The services required from the accounts department of a television programme contractor are as varied as the problems affecting all the other departments which go to make up A-R, its staff management and direction. Everyone’s actions have a financial implication and it is the job of the accounts department to express the results of these actions and their effect to the credit of the company-or otherwise – in terms of £ s. d.
The set-up required to cope with this problem had to be unique as the whole operation is a strange combination of Wardour Street, Theatreland, Fleet Street and the City of London. U.S. commercial methods could not necessarily be followed. Their system enables them to get back their operating costs from advertisers sponsoring programmes but to us sponsorship is a naughty word.
As the organization had to be built from scratch, the staff, as with staff throughout the company, had not only to be found but their training adapted to commercial television and, in our case, the adapting had to be of the ‘makey-learn’ variety: that is, it had to be done while actually carrying out the job.
The reason why we could not carry out pre-transmission training was, in the main, the tremendous concentration of everyone’s energy on the task of getting on the air. Therefore, certain services had to take a back seat. The article ‘Those Early Days’ in fusion 2 shows the extreme difficulties which resulted from this. Another form of necessary training was to convince certain artistic elements that we were not just being unnecessarily sordid in having regard to matters of money.
Nevertheless the foundations on which the department was developed have, I think, proved sound. Their design was (and there is nothing unique about this) to provide the board of directors with the necessary information about current operating losses (as they then were) which, taken in conjunction with the vast and seemingly everlasting expenditure on buildings and equipment at Kingsway and Wembley, would enable it to plan the supply of the necessary cash and to direct the operations of the company both when it stood alone and after the introduction of a networking system.
At the same time the management required as much weekly and daily information as was possible about both programme costs and other expenditure, so that these could be kept as low as was consistent with high standards and efficiency. It was known that they must exceed revenue from sales of air-time to advertisers for quite some time – which turned out to be October, 1956.
It was also obviously essential that staff, artists and other contracts should be promptly paid. The size of the problem, to cope with seventy programmes a week, was not fully gauged to begin with, as was evidenced by the delight of the artists’ and contract payments’ section when sixteen dancing girls decided to delay their appearance on the screen and to camp out in the accounts office until their contracts had been received and payment made.
Advertisement and other sales accounts had to be rendered and collected as rapidly as possible, and bills similarly settled, including the heavy commitments for the purchase of filmed and packaged programmes. With regard to sales accounts a recent quote (page 27, fusion 4) says that ‘At present the advertisement department is selling … some 120 spots a day, 600 a week, 30,000 a year. Each is a single entity … Each is also a single entity for accounting purposes which involves checking, issue of a transmission certificate, invoicing, rendering statements and collection of the cash.
To assist in controlling all payments, it was decided to classify the expenditure of the company into three types-direct, indirect, and overhead. A rough definition of these terms is that:
- Direct expenditure, of which there are 23 main items, sub-divided into a further 130, means any expense which can be directly attributed to making a programme, such as the script, artists, wardrobe, scenery, sets, music, etc., or the cost of a film.
- Indirect expenditure means the cost of providing the facilities to transmit the programme, ranging from studio personnel of all grades and types to the maintenance of studios and their equipment. A method has been devised for the allocation of these costs to specific programmes if required.
- Overhead expenditure means costs incurred in the general administration of the business (other than programme department), such as the general manager’s department, that part of the business department not concerned w ith studio services (for example the running of TV House), advertisement, secretarial and accounts departments.
The first division within this department, therefore, is into cost and finance sections, direct costs being the responsibility of the former and indirect and overheads of the latter.
The basic control of direct costs is by the estimation of a programme quarter’s costs to an overall plan, the plan and the length of the ‘quarter’ being decided by the networking committee. As an adaptation of a U.S. system a cost assistant, who belongs to this department, is attached to the main programme sections, light entertainment, drama, schools and children, etc. The function of a cost assistant is to be in on all programme arrangements from the planning stage so that the cost implications of all actions can be brought to the attention of the manager of a section and, from thereon if necessary, up to the controller of programmes. Thus appropriate action can be taken at the earliest possible moment.
The constant endeavour is to produce information before an event happens so that any necessary action can be taken. To that end, the maximum use is made of estimation, without reference to any books of account. A maximum of speed tends to introduce a sacrifice of accuracy, but the estimated programme cost sheets which are available within seventy-two hours after transmission are now much less than 1 per cent out overall compared with the actual costs subsequently recorded.
Indirect and overhead expenses are controlled by means of an annual budget based on the staff and facilities estimated to be required to produce the expected hours of transmission. In common with most businesses certain items, for example the ITA fee, cannot be controlled by management so attention is concentrated upon those items which are within its control.
The annual budget is prepared by departments, and sections of departments, in association with their respective heads, who will be responsible for controlling the expenditure during day-to-day working. The actual expenditure incurred in each month is then compared with the budget for each month, split up into department and section by type of expense, so that the reasons for differences can be investigated.
Apart from this monthly comparison of actual expenditure with budget, management and the board are provided with a fortnightly operating statement. As this statement deducts from our advertisement and other revenue not only indirect and overhead expenditure but also the estimated direct costs, it is effectively a profit and loss account. It compares the estimated profit or loss for the current fortnight with the corresponding period for the previous year and the cumulative profit or loss to date for the current financial year is similarly compared with the preceding year.
All these statements ultimately build up into the company’s annual profit and loss account (which includes the operations of the TV Times) and balance sheet. Subsequently comes the agreement of the Inland Revenue’s ‘take’, as the senior partner in this, as in all businesses, with all the voluminous and complicated information and calculations required by H.M. Inspector of Taxes.
To sum up, our aim is to contribute to the prosperity, present and future, of A-R and, therefore, of all of us by the speediest possible service of all types to its staff, management and directors.