdle is scheduling the location and time. Not just for me, but for you all as well.

DILEMMA

It’s a dilemma. Some of you want more than I have on the Agendas, some less, and some want more emphasis on related areas, etc. For example, some want the full detail of how to do Hot Cost, and some want only enough to know how to budget for Screen Actors Guild costs. I will continue to do live workshops, but it’s tough on all concerned to arrange their schedules, their travel, hotels, etc. So, my dilemma has been how to get what you want out to you all in a way that works for you and can fit into our busy schedules.

SOLUTION

So, I have decided to start doing a series of advanced online training webinars that can offer a wider variety. Some will be Live – and recorded simultaneously for you to review at your convenience. Others will be pre-recorded and made available with all of the materials. In each case I’ll keep the webinars ‘bite-sized’ so that you can zero in on the material you need to know in order to advance your career in film.

EACH RECORDED ONLINE TRAINING WEBINAR HAS ITS OWN SPECIALIZATION

One series will be general and the next series will have more details.

One series will be for those interested in Managing (i.e. Line Producers, Unit Production Managers, etc.) and the second, more detailed series, for those who want to know how to The topics that can be done.

RECORDED FOR PRIVATE UNLIMITED VIEWING AND FILE ACCESS

Note that each recorded webinar has attached to it, through an ingenious web site called Screencast.com, all of the materials used in that webinar and all files are easily downloadable – such as template budgets in Excel and MMB, Guild/Union agreements, vital links, gross payroll calculating templates, actual cost reports, template cost reports, etc.

TO START – TWO TRAINING TOPICS

(To Be Continued)

The Hot Cost Report – Knowing Film Payroll

On Sept 2, 2013 I finished a Hot Course Online Course – see this YouTube link for more info

_____________________________________________________________________________________________________________

Original article:

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:

DPRBack  DPRFront

Understanding Payroll:

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.

Have a look at this link to a short video of how my SAG on-line course works.

Check out http://www.talkfilm.biz  if you need some more info about cost reports, production accounting, managing film budgets, etc.

Cheers,

John

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