Quick answer: One of the main reasons why productions fail audits is because they’re still using disorganised and outdated systems that make it difficult to organise receipts and documentation. Businesses in the entertainment industry can also run into trouble because they misclassify workers. Keeping accurate records and reviewing everything can help reduce those risks. Allenby Accountants has film accountants who can help you with keeping audit-ready records throughout the production.
UK companies generally need to file annual accounts with Companies House, where they become publicly accessible. Depending on the size and circumstances of your film production company, you may also need to have those accounts audited. And when an audit comes around, you’ll want your records ready from the start. Film accountants can help you prepare by identifying accounting issues before the auditor reviews your records.
Here are some common issues that can cause problems during a production audit and what you can do about them.
Problem: Missing receipts and incomplete documentation
Every expense in your production needs a clear paper trail. If you can’t connect an expense to a physical or digital receipt or even to the correct line number and an account code, an auditor may question if it represents a legitimate production cost.
This is where good recordkeeping is extremely important. With the help of film accountants, you can organise everything from receipts and bank statements to commissioning agent documents and production services agreements.
It’s also crucial to keep contracts for key cast and crew members easily accessible because auditors may ask to review them.
For UK submissions, make sure you can also provide important reference information, including your:
- Companies House Authentication Code
- Unique Taxpayer Reference (UTR) number
Having everything organised before the audit can save you from searching for documents when an auditor asks for them.
Problem: Misclassified workers
Issues can arise when you incorrectly treat someone as an independent contractor or pay them through a Personal Service Company (PSC) when their employment circumstances require a different classification.
Getting this wrong can result in back taxes and fines. Plus, it may even negatively impact your production’s reputation.
That’s why you should review the employment status of every person you hire instead of treating classification as a simple administrative task. Besides, UK authorities may check if your production complies with employment requirements and expect you to maintain detailed records.
If you’re unsure how to classify someone, speak with our experienced film accountants before making the decision.
Problem: Forgetting about compliance until the last minute
When you’re busy keeping a production on schedule, paperwork can easily move down your priority list. But leaving compliance until audit season will inevitably create problems for everyone involved. Compliance should be a regular part of your daily processes if you want your production to run smoothly. Film accountants can keep your records updated and address missing information early. They can also check your documentation as you go along, so you can avoid bigger disruptions and problems later.
Problem: Mixing your personal and production expenses
When you use production funds for personal or unrelated purchases and you don’t clearly separate those transactions, it can make your records harder to verify. A well-organised invoice filing system can help here because invoices will likely make up a significant part of an auditor’s requests.
Film accountants can also recommend cloud accounting software that helps you organise and categorise expenses. They can monitor your records as well, so you can easily provide accurate production expense information when your auditor needs it.
Problem: Using outdated accounting systems
When an auditor asks for a particular or supporting document, you want to be able to find and provide it right away. This could take longer when you still rely on outdated and separate systems, such as offline spreadsheets. Moreover, you increase your risk of working with missing or outdated records.
Cloud-based document management and accounting systems can help you keep information current and more organised, not to mention accessible. When an auditor requests something, your team can retrieve it quickly instead of searching through different files and systems.
How professional accountants can support your production
At Allenby Accountants, our film accountants can support your production through the audit process by keeping things organised and up-to-date. You can even count on us for tax advice and recommendations for accounting systems to help you maintain accurate financial information.
To learn more, request a callback through our website or call 0208 914 8887 to arrange your free initial consultation.
