― Sophie Kinsella, Shopaholic Takes Manhattan
“Money often costs too much.”
― Ralph Waldo Emerson
Money is both the lifeblood and the bane of film; we need it to express our visions on celluloid (or digital) but getting it is a struggle. And getting the money is not only hard to get but also hard to keep. Now, although most directors and producers (and sentient earthlings) would prefer to have the problems associated with money than be broke, it is still important to remember that keeping the money can be even more problematic than getting it. That point was made vividly clear to me by a case I read recently and a question I came across on a Facebook group page.
Essentially, they dealt with the strategy and consequences of handling money with a business partner and setting up a joint bank account for the purposes of a production. The case I read dealt with the misappropriated funds of a movie named Shadow People (previously titled The Door and picked up at the Cannes Film Festival in 2012 by Anchor Bay):
The director-writer Matthew Arnold was teaching at the New York Film Academy when he met Sun Jee Yoo, a student who expressed interest in raising money for his film project. Together, they came to an agreement, put in writing, where Yoo was to use her best efforts to raise $4.5 million. She leveraged her connections back home in Korea and was able to raise the funds...Most of the money went to the film's account but about a $1 million came later. Instead of transferring it to the film production's account, Yoo put it in her personal account and used it as leverage to try to force Arnold to give up the rest of the money or the rights to the film. To avoid further problems, he reduced the budget and gave her a portion of the money to return to investors. Too bad she transferred the money to her own personal account instead. At this point, Arnold's only recourse was to sue her, which he did and eventually won. Read about the case here and the full ruling here.
Around the same time I read this case, I came across a Facebook user in a film group who wanted help in setting up a joint bank account for a production. Thinking about both the case and the question made me reflect on what a filmmaker can do to protect themselves from a potential thieving or negligent partner. As you rise up the production ladder, you will do business with multiple partners or with investors who need assurances that you are doing the right thing with the money they give you. Plus, you might want certain people in your crew to have access to production funds so that they can rent or buy the things necessary for the production. And for all these reasons, you can easily find yourself having to set up a joint bank account.
Although there is no perfect preventative system, there are things you can do to ensure that your funds will be used solely for production purposes. Remember your last recourse is to go to court -- which you want to do the most to avoid. (A caveat: Discuss your plan with a lawyer, accountant, bank, producer and/or consultant before setting up an account.) Until then, here are some guidelines:
- First and foremost, ask yourself questions about the partner: Do you really TRUST this person? How long have you known this person? What do your instincts tell you? What projects have they produced? Are they more concerned with using the funds for the picture then for themselves i.e. what do they talk about more - the future movie or the future profits? Constant "future-profit talkers" would seem suspect in my book.
- Create a budget. You need to know what you need the money for before you get it. Even if it's mostly tentative, try to be as low-budget but as accurate as possible. Include a contingency amount.
- Create your schedule. Anticipate daily expenses.
- Discuss the use of funds and what your proper procedures for bookkeeping and withdrawals will be. What will be the limit for daily withdrawals, if any? Who has access to the account? -- Issues like that.
- You need a pact. Whatever you orally agree to, have your lawyer, consultant and/or accountant verify and approve your procedures. Then prepare a written agreement.
- Preferably, set up one account under your name, assuming your partner will let you. If not, choose a bank together that allows for joint bank accounts, then go to the bank together (if possible), discuss your concerns and procedures with your bank rep and open the bank account together.
- Once the funds are in, limit the daily withdrawals to what is needed based on the budget and schedule. Put a cap on overall withdrawals.
- You will delegate certain jobs during the production but managing the money shouldn't be one of them. All of the partners with power in the account should be proactive in keeping tabs on the money. At a minimum, you can set up a system where one partner pays the bills and the other reviews receipts.
- Check the account balance daily.
- One thing to consider with your bank is whether or not to institute a requirement of two signatures for account transactions. Not all banks require this so if it's a concern for you then find a bank that allows two signatures. Also, two signatures is a good system to have if any crew member is empowered to draw and sign checks.
- See if your bank provides online alerts that let you monitor account activity. If so, use it.
- You might want someone in the crew like a PM or an Associate Producer to be able to draw and sign checks with autonomy. If so, consider transferring money from the main account to another account that your crewmember can access without being able to dip into the main account.
- Require approvals of all the main partners in the agreement if you need to withdraw beyond any agreed-upon caps.
- In the end, if sh!t hits the fan and you ARE dealing with a dirty, rotten scoundrel, be proactive and have money set aside to go to court. Just in case.