Keeping up with Expenses
When you’re in the middle of the chaos of production, if you don’t already have a solid system in place to keep track of your expenses, you can easily lose control of your costs. I cannot stress enough how important it is (and how much it will literally save you) to take time up front to set up a proper system to keep track of all your expenses.
Whether you have an on-site accountant entering your costs into a simple excel document, or a remote team of accountants using more advanced accounting software from an entertainment payroll company, first thing’s first: you have to have a way to monitor and control all costs. That starts with setting up rules, forms and an approval system. There are a few ways expenses get paid, and you need to have a way to monitor and control each: Credit Card Payments, (Petty) Cash Payments, Check Payments and Bank Transfers.
- Step 1: Create a Master Folder for your “Accounting”, and create Subfolders for every one of the payment methods mentioned above.
- Step 2: Populate each Subfolder with the Templates you are going to have production use (and everyone should use the SAME template)
- Step 3: Designate one person (and that could be yourself) to keep these folders up to date like the production depended on it (because often times, it does!)
If you want accounting templates, click here.
You can download a Zip file with all the accounting templates mentioned in this post in Excel and PDF form.
Purchase Orders & Check Requests
Purchase Orders and Check Requests are a great way to monitor and approve production costs. Essentially whenever something has to be paid, a Purchase Order Form would be filled out with all the relevant information (Vendor, Description of goods or service, Price, etc.), approved by the Line Producer, and then sent to the accounting department to process payment. This way no checks or transfers can be made without the accounting department first making sure it’s within budget and approving the expense.
Check Requests are similar to Purchase Orders, except you would use a Check Request when asking for a reimbursement, whereas you would use the Purchase Order Form when requesting a check for the vendor directly. A Check Request would still have to be approved, so the employee filling out a Check Request for reimbursement better be sure that those reimbursement costs were approved prior to going out of pocket.
Often times, on small indie films, there’s no accounting team monitoring a Purchase Order system, and a lot of Petty Cash is being disbursed. There are three simple rules to ensure you always have control over your Petty Cash, even if you have $25,000 in PC floating around:
- RULE #1 – Make every person receiving Petty Cash sign a “Petty Cash Receipt” form — NO EXCEPTIONS. And make them count the money in front of you. They might say “I trust you”, and that’s nice and all, but if later something is off in the count, then you both have a problem. By making it a habit to have the other party count the Petty Cash in front of you every time, and signing off on it only after confirming the count, then there can be no excuses for either party.
- RULE #2 – They HAVE to fill out a Petty Cash Envelope topsheet and return that topsheet filled out with every single receipt listed (in the order that they are sorted inside the envelope.) The amount of receipts + cash returned must equal the amount they signed off for on their Petty Cash Receipt. When they do return the PC, sign the Petty Cash Receipt as “RETURNED” and give them a copy (or have them take a photo for their own records).
- RULE #3 – Every time you hand out Petty Cash, log it in a Petty Cash Log as “OUT”. When they return the receipts and cash back, log the amount of ‘receipts + cash back’ as “IN”. Your “BALANCE” should be $0.00 upon return. (For example, if you hand out $300 in Petty Cash, and the person returns $150 in receipts and $150 in cash back, your log would read “OUT: $300, IN: $300, BALANCE: $0”)
If you stick to these 3 simple rules, and you never make any exceptions, then there is no reason why you shouldn’t be able to keep complete control over any amount of petty cash circulating your production. (And Investors, EPs, Studio Heads love Producers/LPs/UPMs who can keep a tight rein on their cash!)
Credit Card Log
Credit Cards are a little trickier if you’re not using Purchase Orders to keep track of them, because you’ll have to rely on the Credit Card holder to keep their Credit Card Logs up to date. Auditing credit card holders regularly (and keeping the limits on the credit cards as low as possible) will be a huge benefit in keeping your costs on track. In my opinion, very few people should have credit cards, and preferably they should be limited to 2 or 3 people, whom know to run all costs through the Line Producer for approval. That way, even if you’re not implementing an official Purchase Order system, the Line Producer is still looking at the majority, if not all, the credit card purchases before they are made. By keeping a Credit Card log, the LP and/or accountant can review those regularly to make sure that no expenses were made that were unexpected or outside of the budget. Of course, these also show up on your Bank Statements, but it is much easier to keep track of these in a separate (more detailed) log.
These are really the easiest, because often times, they can only be executed by the person approving all costs, so (presumably) that person won’t execute any bank transfers that are not approved our outside of the budget. Because of this, I see little need to keep a log of all Bank Transfers, and I would just annotate in the Cost Report that the expense was made by transfer.
I keep going back to the Sun Tzu quote from the Art of War:
Management of many is the same as management of few. It is a matter of organization.
The same is true for your expenses. You’ll be keeping track of hundreds, if not thousands, of individual expenses on a single project. If you simply set up a good organization system up front, it doesn’t matter if you’re keeping track of 10 receipts or 1000 receipts, you’ll feel you have control over your expenses.