In the film industry, accounting is not just about recording expenses. Accounting plays a
critical role in the entire production process, as it is the main component that decides whether
a project is profitable or not.
Any film project has three main steps: pre-production, production, and post-production. The
accounting process starts with budgeting during the pre-production stage.
1. What is budgeting in film production?
Budgeting is the starting point of film production accounting. It begins by identifying the
client’s requirements. After identifying the client’s requirements, the line producer (the heart
of production) or his team starts the budgeting process. The budgeting process mainly
includes the cost of permission processes, art department costs, equipment hiring costs,
accommodation costs, food costs, medical costs, and more.
After preparing a rough budget, the line producer presents it to the client. This process
normally goes through a few rounds until the project budget is finalized.
2. What happens after the budget is locked?
After the budget is locked, the client checks the locations, equipment, and other necessary
things. This cost also goes under the pre-production cost. If the client is satisfied with the
checking, the client will bring his crew and actors down to start production.
3. Accounting during production time
Accounting during production time is the most challenging part of the production accounting
process. The most important thing during production is always to monitor the budget lines
and make sure the actual costs are not exceeding the budget lines.
4. Main challenges faced during production time accounting
- Too many cost centers: The challenging part is having too many cost centers and putting the correct bills under the correct categories. Accountants must be very careful and accurate with categories and values.
- Mostly based on the cash basis: Production sites are typically very busy places. Because of that, accountants must have a lot of cash on hand. Accountants must be very careful with the handling of cash.
- Cash floats management: Normally, during the production period, the project accountant cannot handle all payments by himself. Most of the time, production assistants are the ones who receive floats from the accountant and collect bills for the accountant. The accountant is responsible for maintaining separate accounts for each and every float receiver.
- Departments cost monitoring: Identifying the department cost separately helps
monitor the budgeted cost and actual costs incurred by each department separately. It
helps control any additional costs that can occur during production time. - Special requirement cost: Normally, during ongoing production, there are many
special requirements from the client. Accountants must make sure to put the special
requirement as extra cost out of the locked budget. - Billing and filing: Properly organizing and filing all bills according to the invoice
number is one of the most important parts of the accounting process. This will
definitely be an advantage when the project audit happens. - Daily and weekly cost report preparing: As per the client’s requirement, the CFO
(Chief Financial Officer) must prepare the cost reports. For reporting the accurate
cost, accountants should gather correct data and provide it to the CFO on time.
5. Excel for production accounting
Excel is a useful software for preparing, recording, and presenting accounts in film
production projects. With proper formats and continuous data entry, accountants can handle
the full production just by using Excel sheets. Excel has many functions that can help reduce
time and increase accuracy of data that is gathered in the sheets. It is also a great analysis
platform that can help prepare project cost analysis and identify outliers according to the
budget. One of the biggest advantages of using Excel for production accounting is that it is
very user-friendly and easy to make changes compared to other standard accounting software.
6. Importance of stress management
The production period is normally very stressful for the accounting team because there are
lots of cost centers to monitor and lots of cash to handle in a short time period. so, the
accounts team must be very flexible with their work and working hours to ensure the
production runs smoothly without delaying any payments. With good stress management and
accurate data processing, the accounting team can help to ensure the success of the project.
Article by – Gihan Malka ( Production Accountant “Circle 360 Creative Solutions” )