This new monthly series (Part 2 of 3) illuminates some of the mysteries associated with budgeting. This is not a step-by step guide, as each film and budget is unique and dependent on numerous variables, but rather, an overview that helps you enact best practices for your next project. Preparedness and adaptability are the most vital tools when maintaining a budget over the life cycle of a film.
See the full publication here, which includes a break down of a detailed sample budget for International and Canadian filmmakers.
Treading Carefully.
• Legal and interim financing are probably the most important items to predict accurately; they are expensive and can balloon quickly.
• Be mindful that it is hardest to keep track of expenses when you are in production, especially on the road. Create a system to do it effectively.
• When shooting abroad with local crew, consult pay regulations of that country regarding workers’ compensation, healthcare, union costs, pension, social security, etc. It will likely be different (and possibly higher) than in your own country.
• Expenses such as travel, archive, re-enactment or length of edit might be a red flag for some financiers. Be prepared to justify costs and shooting times. Identify legal costs if the subject matter of your film is controversial in some way.
• Typically budget between eight and 10 per cent for contingency, especially on higher budget films.
Working with Your Partners.
In a co-production, like all relationship, honesty is best policy.
• Accurately budget for your shared costs by being very honest with each other about what those costs will look like on each side. If the budget is artificially increased by repeated items, it will be harder to get the project financed.
• Sit down and go through each line to work out which partner will cover what, and then work out each of your contingencies based on what percentage of the entire budget each party contributes.
• Write into your contract that if either of you goes over budget, it’s that party’s responsibility to cover those costs from their own contingency.
If you are working with government funding bodies who do international co-productions all the time (and more often than you do), sit down with them and go through your budget. They will help you navigate relationships with your potential international partners.
Broadcaster Funding.
Regular reporting to your broadcaster is par for the course. You may need to prepare a cost report every couple of weeks, or at milestones like start of principal photography, end of principal photography, rough cut, fine cut and delivery.
Find out what your broadcaster doesn’t allow in a budget early on to avoid having to reduce or move money around in your budget. For instance, some don’t allow marketing or re-versioning costs.
Cash Flow.
Be conservative in estimating your tax credits (if applicable) for the finance plan, as you don’t want to overestimate what finance they can bring in. You will need someone (a lending body perhaps) to cash flow the tax-credit amount, and there will be an additional cost for that.
• Tax credits are applied to your financing, and are usually received six months to a year after project completion.
• Plan to receive at least 85 per cent of your estimated tax credit amount. You cannot consider all budget lines when calculating your tax credits, so know which are excluded inyour country.
• If you are going to bridge finance via a bank loan, find a bank with a reputable film and television department.
Review Engagement is a final cost report accompanied by an independent public accountant’s review engagement report. It is meant to ascertain whether or not your financial statements are believable or plausible, to receive your tax credits. While an audit is meant to give assurance
that your finances are free of misstatements, if you have a budget under $500,000 you may not have to do an official audit for your tax credits.
See the full publication here, which includes a break down of a detailed sample budget for International and Canadian filmmakers.
Thank you to John Choi, Nicolina Lanni, Al Morrow, Stewart le Maréchal, Kristina McLaughlin, Yael Melamede and Karam Masri for offering their advice and expertise