Cost Management TipsAs a production manager, it’s your duty is to keep your film project on schedule.  An important aspect of your job is budgeting and managing finances to keep production running smoothly.  Work closely with the Production Accountant to track the flow of expenditures and keep meticulous cost records.  Cost information will help guide your day-to-day financial decisions.  This article will provide you with information that will help you effectively manage production costs.

Common Cost Management Issues

Budget issues will inevitably come up during film production.  The Production Manager’s job is to resolve issues with minimal impact to the production schedule.  If a limited amount of money is available, compensate your crew first and discuss cash flow issues with your suppliers.  They are usually flexible about payment schedules.

Hopefully your budget has some built-in flexibility.  However, there will always be overages in some areas and savings in other areas.  It is a good idea to keep a record of all your cost changes.  If you are lucky, there will be savings in some areas.  If you realize that you are going to be significantly under budget, you can reallocate the extra money to other areas, improving the quality of the film.

You can compensate for some overages by moving actual or potential savings to areas in need.  If you’re still going to be over budget, it is wise to address the problem immediately.  You will likely have to involve the Producer and Executives to come up with a plan to cut down on spending or obtain more money.

The Official Cost Report

The Official Cost Report is a valuable reference for Production Managers, as it lists weekly expenditures and contains estimates for future costs.

An Official Cost Report contains the following elements:

  1. Weekly Costs – A record of the most recent expenditures.
  2. Costs to Date – The total amount of money you’ve spent so far on the project.
  3. Committed Costs – All upcoming purchase orders that have been completed but not yet paid.
  4. Total Costs – Committed Costs plus Costs to Date.
  5. Estimate to Complete – An estimate of the total amount of money you needed to complete production.
  6. Estimated Final Costs – Total Costs plus the Estimate to Complete.
  7. Budget – The amount allotted for each expense category. Always keep your budget in mind and compare it to actual costs.
  8. Variance – The difference between the Budget and the Estimated Total Costs.  If this number is positive, you are within your budget.

Two additional items are included with every Official Cost Report.  The first is the Trial Balance, which shows your actual bank transactions.  The second is the Explanation Memo.  This memo is used to address issues that might cause concern.  Questions about how money is being spent always come up, so it’s best to give information up front when possible.

As production moves along, remember that the final Official Cost Report will be audited.  To prepare, keep copies of all your records.  Make sure the Production Accountant is keeping copies of all agreements, call sheets, cost reports, explanation memos, citizenship lists, residency lists, and other documentation you deem significant.

Typically you will meet with the Producer each week.  It is a good idea to go over the most recent Official Cost Report and discuss any financial issues.  It is best to keep the Producer up-to-date on budgetary concerns.  Doing this ensures that when financial issues arise they can be handled quickly and efficiently, with minimal impact on the production schedule.

Special Types of Cost Reports

There are several special types of cost reports that differ from the regular weekly report.  Being aware of these types of reports will help you avoid future accounting or auditing issues.

1.  End of Prep Cost Report – This report begins on the first day of shooting and contains the developmental expenses.  It is important to complete this report as quickly as possible since it typically triggers financial drawdowns necessary for production.

2.  First Week of Wrap Report – This report is produced after filming is complete.   It is given to the Postproduction Supervisor and the Postproduction accountant.  It’s best to include as many details as possible about the budget.  The Postproduction Supervisor will be in charge of managing all the remaining expenses and expenditures.

3.  Co–Production Report – In the case of a co-production, you will have three separate cost reports–one cost report for each country and one combined report.  Each co-producer supplies a local cost report and they are audited separately.

4.  Series Cost Reports – When you are producing a series, a report exists for each episode and one combined report.  This is useful because it allows you to compare costs for each episode.  If one episode is particularly inexpensive to produce, you can apply the savings to another episode that requires a larger budget.

Tracking Day-To-Day Expenses

Since the official cost report only comes out weekly, it is essential for you to keep your own record of daily expenditures to help you handle daily cost management issues.  You can capture this information in a PM-Only Cost Report.  The PM-Only Cost Report is not an official document, but it is an important tool you can use to stay within budget and keep production on track.

There are several ways to maintain a PM-Only Cost Report

  1. Use a spreadsheet from accounting.  Export data from the Official Cost Report into an Excel spreadsheet and modify it to suit your needs.  Mainly, you will want to insert a column for PM-Estimated Costs.  When you use this method, it is easy to compare the PM-Only Costs to the Official Cost Report.  The only drawback is that the spreadsheet has to be reformatted each week when a new Official Cost Report is generated.
  2. Create your own spreadsheet.  The spreadsheet includes the Total Costs, Estimated Total Costs, Estimated Final Costs, Budget, and Variance as reported on the Official Cost Report.  Add a column for the PM-Estimated Costs.  This method requires weekly manual updates after each Official Cost Report is released, but the spreadsheet retains its format.
  3. Use Budget Software.  If you prefer, you can track your PM-Only Costs using a budget program.  In this case, you only add projected overages and negative estimates.  This is a simple way to track costs.  The main down side is that the format differs significantly from the Official Cost Report, making it more difficult to compare the figures.
  4. Use a Paper Copy.  If you don’t like using computers, a paper copy is always an option.  You can write your PM-Estimates directly on a photocopy of the Official Cost Report.  This is a simple method and makes it easy to compare the numbers.  The downside is that it involves manual calculations and a lot of transposing, which increases the likelihood of error.

It’s always important to keep your film project within budget.  Using money wisely and monitoring the budget closely is the key to success.  The tips in this article should help you keep a firm handle on your budget and ensure that your project finishes on time.