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Shaudi is a Seattle-based musician, theatre artist, writer and social media marketing specialist. She holds degrees from Berklee College of Music and the University of Washington School of Drama.
At Wrapbook, we pride ourselves on providing outstanding free resources to producers and their crews, but this post is for informational purposes only as of the date above. The content on our website is not intended to provide and should not be relied on for legal, accounting, or tax advice. You should consult with your own legal, accounting, or tax advisors to determine how this general information may apply to your specific circumstances.
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Behind every successful film is a solid financial foundation—and that foundation starts with knowing how to read your balance sheet and income statement, and understanding how the two complement each other.
Balance sheets show your company’s assets on one side and liabilities on the other—two sides that should always balance. This document offers a snapshot of your production’s financial position at a specific point in time.
On the other hand, film income statements—also known as profit and loss statements—track your revenue and expenses over a set period, offering insight into profitability.
Together, these financial reports provide a more complete picture of your film’s fiscal health.
While production accountants rely on balance sheets and income statements regularly, these reports are equally essential tools for productions looking to attract investors or distributors, producers making budget decisions, and for financiers evaluating the project’s financial viability.
Both the balance sheet and income statement deal with financial activity—very broadly speaking, they help track what’s coming in and going out.
The key difference is that the income statement covers a period of time, while the balance sheet captures a single moment. The income statement provides helpful context for the balance sheet’s more detailed information.
Think of the income statement as a wide shot, and the balance sheet as a closeup—you can use the balance sheet to zoom in on specific details that give context to the broader financial picture.
During pre-production, the income statement helps track early development expenses—such as script development, legal fees, and casting—and provides a way to compare budgeted costs to actual spending as the project progresses.
It’s the document that’s most helpful for projecting revenues and expenses over time, helping you compare anticipated costs for different artistic choices. This document helps you model scenarios—for example, can we afford to spend $50,000 to hire 500 extras for the film’s climactic scene? What happens if we spend $15,000 to do it with CGI instead?
Your balance sheet, on the other hand, is less useful for making detailed budgeting decisions, but does show you available assets, including tracking pre-production funding secured and cash on hand, and helps indicate your financial readiness to enter the production phase.
Productions can get expensive fast—unexpected costs are the norm. Your income statement is crucial for helping the production monitor day-to-day spending on things like permits, crew, and equipment. It also helps your team flag any potential budget overruns while there’s still time to address them proactively.
During this phase of the project lifecycle, you may still be taking on new liabilities like loans and deferred payments to cast or vendors. Your balance sheet helps you track your liabilities, as well as your working capital and new or remaining assets.
In post-production, there are so many new costs to track, including items such as sound design, color correction, scoring, and marketing prep. Look to your income statement to help you keep track of costs like this and potentially help identify areas for cost control.
Many productions do find at this point in the process that they need additional financing to get their film over the finish line—for example, special effects or reshoots turn out to be more expensive than originally budgeted for. Your balance sheet can help you assess whether this is the case for your project, as well as keep track of your assets.
Once your film is streaming and/or playing in theaters, your income statement helps track revenue from box office, licensing, and sales. These numbers are particularly crucial to manage because they affect repayment schedules. Your income statement compares project income versus your total project expenses in order to assess profitability.
Delivering your film can trigger a high volume of financial activity, much of which is reflected on your balance sheet.
This includes any revenue-related assets, such as payments from distributors, or income from tax incentive programs that is expected but not yet collected. It also captures transactions like repayments of loans and profits distributed to investors.
Overall, it offers a snapshot of your production’s financial position post-release, including retained earnings or accumulated losses.
Now that we’ve covered the value of the film income statement as a financial tool, let’s take a closer look at how exactly it helps you track profitability over your project’s lifecycle.
Your film income statement shows revenue, cost of goods sold (COGS), gross profit, operating expenses, and net income.
Revenue includes income line items like money received from distribution deals, presale agreements, and residuals owed to the production company.
Your COGS are essentially your production costs, since the “goods” in this case refer to your film. This includes expenses like fees for cast and crew, locations, costumes, special effects work.
Your COGS are subtracted from your revenue to calculate your gross profit.
Operating expenses are distinct from COGS in that they relate to the business side of the film or film company. This includes administrative costs such as office rentals and production accounting fees.
Your operating expenses are subtracted from your gross profit to calculate your operating income.
So how can producers use their film income statements as a practical decision-making tool mid-production?
This document is extremely helpful for monitoring actual spend (captured as COGS) versus budgeted costs, meaning overspending can be caught early. If particular line items are going above projected costs, producers can decide where to cut back on other production expenses to stay within budget, or may decide that more financing is necessary.
Producers can use trends in gross profit to evaluate whether their production costs are sustainable relative to expected revenue from presales or distribution deals.
After using the document to forecast remaining expenses, a producer may feel it’s necessary to adjust staffing, shooting days, or resource allocations to keep the production on budget.
This income statement can also be used to communicate the project’s financial status clearly with investors and stakeholders to manage expectations.
In most cases, once a film is and delivered to distributors, there won’t be new COGS added since those are costs directly related to the hands-on production of the film.
However, operating expenses, particularly those related to marketing and distribution campaigns, typically become more active during this time.
Producers can use the film income statement to track those operating expenses against planned budgets. If operating expenses are too high relative to gross profit, producers might decide it’s best to scale back marketing efforts or find ways to cut costs at promotional events in order to protect the film’s net income.
In collaboration with their sales agents, producers can use income statement data—such as early revenue from initial territories or platforms—to refine distribution plans in other markets, adjusting release platforms, timing, or marketing spend to maximize profitability.
Your balance sheet, which captures a snapshot view of your production’s finances on the day the report is prepared, reflects your production’s cash balance, your accounts receivable (money that is owed to but not yet owned by the production), accounts payable (money your production owes but has not yet paid), loans payable or other production liabilities, fixed assets and equity.
Together with your income statement, these tools offer a fuller financial picture: the income statement tells the story of profitability, while the balance sheet reflects financial stability and risk.
For producers, the balance sheet is crucial for understanding your film’s financing structure. For example, a high accounts receivable line might indicate you’ve secured tax credits or presale deals, but haven’t yet been paid—meaning cash flow could be tight, even if the income statement looks healthy.
A large accounts payable balance could suggest you’re relying on deferred payments, which can be smart in early production phases, but risky if not backed by predictable future income.
If your production has utilized gap financing—short-term loans taken against anticipated revenues to cover the gap between secured financing and total production budget—you might see that reflected in your loans payable, signaling overextension if that number climbs too high.
The balance sheet is also a major aspect of the package financiers look at when considering investment in your project.
Financiers want to see a robust cash balance, a ratio of assets to liabilities suggesting responsible financing and lower risk for them, and equity that reflects meaningful producer or investor contribution, reducing your production’s reliance on debt.
On the other hand, if your balance sheet reflects low cash reserves or little or negative equity, particularly in the pre-production phase, these can be red flags for potential investors. If your balance sheet looks like this, it’s not necessarily a deal-breaker, but be prepared to contextualize these figures strategically and clearly show your financing plan and cash flow timing.
Making financial decisions based on your film income statement alone is making decisions without having the full picture in mind. The fuller context of the balance sheet is crucial for strategic decision-making.
For example, say you check your film income statement on day 14 of production, and see that you’re under budget—things look great and your production seems financially on track.
But when you check your balance sheet, you notice a large amount of accounts payable due in 90 days. That liability puts the project’s spending in a new context: if you don’t adjust now, you may not have enough cash to cover upcoming obligations. So you decide to start cutting costs in the production budget to stay financially safe.
Income statements and balance sheets are typically prepared and updated regularly throughout a film’s lifecycle. While the cadence can vary by project, it’s common for balance sheets to be updated monthly or even biweekly during active production. Income statements, depending on your project timeline, might be prepared monthly, quarterly, or annually.
Let’s take a look at how different members of the filmmaking team use these financial reports at various project stages.
While income statements track ongoing revenues and expenses—helping producers monitor budget performance in real time—balance sheets provide a snapshot of the production’s overall financial position at a given moment.
Particularly during pre-production and production, regularly reviewing the balance sheet enables producers to balance creative ambitions with financial realities.
For example, in pre-production producers can use the balance sheet to review assets like cash on hand and accounts receivable alongside liabilities such as loans and payables.
Then can use this information to assess their immediate ability to fund upcoming costs and decide whether they need to secure additional financing before production can begin. This type of insight can help avoid cash flow crunches down the line.
Production accountants use income statements and balance sheets to ensure accurate financial reporting and maintain compliance with industry regulations and investor requirements.
They track expenses against budgets, verify that all costs are properly categorized, and prepare regular reports—including weekly or bi-weekly cost reports and high-level investor reports—that provide transparency to producers, financiers, and auditors.
They also use these documents to ensure compliance with union and guild requirements. For example, accountants help productions avoid potential disputes or penalties by properly categorizing labor costs on income statements and verifying liabilities on the balance sheet to help confirm that all union obligations are met.
All of this helps the production stay on track financially and meet contractual obligations.
Investors and financiers may use these documents before committing to an investment to help determine a project’s viability. But even after agreeing to invest in a film, investors review income statements and balance sheets throughout the project lifecycle to evaluate the production’s financial performance and creditworthiness.
This information can help financiers decide whether to continue funding, release additional installments tied to specific deliverables, or invest in future projects from the same producing team.
Sales agents and distributors will use your income statements and projected balance sheets to determine whether a film’s ROI (return on investment) potential is in alignment with their expectations before agreeing to take it on.
This typically happens in late or post-production, although in some cases the film may be marketable enough to approach sales agents and distributors while still in pre-production.
Contrary to popular belief, accounting isn’t black and white. Nuance and context play an important role, including in interpreting balance sheets and income statements.
For example, it may appear at first glance that negative equity on the balance sheet always reflects a failure to secure funding on the project’s part, but that’s not always the case. As we mentioned earlier, having a credible financing plan in place can help provide important context.
It’s also more common than many people realize for a balance sheet to reflect negative equity in the middle of production. You're actively spending on the film, while anticipated funds from sources like tax credits or grants may not have been received yet.
Another common area of confusion is equating deferred revenue with actual income. Productions risk serious overspending if they treat deferred revenue—such as advance payments contingent on future deliverables, like grants dependent on project completion or distributor funds tied to delivering the finished film—as guaranteed funds.
Instead, be sure to track deferred revenue separately in your accounting system—and clearly show when it converts to actual income. Budget cash flow carefully, knowing some funds are restricted until deliverables are met.
Finally, many producers make the mistake of ignoring or mishandling contingent liabilities, such as profit participation deals or backend bonuses.
Producers working on small independent films in particular might think these contingent liabilities are something to deal with later—if the film ends up making money. But responsible financial management entails tracking these liabilities throughout the project, clearly disclosing them to stakeholders, and including them in your waterfall structure so that you and your investors can see what will happen if the film does make a profit.
We’ve covered the importance of these reports, and detailed how to utilize them wisely. But how do you actually create a balance sheet or income statement for your film?
Generally, it’s a best practice to entrust that task to experienced production accountants using film-specific accounting software like Wrapbook.
One reason accounting teams love working with Wrapbook is our platform’s intuitive, on-demand reporting capability. We’ve helped thousands of projects gain real-time insights into spend, using next-gen technology that’s backed by top-tier entertainment payroll and labor experts.
Accounting professionals and the right tools will make sure you’re using a consistent chart of accounts as you build your reports. A consistent chart of accounts ensures that every cost and revenue item is categorized the same way across departments and time periods, allowing for accurate tracking, clear reporting, and meaningful comparisons. Without this consistency, your financial reports can become fragmented or misleading, making it harder to assess performance or make strategic decisions.
Finally, skilled accountants and the right accounting software can help ensure your financial reports align with industry norms—like standardized line items and proper categorization—making them clear and credible to investors and distributors. This alignment helps build trust and streamlines due diligence when seeking outside financing.
When interpreted together, the income statement and balance sheet offer a powerful, complementary view of a film’s financial health—past, present, and projected. They help producers not only monitor spending and assess profitability, but also understand financing structure, anticipate risks, and make informed financial and creative decisions at every stage of the project.
These documents aren’t just reports—they’re essential tools for navigating your production’s financial reality and unlocking its full potential.
For an even deeper dive into interpreting your balance sheet like a pro, check out our guide to everything your balance sheet can tell you.
