Keeping track of show expenses is critical for any production company, but it can be fraught with potential errors and pitfalls. Because small mistakes can yield massive consequences, it’s vital that producers understand both the risks and how to navigate them.
Don’t worry. We know an expert.
Production accountant Margot Ransom clued us in on the most common perils of expense-tracking for productions. We’ll outline her top 3 pitfalls that producers should watch out for when tracking expenses and break down exactly how to avoid them.
But before we dive in, let’s take a moment to meet Margot.
As the CEO and Founder of Prod Co Accountants, Margot Ransom is an expert in all things production accounting. She understands not only the financial complexity of running an unscripted production but also how to leverage that knowledge to optimize a production company.
Through Prod Co Accountants, Margot provides her clients with powerful tools and custom strategy for streamlining production finances. She and her team empower unscripted production companies to make smarter financial decisions faster, easier, and with greater confidence.
For this post, we mined Margot’s in-depth eBook: 3 Pitfalls to Avoid When Tracking Show Expenses. The eBook distills firsthand knowledge and expertise into an invaluable primer for business-savvy producers. In the following sections, we’ll dig into Margot’s insights and break down how you can apply them to your own production company.
Every production company is unique, but some principles are universal. Your company may specialize in reality TV, feature films, commercials, all of the above, or something completely different. Paying attention to the pitfalls described below should still be considered best practice. These simple concepts can help keep you out of financial trouble and at the top of your game.
Please note that this post is no substitute for the consultation of a qualified accountant. Before making any major financial decisions for your production company, be sure to seek the advice of a professional like Margot.
Building an effective budget is the first step toward protecting the financial success of a production. However, it is equally important that the budget be accurately executed and adjusted to meet the realities of a shoot over time. That’s why it’s so important for a production to account for every single expense it incurs.
Here are a few missed expenses that Margot says her clients commonly report:
A few missed costs here and there might not seem like a big deal, but they add up over time. Even the smallest of mistakes can compound to create massive budget problems in the long run.
At best, an unexpected overage is inconvenient. At worst, it can bring your production to a standstill and drive your company to the brink of a financial disaster.
In the heat of a shoot, how does a production make sure it captures every cost? When juggling multiple projects, how does a production company keep expenses from slipping through the cracks?
Whether it’s for an individual production or an entire production company, accurate reports are the key to making informed financial decisions. In fact, when we spoke to Margot about the challenges of uneven cash flow, she told us that accuracy in reporting should be at the core of a production company’s financial operations:
“The most important thing for all financial areas of the business is visibility. By that, I mean accurate, up-to-date data [for the company’s costs and cash flow].”
Accurate reports offer a lens for viewing your financial health and a framework for adjusting long-term budget strategies. Without them, your production company is essentially operating in the dark.
Margot suggests that production companies focus on reconciliation to keep financial reports accurate and up to date. This means reviewing all known transactions against both bank and credit card statements to make sure they match.
It can be a manual and time-intensive practice, but one that’s well worth the effort. By reconciling your bank AND card transactions, you give yourself the opportunity to catch and correct overlooked expenses before they compound into serious problems. You can also use the experience to improve recordkeeping systems and procedures.
For best results, reconciliation should occur on a regular, recurring basis. In her eBook, Margot recommends working through the process monthly:
“Going through your expenses with a fine-tooth comb every 30 days is an excellent way to stay on top of your finances (making things even easier come tax season!).”
On individual productions, producers may prefer to review transactions more frequently. Coordinate with your accounting team to determine the ideal reconciliation procedures for your project.
Using outdated software to manage production finances can increase the risk of accounting errors. The wrong software can lead your team to generate inaccurate reports, which makes it more difficult to catch errant expenses.
Margot points out that outdated software is particularly risky for professional filmmakers:
“The production industry is incredibly unique. How you operate, hire, and produce shows is nuanced and complex. Although several legacy software platforms are built with production in mind, the reality is that many don’t follow GAAP (Generally Accepted Accounting Principles) to the letter of the law.”
The inaccuracies of outdated software can force you and your team to do more work in the long run. Fortunately, there’s a relatively simple way to keep up to date.
By combining systems for business and production accounting, you minimize the risk of software-driven errors when tracking your expenses. It creates an overlap that allows you to produce both standard financial reports and production-oriented reports without letting expenses fall through the gaps in between.
For example, accounting for production incentives can be quite complex. Even if an individual production accurately accounts for an incentive, a failure to account for its effects on your corporate books can have serious consequences for your production company. It could create a cash flow deficiency that interferes with the financing of other productions or even the company as a whole.
When choosing software solutions for your production company, Margot recommends that you consider the following tips:
Margot also stresses the importance of clarity and speed. Your production company needs tools that provide reliable information exactly when you need it.
Wrapbook is a unified tool for managing payroll and production accounting. Our accounting features empower you to track all your production’s finances from a single login within a single powerful platform.
The intuitive Wrapbook dashboard brings your production’s most critical records and tasks together in one place. You can access your budget, run your payroll, monitor costs, and much more with a few clicks.
All of this is supported by Wrapbook’s dedication to compliance and data security. Our platform is constantly updated to accommodate the latest federal, state, and union guidelines. We offer best-in-class data security with SOC Type 2 compliance to keep your information as safe as possible.
With Wrapbook, you can make better financial decisions faster.
The production industry is unique. The flow of work, personnel, and money is unlike what you’d find in any traditional business ecosystem. Every film is its own temporary business. Every TV show has a period where it does nothing.
To run an efficient production company, producers need financial specialists who understand those idiosyncrasies.
In other words, they need experienced production accountants.
An accountant familiar with production can help protect your company from risks that an accountant lacking that experience might not even consider. They’ll be able to track expenses accurately and easily integrate them into your company’s financial reports.
As a result, your company will be less prone to avoidable mistakes, and you’ll endure fewer avoidable headaches.
However, hiring an accountant with production experience is more than just a protective measure. As the saying goes, the best defense is a good offense.
When your production company is growing, the expertise of a qualified accountant is invaluable. Margot notes that production-specific accounting professionals - like those at Prod Co Accountants - can not only protect producers but also empower them in several surprising ways.
An accountant with a production background can enable you to:
More importantly, a production-qualified accountant can increase confidence, clarity, and freedom when managing your company. They’ll make your finances easier to understand, providing better information that you can use to make better decisions.
Ultimately, the right production accountant will allow you to put more time and energy into the work that really matters to you.
When tracking show expenses, consistent due diligence is key. If you always make sure your production company has the best information, tools, and people, you’ll be able to avoid the pitfalls of tracking expenses with ease.
If you want to further optimize your production finances, be sure to take a hard look at Wrapbook. Our platform combines payroll and cost management with innovative software to bring you one powerful solution. With Wrapbook, you can work smarter, wrap faster, and collaborate more effectively.
Find out more here.
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.