Forecasting Top Tips

   
1) Contingencies Both budgeted contingencies and unofficial ‘pots’ are an important part of estimating a production’s final cost.  It is more art than science and the benefit of experience is the most valuable commodity here.  It can also have internal political complications as your contingencies may move the show into an overspend position. Always remember that you have a professional responsibility to forecast the final cost to the best of your ability.  With all this in mind here are some tips about contingencies:-

–          Total contingencies for your production should be in the production budget at the start.  In TV they are often in the region of 1 and 5% of the budget.  However for independent feature films, the contingency line item required by financiers and bond companies is often 10%.

–        Best advised to take a prudent, mildly pessimistic approach to the unknown but do not plan for worse case scenarios in your forecasts as significant underspends can be frustrating for producers keen to get most value from their budgets.

–        Areas regularly open to significant change include: design, locations, costume and VFX.

–        How numerically proficient are your heads of department?  You will be able to judge from the quality of their reports quite quickly how much confidence you can have in their forecasts.

–        How long is left to go?  Contingencies should reflect risks which should reduce as the production proceeds.

–        What is the risk appetite of the LP/PM?

 

2) Don’t automatically assume that an insurance claim will succeed Insurance claims are often subject to a deductible ‘excess’ and are not always successful. Make the claim as early as possible and liaise with the loss adjuster on the likely payout.

 

3) Ensure that the cost report is consistent with itself. The budget lines within a cost report are inter-linked.  For example, if you are projecting eight weeks of off-line edit in ‘post production’ you need to have eight weeks of off-line editor in ‘crew-edit’.

 

4) There is usually only one production budget Where a Line Producer/PM is given a budget at the start of a production they frequently find that the production has so fundamentally changed since it was budgeted that they want to re-budget to ascertain whether they are likely to be able to bring the production in on-budget. Where a production has already been financed it is unusual for a financier to allow a re-budget to occur. If this is the case, then it is best to stick with the existing budget and if necessary a cost report can be done before any expenditure has occurred with all costs in cost to completion to ascertain whether the production is on-budget.

 

5) Nominal ledger codes The Production Accountant should agree the nominal ledger account codes with the Line Producer/PM as early in the production process as possible. If the Production Accountant and the PM are using different account codes there is a danger that invoices will be posted to the wrong nominal ledger code.

 

6) Listen to ‘throw away’ remarks by heads of production In a meeting with a Head of Production a remark the Head of Production considers to be insignificant can reveal a potential cost or contingent liability. If, for example, a Location Manager mentions that the owner of a location has complained about damage or the state that the location was left in then this may result in a repair cost being incurred.

 

7) Beware budget lines that the PM says are ‘to budget’ Whilst it is not wrong to consider a budget line to be exactly on-budget the Production Accountant should beware if the PM has too many lines exactly so. This can indicate that the PM is not considering each budget line carefully but is instead just assuming the budget line to be on-budget. Assumptions can be dangerous.

 

8) Review the balance sheet items in a cost report Balance sheet items represent assets or liabilities.  The Production Accountant needs to review the assets to ensure that they exist (will debtors be paid and have allowances been made for the costs which are paid for from floats?) and the liabilities to ensure that they correctly reflect what the production owes (are there any debits on the purchase ledger that represent a hidden cost?)

 

9a) Logic errors in cost reports Where a cost report is in the form of a spreadsheet it is important to verify that there are no logic errors in the cost report such that it doesn’t cross-cast. It is worth regularly checking, for example, that total spent to date+ total accrued costs do equal total costs to date, that total costs to date+ total costs to completion do equal total production costs and that total production costs less the total budget do equal the projected over/underspend in the cost report.

 

9b) Development/script Quantify development costs as soon as possible and then, if possible, make sure that the production company is aware that the development period has ended and no further costs will be accepted relating to this period.

 

Refer to writers contracts to ascertain what the production liability is for scripts. Where there are several writers and they are paid in instalments dependant on certain milestones being met then it is easy to under or over-pay a writer.

 

Questions to ask yourself:

Have the correct subsequent use advances been budgeted?

Is there a format holder that will be paid for scripts not written? The contract for this might be old.

Is there an allowance for re-writes?  These are common on multi episodic dramas.

 

9c) Artists and extras A complete cast list can be obtained from the schedule and can be analysed to calculate artist costings and overtime.  The list can also be cross referenced to the casting advice notes and artists’ contracts.

 

The daily call sheets should give details of extras used.  It is then important to require extras agencies to invoice promptly so that the exact cost is quickly ascertained.

 

Questions to ask yourself:

What specific rights are required for clearance?

Does this affect all classes of artist from principals to stunts?

Have there been instances of stunt artists performing in more than one episode in a day? Check the PACT Equity agreement.

 

9d) Wardrobe/art department The person who knows best what the wardrobe/art department costs are  likely to be is the relevant head of department. Close and regular liaison with the head of department is fundamental to forecasting these costs.

 

Wardrobe and art department floats must be promptly accounted for by those departments so that the level of floats are kept to a minimum. A float advance represents a potential cost so the lower the level of unaccounted for floats the less uncertainty there is.

 

Costs for the wardrobe and art departments can be unpredictable and have a nasty habit of going up unexpectedly.  The Production Accountant should consider whether it is prudent to put a contingency aside for unexpected costs in these areas.

 

9e) Location costs Location fees are usually best controlled by close liaison with the Location Manager.

 

You will need to see evidence that they are breaking down their schedule and budgeting effectively in order to have confidence in their forecasts.  Be ready to offer advice on how best to do this.

 

Keep a close eye on the progress report for scenes not completed and make sure the additional pick up costs are in the Location Manager’s next forecast.

 

There is often a close relationship between Location and art department costs as good locations need less dressing and vice versa.  Beware of costs that are falling between two departments, make it clear to budget holders they are responsible for getting other departments to bear their costs, not you.

 

Location department floats must be accounted for promptly to keep them to a minimum. This is a department where there is lots of scope for additional cost and such cost often first materialises when floats are accounted for.

 

Unit base costs can be very high and it is therefore important that the Production Accountant is fully aware of the vehicles and drivers that are used. Very often unit base vehicles come as part of a package deal so the Production Accountant should obtain the contract/quotation for the package and then liaise closely with the facility company to ascertain variances/extras.

 

 

Location costs is another area where it may be useful for the Production Accountant to put aside contingency monies.

 

9f) Post production The Production Accountant must identify what the post production delivery requirements are and then ascertain that all such costs are allowed for in the post production quotation.

 

Post production is a very specialist area and the Production Accountant should therefore rely on the Post Production Supervisor (if there is one) for costings. If there isn’t a Post Production Supervisor then the Line Producer/PM must implement a system promptly to identify variances from the post production quotation.

 

VFX (visual effect) can be extremely expensive and costing them is a specialist area. The Production Accountant needs to identify areas where VFX may be required and then defer to experts to forecast the likely costs.

 

9g) Archive Archive costs can easily be overlooked. The Production Accountant should enquire of the Line Producer early on whether any archive is likely to be used and if so what source the archive is likely to come from and how much it is likely to cost (archive costs vary enormously depending on the source). It may also be sensible to check that the archive is cleared for the required number of screenings and for the correct world territories.
9h) Music Music clearances are a specialist area and the Production Accountant generally needs to rely on the expertise of others to ascertain the likely cost of the music to be used. Many broadcasters have blanket agreements for music used in their programmes and such music is then free of charge to the Production Company making a programme for that broadcaster.

 

Where music is extensively used in a programme, the Accountant needs to obtain a full list of music usage (including duration) as early as possible and details of the contracted cost of each piece of music.

 

Where a piece of music is used several times in a programme the Production Accountant should be careful that it is correctly costed. For example, many music companies charge a set fee per half-minute of a track but two music cues of 10 seconds each would incur two half-minute fees.

 

The Production Accountant should verify that music invoices do cover the required number of territories and world territories.

 

9i) Travel and transport There is enormous scope for inaccurate forecasting in this area and the Production Accountant should therefore consider putting aside a general contingency for unexpected costs in this area.

 

Where a production has a large number of production vehicles the Production Accountant should be aware that vehicle usage will correspond to the crew members contracted time. If a Location Manager is contracted for eight weeks and is paid for car usage you would expect to see eight weeks of car usage (and associated petrol costs) forecast in the cost report.

 

Fuel cards help with the consistent monitoring of weekly expenditure and reduce the amount of petty cash you have to deal with.

 

Ensure that any person responsible for booking transport has an appropriate system for logging the expenditure and reporting it to you.

 

Travel is another area where costs are hard to estimate and where a general contingency for unexpected costs might be sensible.