Sunday, May 15, 2011

Feature Film Accounting

All art is defined by its limitations.  Origami is an artform where you are limited to using only folding paper.  A sonnet is limited to fourteen lines.

And a feature film's major limitation?


So to understand this better, I figured I'd better talk to an expert.

Dean Hood has been working on film budgets for decades.  He started as an assistance accountant on 'The Flying Doctors' back in 1989 and has since worked across the globe on projects including “The Saint” (Russia), “Kundun” (Morocco), “Star Wars Episode 1” (Tunisia & England), “The Talented Mr Ripley” (Italy), “Gangs of New York” (Italy!) and “The Life Aquatic” (Italy) - as well as local productions like  “Charlotte’s Web” (Melb), “Fool’s Gold” (Qld) and "The Pacific” (Qld, Melb).

He's also a partner in Australia's leading payroll service company Threadgold Plummer Hood (TPH)  which supplies 'Eclipse' - production accounting software for the Film & TV industry..

His latest projects are Guillermo del Toro's "Don’t Be Afraid of the Dark” & the upcoming Robert De Niro film “The Killer Elite” where he was UPM.

So I thought I could learn a thing or two from him !

Q: How do you get involved in a project ?

I quite often prepare comparison budgets for studios. US studios normally start with an LA based budget then they will shop the film around the world. Depending on the script, I will pick a location (generally Melb, Syd, Gold Coast or FNQ) and budget accordingly using the same type of appetite used in the LA pass. With the AUD currency so high at the moment there are not many requests to do budget comparisons. When the currency was around or below $0.75, I would estimate I prepared around $750M worth of budgets per year - although some years have exceeded $1B.

Estimated rebate figures are also prepared at this time to give the studios the complete picture. At this stage I would also work out what rebate they would be entitled to - Producer or Location Offset. The last budget I prepared, however, was for Montana USA.

Q: So after preparing a budget for an Australian production - it might end up getting filmed overseas?

There are always multiple budgets done for US Studio films. There are various reasons why they come and why they go elsewhere. The studio will generally like to go with the cheapest realistic budget. Other factors that change locations are seasons (eg: winter or summer) required for the film - especially if you are backing into a delivery date. Sometimes cast will not leave the States or Canada.

Sometimes the Studios may be on the hook for a stage facility, so they send a film to that location to save the loss on the stage. Stage availability and location availability are also factors. Almost every country in the world are sending delegates to the US studios to entice them to film in their country offering rebates. Australia once had the best deal going around, now we have one of the lower rebates on offer. Even various states within America offer incentives now to get the work from California.

Approximately 60% of the budgets that I prepare for projects don't go end up going ahead.  The problem is some don’t get made in Australia.

Q: So how are finances managed during production?

There are a lot of policies and procedures the studios put in place to keep a better handle on the ongoing cost of a film. If you can keep people to using the procedures then you’re halfway there to keeping a good eye on things. Constant communication with department heads, producers and production managers is the only way to help keep things on budget. Although the bottom line of the budget doesn’t move very much, all the accounts within it get shuffled around constantly to plug holes where needed. Finances on a studio picture come from the one studio.  If it is a co-production between two studios then one studio will be the lead and the other will not get involved in the sending of finance. On a studio picture it is normal for the production accountant to stay on the picture until delivery.

Q: What about auditing ?

There are many levels of auditing on a film. Each accounts department will audit everything that comes in from crew & vendors. Studios will send in their own internal auditors to check the work of the accounting department, these reports are kept within the studio and can make or break the production accountant. Statutory auditors also come in once or twice during the film to conduct their audits.

Q: For most of us, the 'A-Z' budget spreadsheet for Screen Australia is pretty scary.  Fourteen different categories, each of which might have between a dozen and a hundred entries to get right.  Or is it just me who breaks out in a cold sweat at the sight of it?  

For the record the A-Z budget system is terrible. It separates labour and equipment so to get an overall cost of say grip or electrics you need to add two accounts together. Even keying in cost codes means you are using Alpha numeric codes over simply numeric codes. As an accountant you know all the codes so it’s not a big deal to use the A-Z, it’s just a pain. On a studio picture it’s normal to operate off a 150 to 200 page budget.

Each US studio has its own chart of accounts although they are fairly similar.

Q: When you create a budget - where does the information comes from to determine the numbers?  So if there is a scene involving three elephants driving a truck over the Sydney Harbour Bridge - how do you decide what the expected costs are ?

It varies from film to film, sometimes you prepare the budget yourself, sometimes it’s in conjunction with a line producer or UPM and sometimes the UPM or line producer has done the first pass themselves. Regardless of who starts the budget, by the time it is finished and ready for sign-off everyone has been involved in preparing it, department heads, UPM, Producer, studio and the accountant. It takes everyone to prepare the document and to be responsible for their portion of it.

The main thing is to have a schedule. Once you know how many days you need, you can build everything else around it. Factors like elephants, bridges, explosions etc - you know from past experience what these can cost.

Q: On our non-studio projects there is often a Production Guarantor that signs off on the budget before filming starts.  They guarantee that the film will be made on that budget - even if they have to fire the director (etc) to do it!  What do studio projects do?

Studios guarantee their own pictures so they don’t have to wear the cost of a guarantor. Studio executives, Producers, Director, UPM and Accountant sign-off on the final budget. The studios receive daily hot costs, DPR’s and are involved in the weekly cost reports. The studios stick with people they know and trust. There is normally no contingency in a studio picture. If you go into overages for any reason (eg: weather or slow filming) you will need to get approval from the studio for more funds.

Q: We've all seen projects where something has been forgotten - what happens in those cases for larger projects?  So if partway through filming someone realises that not enough money was allocated for foreign language translation towards the end, do they cut corners to bring it in budget - or wear the extra cost?

Studio pictures have internal post production departments that cater for their films. They normally use a standard post production budget. They have three levels, low, medium or high post budgets. The studio is free to add to this if they like at any time.

Overages will always be offset within the shooting budget if possible. If there are short cuts that can be taken and everyone is on board with the change then this will happen. Appetites are normally big on a studio picture so shaving off a little to cover overages in theory should not be difficult.

Q: What should producers keep in mind when working with production accountants?  

The best thing to keep in mind as a producer is an accountant is only as good as the information they are receiving. Keep the information flowing - then no one has any excuse for not performing.

There are limited numbers of accountants available in Australia. If you find a good one hang onto them.

This entry is an archive from my earlier blog on 'The Filmmaker's Factory'

Image used with permission. CC License

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