How Production Transparency Can Impact Your BudgetSeptember 8, 2017
Building from last week’s “Cliffs Notes” on production transparency, this week we take a look at case studies and examples of how this very topic can directly impact your budget.
Whether it’s internal or external, having a resource for production expertise can lead to real savings for advertisers.
Below are a few real-world examples of how a lack of transparency can lead to increased costs:
Here in the United States, bids for TVC/video production shooting and post production are often on the Association of Independent Commercial Producers (AICP) and Association of Independent Creative Editors (AICE) forms. However, the scope of work for digital, photography and experiential projects are often in different formats with varying levels of detail and specifications. This makes it extremely difficult to compare across bids submitted. A best practice is for the advertiser to utilize a standardized template with all the required specs and appropriate level of detail (similar to what is in practice for TV and video). This allows for a smooth pre-bid meeting and the ability to make smart business decisions regarding costs.
Related Party Transactions with Bidding:
The ANA Production Transparency Study noted cases where related party transactions were not disclosed leading to various competitive bidding issues. In a recent project, a freelance producer who also owned a production company wanted that company to submit a bid for the project. In this instance, since an external production consultant was involved, the relationship was disclosed and bids from all production companies were received and evaluated by a 3rd party resource. Can you imagine what would’ve happened if the production consultant hadn’t required proper disclosures before bidding began?
During a recent bid review, a line listed “equipment” with an associated dollar figure. When asked for clarification, the specific items (grip, lighting, back drop, gels, etc.) with prices were provided and the total “equipment” amount came down several thousand dollars.
A brand director on a commercial shoot was asked by the agency to approve an overage on set due to some overtime requirements. The brand director “signed off” not really paying attention to the amount, authorizing the over time required in the amount of $60,000. When the production consultant analyzed the charges the next day and looked at the detail requirements for the two hours, the overage amount should have been $16,000. Having someone with production knowledge understanding the details and digging in really paid off in this situation!
Why use your precious budget on things you shouldn’t be paying for? In today’s world of high turnover, short-staffed teams, and people who are stretched so thin, there’s a higher risk for error — which can impact your bottom line. Invoicing transparency issues aren’t necessarily intentional or malicious, but it’s critically important review all billing prior to payment to ensure you don’t fall victim to common issues, which include:
- Number of individuals above guideline limits traveling to the shoot
- Inappropriate class of airfare, upgrades, airline clubs, monthly fees, subscriptions, etc.
- Miscellaneous non-billable expenses (items you can’t imagine!)
- Non-transparent talent charges related to miscellaneous payments, member violations, fees, wardrobe, overtime, etc.
- Charges to incorrect brands or projects (and yes, even incorrect clients)
- Duplicate charges
- Past due balances on invoices
- Taxes charged on non-taxable items
NOTE: MRA has an entire team of people who review agency invoices and back-up documentation to ensure billing is 100% accurate. To learn more, click here to download an overview of our LineWatch® Invoice Monitoring process.
Purchase Order & Budget Management
When advertisers don’t have solid pre-bid and bid review processes in place, project estimates become inaccurate and one risk is having the purchase order open for a larger amount than needed. If the advertiser doesn’t have an individual or team closely managing open purchase orders and budgets (vs. actual expenses), significant amounts may be left on open purchase orders and when final billing is settled, there isn’t always enough time to utilize the available funds. Imagine if YOU were the client that found out too late an entire additional spot could have been produced for your campaign!
Join us next week as we provide steps for how to get started and make improvements to your production management practices.
Written in collaboration with Angela Saferite.