Commercial Production Cash Flow Management 101

On any given day, there are a multitude of back-office affairs functions your team takes on to ensure cash flow is being appropriately managed— tasks like tracking expenses, creating a detailed budget, negotiating with vendors, forecasting cash flow, and more. 

Conversely, producers take on the pivotal role of ensuring their payment terms align with the approved budget. Staying within budget and maintaining a stable relationship with your brand or agency is of utmost importance.

Having a tight leash on your cash flow throughout production can avoid added expenses and possible production delays. But not every production is smooth sailing in terms of aligning with budget. Extra expenses come up all the time. Knowing how to handle the unexpected is the key to success. Read on as we explore the ins-and-outs of smart cash flow management for your commercials.

Cash Flow Management 101 | Why It’s Important | Best Cash Flow Management Softwares

What is Cash Flow for a Commercial Production?

Cash flow in the context of a commercial production refers to the movement of funds into and out of a production project over its lifecycle. This includes both the revenues earned and the expenses incurred in the creation, production, and distribution of a commercial. Understanding and managing cash flow is critical for the financial success of a commercial production. Here's a breakdown of the key components.

1. Pre-production costs

This includes expenses incurred in the initial stages, like scriptwriting, casting, location scouting, and initial set design. These costs occur before actual filming starts.

2. Production costs

These are expenses related to the actual filming of the commercial. It includes costs for equipment, sets, props, salaries for cast and crew, location fees, and any travel expenses.

3. Post-production costs 

After filming, the commercial needs to be edited, sound needs to be mixed, and visual effects may need to be added. This stage also includes costs for editing software, special effects, and post-production staff.

4. Marketing and distribution costs 

Once the commercial is ready, it needs to be distributed and marketed. This can include fees for airing the commercial on various media platforms, marketing materials, and promotional events.

5. Revenue 

The primary source of cash inflow for a commercial production is usually the client or sponsor who has commissioned the commercial. The payment terms might include upfront payments, progress payments during the various stages of production, and final payments upon completion.

6. Contingency funds

It's common to have a contingency fund to cover unexpected costs or overruns, which are not uncommon in production projects.

Why Is Cash Flow Management Important for Commercial Productions?

Ensuring producers have effective cash flow management over your commercial can distinguish between a successful production or the risk of a financial flop. Without proper cash flow management, a production company can quickly find itself in financial trouble– struggling to pay bills, invest in future projects or maintain financial health. Here, we list several reasons why cash flow management is crucial for commercial productions.

1. Budgeting and planning 

Commercial productions must be adequately budgeted so that there are no surprises. Working with a qualified line producer can help you develop a realistic production budget that fits your commercial needs and is even prepared for unexpected expenses.

2. Liquidity  

Commercial productions must match agency or brand payment terms to meet production obligations. Managing cash flow ensures enough liquidity to pay crew, actors, and suppliers, preventing disruptions.

Payroll alone is 50% of the total budget. Ensuring payment terms align with your budget is extremely important to get labor paid to comply with legal and union guidelines. Working with a qualified payroll provider is the best plan to ensure payments are made on time to avoid added fees.

3. Risk Mitigation 

Productions often face various risks, including delays, cancellations, or unexpected expenses like union grievances or claims. A good cash flow strategy provides a buffer for production to handle these unforeseen events without jeopardizing the output.

Working with a qualified finance team for your back-office production affairs - such as CMS Productions - can help navigate your production through hiccups that allow producers to focus on their work.

4. Financial health and creditworthiness 

Producers must establish good cash flow when securing loans or additional investments on future projects if needed. Having an impeccable payment record establishes credibility with the brand or agency and further solidifies important relationships producers should have with their sponsors.

5. Long-term growth and sustainability 

Successful cash flow management contributes to the long-term sustainability of a production company, allowing it to invest in future projects and grow its reputation in the industry.

6. Overages 

In the worst-case scenario, your production goes over budget. What happens next? Producers must speak to the brand, agency, investor, or sponsor to approve the additional expenses. If the agency does not approve additional funds, your production company will be held accountable for the overages. 

Best Cash Flow Management Software For Film & Commercial Productions

Whether you’re a seasoned producer, meticulous production accountant, or an advertiser seeking to keep your finances in check, the right tool can make a world of a difference. From comprehensive budgeting platforms to user-friendly accounting software, the market is brimming with solutions tailored to the unique needs of the commercial production industry.

Below, we’ve curated a list of the best software for managing commercial cash flow. These recommendations are based on functionality, user-friendliness, and their proven track record in the industry. Whether you’re handling a small-scale project or overseeing a large production, these tools are designed to bring clarity, control and efficiency to your financial management process.

Best Cash Flow Management Software for Commercial Productions
Software	Best For	Key Features
Movie Magic Budgeting	Line producers, production accountants	Detailed budget breakdowns, cost monitoring, scenario planning
QuickBooks	Small to medium sized productions, freelancers	Invoicing expense tracking, financial reporting, user-friendly interface
ProductionPro	Production managers, coordinators	Visual planning, digital production binder, script breakdowns, budgeting integration
StudioBinder	Producers, production managers	Call sheets, shooting schedules, script breakdowns, task management
Celoxis	large-scale productions, ad agencies	Advanced project scheduling, resource management, expense tracking, workflow automation
Wave	Independent producers, small companies	Free service, invoice creation, receipt scanning, simple expense tracking
Zoho Books	Small to medium productions, cloud-based needs	Online accounting, invoicing, expense tracking, automated workflows, cloud access
Hot Budget	Line producers, production accountants	Budgeting software, simple top sheet, seamless payroll log
Showbiz	Producers, production managers	Self-updating OT calculator, seamless PO system and petty cash

1. Movie Magic Budgeting 

Movie Magic Budgeting is a comprehensive budgeting software specifically designed for film and television production. It allows for detailed budget breakdowns, cost monitoring, and scenario planning.

• Best for: Line producers and production accountants in the film and tv industry 

• Why: It offers industry-specific features and formats, making it ideal for handling the unique budgeting needs of commercial productions.

2. QuickBooks 

QuickBooks is a widely used accounting software that offers features like invoicing, expense tracking, and financial reporting.

• Best for: Small to medium-sized production companies and freelance producers.

• Why: Its ease of use, widespread acceptance, and comprehensive accounting features make it suitable for general financial management in various types of productions.

3. ProductionPro

ProductionPro focuses on visual planning and digital production binder, integrating script breakdowns, budgeting, scheduling, and collaboration.

• Best for: Production managers and coordinators, especially in collaborative environments.

• Why: It enhances the organization and sharing of production-related documents and budget information, streamlining the workflow and communication.

4. StudioBinder

StudioBinder is a production management software offering features like call sheets, shooting schedules, script breakdowns, and task management.

• Best for: Producers, production managers, and team leaders.\

• Why: It provides an all-in-one platform for various aspects of production management, including financial aspects.

5. Celoxis

Celoxis is a comprehensive project management tool offering advanced project scheduling, resource management, expense tracking, and workflow automation.

• Best for: Large-scale productions and advertising agencies looking for an all-encompassing project management solution.

• Why: It offers robust features for managing complex projects, which can be particularly useful for larger productions with extensive financial management needs.

6. Wave

Wave is a free, user-friendly accounting software designed for small businesses, offering invoicing, receipt scanning, and expense tracking.

• Best for: Independent producers, small production companies, and startups.

• Why: Its cost-effectiveness (free) and simplicity make it ideal for smaller operations with straightforward financial management needs.

7. Zoho Books

Zoho Books is an online accounting software with features like invoicing, expense tracking, and automated workflows.

• Best for: Small to medium-sized productions that require a cloud-based solution with mobility.

• Why: It offers a good balance of features and usability, with the advantage of cloud-based access for managing finances on the go.

8. Hot Budget

Hot Budget is an online user-friendly commercial budgeting software that focuses on improving your budget for your next bid. 

• Best for: Line producers and production accountants to best prepare for their production budget.

• Why: It offers a more affordable option, and its software allows for efficiency with top sheet features, and a client-friendly format.

9. Showbiz 

Showbiz is a film budgeting software that offers special features such as self-updating OT calculator, seamless purchase order system and petty cash workflow. 

• Best for: Producers or production managers working on commercials and music videos.

• Why: It’s a one-stop shop for film budgeting solutions with built-in calculators for easy overtime tracking, streamlines purchase orders system and petty cash workflow.

Managing Your Production’s Cash Flow Like a Pro

It's a no-brainer that the importance for any producer to have productive oversight over cash flow during production will determine the financial success of your commercial film and can further establish the credibility and reputation necessary for loans and additional funds on future commercial projects. 

Producers' primary focus during productions involves planning, coordinating, directing, editing, distributing, among other essential tasks. Topping the added responsibilities of effective cash flow management can become daunting for any skilled producer. 

CMS Productions has a qualified team of experts who can streamline your back-office production support services for your next commercial. Contact us today to set up a call.

FAQs

• What is the biggest cash flow challenge in commercial production?

  The biggest challenge is often the timing mismatch between income and expenses. Production companies usually incur upfront costs such as staff, equipment, and location fees, while income from clients or sponsors might be received much later, creating cash flow gaps.

• How can production companies improve their cash flow management?

  Effective cash flow management can be achieved through accurate budget forecasting, negotiating favorable payment terms with clients and suppliers, regular monitoring of cash flow, and maintaining a contingency fund to handle unexpected expenses.

• Why is a contingency fund important in commercial production?

  A contingency fund is crucial as it provides a financial buffer for unexpected expenses or emergencies. Without this fund, unforeseen costs could lead to cash shortages, potentially causing project delays or compromising production quality.

• How important is it to track real-time expenses during production?

  Real-time expense tracking is essential. It enables early detection of budget deviations, allowing for timely adjustments. This proactive management helps prevent overspending and maintains a healthy cash flow.

• What happens if a production goes significantly over budget?

  If production goes over budget, it can strain financial resources. Solutions may include negotiating additional funds from clients or investors, using contingency funds, or implementing cost-saving measures. Consistent budget monitoring and proactive management are key to preventing and managing over-budget situations.