Film Production Budgeting and Accounting

Posted on Oct 15, 2024 in Economy

Budget

We define the translation budget breakdowns and work plan figures as tools for forecasting and controlling payment expenses. There are two types of budgets:

Preventive Budget

This is a cost estimate for the production of a play, helping us understand project viability and determine funding needs. The budget is considered positive when income exceeds expenses. This budget reflects below-the-line costs, which are technical and material costs such as:

  • Recruitment of technical staff
  • Set construction
  • Equipment hire
  • Use of studios and services
  • Production logistics

These costs are easily quantifiable and represent fixed costs for each shooting day. Above-the-line costs are creative costs, which are difficult to account for and manage during filming. These include:

  • Rights purchases
  • Music
  • Salaries of top talent (director, producer, screenwriter, and principal cast)

These costs are not dependent on filming duration and can be variable.

Final Budget

This includes both above-the-line and below-the-line costs, and sometimes the project’s own costs. It represents the actual product cost, known only after filming is complete.

Computers in Production

Compared to traditional budgeting, computer techniques allow using spreadsheets and databases for data entry and calculations. This facilitates budget evaluation, simulations, and average expenditure calculations. Programs like Movie Magic Budgeting link budgetary calculations with scheduling, allowing real-time simulations and deviation calculations.

Budget Estimates

Budget estimates should be based on scientific analysis, allocating budget items to each resource. The producer must consider all aspects affecting the total cost of each item. The budget is organized into four main groups:

1. Intellectual Property Rights

The cost of intellectual property rights is variable. A script for a one-hour documentary can cost between €10,000 and €100,000, while a half-hour drama can cost between €100,000 and €3,000,000. Influencing factors include project complexity, dedication, fame, and discretion. In Spain, original scripts are more expensive than adaptations, unlike in Anglo-Saxon countries.

2. Human Resources

Wages are calculated based on the planned work schedule. In the media industry, wages can vary significantly, from astronomical amounts for stars to more modest amounts for other roles.

3. Artistic Resources

Actors’ wages are agreed upon between the actor and their representative or the producer. Representatives typically receive 10% to 25% of the total recruitment cost.

4. Technical Resources

The producer must evaluate unit costs and processes. Technical resources can be acquired through sales, rentals, exchanges, sponsorships, or cooperation agreements. Lighting and vehicles are significant cost factors. Set costs are assessed per square meter, plus labor costs. Laboratory costs can reach 10% of the production cost and depend on the film length. Film length conversions are as follows:

  • 10 minutes: 274m (35mm), 110m (16mm), 343m (70mm)
  • 100 minutes: 2740m (35mm), 1100m (16mm), 3430m (70mm)

A 10:1 ratio is needed for raw film. For a 100-minute film, 27,400 meters of negative film are needed. Sound requires a 2740m copy (same as the standard positive copy).

Budget Control Mechanisms

Budget variance analysis helps identify and explain cost deviations. This involves starting with the final cost and working backward to identify contributing factors.

Economic Report of Production

The financial summary, or annex, explains the balance sheet and income statements, providing insights into the producer’s economic situation and financial results. This justifies costs to financiers and shareholders.

Review Question

The report provides additional information and clarification of the financial statements.

Short Report

Companies can present an abbreviated report if they meet these requirements for two consecutive years:

  1. Assets do not exceed €18,000
  2. Annual turnover is less than €36,000
  3. Average number of workers is not greater than 50

The short report should include the following:

  1. Company activities (audio-visual production)
  2. Basis of annual accounts presentation
  3. Distribution of results
  4. Assessment standards
  5. Fixed assets
  6. Social capital
  7. Liabilities
  8. Group and associated companies
  9. Expenses
  10. Other information (e.g., duties and obligations)
  11. Further information (e.g., unforeseen expenses)

Economic Documentation

  1. Inventory book and annual accounts
  2. General journal

Accounting Process Management

  1. Opening entry
  2. Journal information transfer to ledger
  3. Balance checks
  4. Accrual accounting
  5. Accounting adjustments
  6. Closing of accounts and balance sheet preparation

The profit and loss account and balance sheet form the company’s annual accounts.