Bank Accounts

Initial considerations

Should the production have its’ own dedicated bank account?

The decision as to what bank accounts are required is generally governed by the policy of the company concerned.  Large productions will almost certainly require a separate bank account but it is sometimes sensible for a company with several small projects in development to put all developments through one designated development bank account, only opening a designated production bank account when the programme is commissioned.

What accounts are required?

For most UK independent productions a recommended structure would be:

  • Sterling current and deposit accounts in the name of the production company. By arrangement with the bank you should be able to ensure that the current Account balance ‘zero’s out’ at daily close of business and transfers into the deposit account so that some interest can be earned when the bank is closed. They will make a charge for this service.
  • A foreign currency account (if relevant). This will certainly be required if you have an overseas location shoot but could also prove to be of use if you are receiving funding in US$, Euros etc, and have to make payments in those currencies, as you can avoid conversion costs on both incoming and outgoing transfers.
  • Trust account.   Some funders require that production bank accounts are set up as ‘trust accounts’ which operate under a special mandate that the large banks have pre-approved. These accounts operate in a similar way to a normal bank account but the trust account funds are held in trust for the funder and if they wish to, the funder is able to take over the operation of the bank account without requiring authority from the production company.  Furthermore, in the event of insolvency, trust bank accounts are ring-fenced such that they are not available to creditors but are available only to the funder.  If the funder stipulates that a trust account must be used, the Production Accountant will need to obtain the mandate from the funder and will need to ensure the mandate is signed by both the funder and the production company before the bank account can be set up. It is not generally possible to open a normal bank account and then change that bank account into a trust account.  Furthermore, trust accounts’ title should carry the name of the production company, the name of the company whose funds are in trust and must also indicate that the bank account is a trust account.

E.g. ABC Limited receive a commission from Sky TV for a production called ‘Cats’ and Sky require that the production is operated through a trust account then the name of the bank account should be ‘ABC Limited ‘Cats’ Sky Trust Account’.

Who should be able to approve payments?

Large scale operations (such as the BBC) have well defined controls over payments and the Production Accountant has to operate within the requirements of such organisations. For independent productions, best accounting practice requires that payments can only be made from a bank account when approved by at least two authorised signatories. Furthermore, no-one should authorise a payment to themselves; such payments should be authorised by the other bank signatories.

Funders and production companies  may also require specific people to authorise payments in excess of certain limits and the Production Accountant needs to ascertain what the requirements are for his/her production.

Best practice would also generally require that the Production Accountant and Line Producer are not able to make a payment without it being approved by the Producer or a Director of the company. This division of authority is usually achieved by specifying in the bank mandate that the Line Producer or the Production Accountant can sign and that the counter signatory then has to be the Producer or a Company Director.

The Production Accountant also needs to consider what controls should operate over online payments. Many banks already have an online approval system that requires two separate people with different passwords to approve online payments but where this is not the case, best accounting practice would require that the Production Accountant has to ensure at least two authorised people to sign off a list of the payments that the Production Accountant is intending to make online.

 

Account signatories

An example of account signatories control might be as follows:

Each cheque requires a minimum of two signatures on every outgoing payment, either one each from lists A & B or two from list A

Signatory list A: Producer, Line Producer, Production Manager, Production Company Director

Signatory list B: Production Accountant, Assistant Production Accountant.

However, individual companies may have different requirements.

 

Account operating

When presenting cheques/wire transfers/BACS etc for payment approval and signature, the Production Accountant should ensure that all supporting documentation duly checked and authorised, is attached.

Allocated passwords that have been agreed with the bank for validation of all non-cheque payments should be kept secure and separate from any other bank documentation on file. Unused cheques should be kept in the safe or a locked cupboard.

 

Bank reconciliations

Bank rec.xlsx

Every production bank account must be regularly reconciled to the accounting records (at least weekly but on larger productions a daily reconciliation may be necessary).  The minimum requirement is that bank reconciliations are produced to support every cost report.  All differences, no matter how small, must be investigated and resolved.  A 10p difference on the bank account might be made up of one item of £100,000 and another of -£100,000.10!

The reconciliation should start with the bank statement balance and then adjust/deduct uncleared items to agree back to the figure on the Trial Balance. Ideally this should be done by a member of the accounting department and then checked and signed off by the Production Accountant.

All banking transactions, both receipts and payments, should be recorded under the Bank section of the Production Accounting system as soon as they are processed. If the payment system is computerised this will happen automatically but there will be instances where transactions may require manual input (e.g. incoming funding, direct debits, bank charges etc), and these should be journalled into the system as soon as they are identified.

On larger productions it would be useful to download statements on a daily basis so that they can be checked and any differences, or items requiring manual input, be attended to. This saves time when the full reconciliation is due.

The bank reconciliation should always be prepared by one person and signed off by a second party.

When the bank reconciliation is prepared, it should be reviewed for old outstanding un-cleared items. Lodgements generally appear on the bank statement very quickly and online payments older than a week and cheques older than three months) should also be investigated.