What is the lifeblood of filmmaking?
Is it the story?
The magic that happens when a group of skilled individuals come together to make something great?
I really wish it was any of these things.
But here’s the sad reality: it’s money.
Money is the thing that enables us to bring our ideas into reality.
And regardless of your budget or the scale of your production we all know: in order to keep a film running you have to move money around a lot.
As a producer, line producer, or someone else trying to get a project off the ground you might have questions about money and filmmaking.
- What do I need to consider?
- What do I do myself and what do I outsource?
- What does an ‘ideal’ production look like from an accounting perspective?
- Where can a bookkeeper help?
- Do I really need a production accountant?
- How do I build the right team for my production?
This series will be your all encompassing guide to tax, accounting, bookkeeping and generally managing all things ‘money’.
We’ve broken each stage of production down and considered
- What should happen each day
- What you need to look out for
- How to manage the money more seamlessly (and claim the producer offset at completion)
This series is part guide, part advice and part ‘day in the life’.
Let’s dive in.
While calling your accountant might not be at the top of your list when you begin development, money is probably still front of mind. Whether paying for a scriptwriter or editor, or buying an existing property, it’s time to start keeping records.
Ensure you have a permanent record of all expenses, and any supporting documentation. It’s good for you and for the final production – reimbursement will be easier once the production is financed if you’re got the right records on hand.
This is the first point in a production that you might give us a call – but it’s more likely that a line producer will take the reins.
You’ve got your script and your project is considered market ready – it’s time to look at scheduling and of course budgeting.
In Australia, Screen Australia A-Z is the industry standard format for production budgets. If you’ve been involved in any kind of production before, you’ll know how important this is for raising finance.
Your budget is the basis for your production’s finance plan – which is when we get to start talking about the Producer Offset, as well as private investment, distribution guarantees, loans and other funding. You’ll learn about some of the ways you can handle and manage these funds as we walk through pre-pre-production below.
Finance, of course, means a green light.
Which also means it’s finally time to call your accountant. We’ll often come in at this stage to prepare a cashflow. We’ll match up the budget with when money will come in from various sources and the production plan. You never want a production to run out of money part-way through, and having and accurate cashflow from the start is one of the best ways to ensure that this won’t happen.
We all know that the phase before pre-production (pre, pre-production!) is one of the most important parts of any project.
It’s when the initial ideas happen.
You’re excited to bring this thing to life. The project is fresh and you’re gaining momentum.
It’s also the most important time to get your business foundations in order for smooth sailing down the line.
Determine your legal structure
Do you need to set up a Special Purpose Vehicle (SPV)?
A Special Purpose Vehicle is an entity set up specifically to handle the business of your production. It keeps your production isolated from any parent company, which helps you control risk and manage all business operations from within a single place.
Your SPV might pay your production company for overheads or other expenses, keeping the costs of your production clear and segregated from other expenses.
If you plan on utilising the Producer Offset – especially if you are looking to borrow against it – then you should seriously consider setting up an SPV.
Let’s say you want to borrow against your Producer Offset. You prepare all your documents and head to the bank. The bank manager looks at your current business (not the SPV) and sees your last tax bill. They know that the ATO is going to take a chunk of your Producer Offset before it arrives in your account. This means that they won’t get paid. What would you do in their shoes?
The best case scenario is that your borrowing power is limited (i.e. they give you less money). The worst case scenario? They don’t fund you at all.
While this example might have you running to set up your SPV immediately, please know that it isn’t appropriate in all scenarios.
There are costs involved. If you are delivering a short film, for example, the cost could make a huge impact on your budget.
It’s all about weighing up risk versus reward and getting advice from the right people.
Sort out your tax registrations
GST. ABN. PAYG.
These little acronyms are hugely important to the ongoing success of your production. Tick the boxes on all of your tax registrations as early as possible.
Organise your bank accounts
With your SPV and tax registrations in order, it’s time to head to the bank.
Decide what accounts you need to manage the production cleanly and efficiently.
We often advise producers to set up two accounts
- a higher interest account to manage investments in the project
- a separate transaction account for the day-to-day operations
This keeps your different transaction types separate and assists with account reconciliation and management.
This isn’t just kind to your bookkeepers, but also to yourself. You’ll find it easier to take a quick assessment of your finances each time you check those accounts.
At this stage you’ll also need to consider who the signatories might be on each account. If you need two signatures to withdraw funds, what impact will that have on managing the day-to-day payments during production? A production can be a long-term commitment. Who are the right people for the job?
Pick your systems
We tend to work in Xero, but there are a number of accounting systems out there that are appropriate or small, mid-sized and larger productions.
The important thing is that
- The right people have access to your systems
- The system ticks the basic boxes of handling invoicing, payroll and expenses
- Any transactions from development are moved into the system (and under the SPV – if you’ve set one up) as soon as possible – this saves tax headaches later on
If I could leave you with one thought about pre-pre-production it’s this: get your money in order early.
Seek advice where you need to. Make sure you understand your legal structures and obligations. And please consider the team you want to have around you once you start pre-production.
We’ll tackle exactly what does, should and could happen in pre-production time.
Until then, if you need any assistance in managing the business of your current or next production, please get in touch for a free consult.
As creators and producers ourselves, we know Australian film and television, and how to manage your money within the industry – at any stage of production.
A note on this article
Information provided by the Above the Line Accounting on this website is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice.