BUSINESS AND MARKETING: Business and Marketing Forum Business and Marketing Articles

The Invoice

COW Forums : Business & Marketing

<< PREVIOUS   •   FAQ   •   VIEW ALL   •   PRINT   •   NEXT >>
John Nelson
The Invoice
on May 3, 2009 at 2:13:16 am

In preparing an invoice for the client, I have been using hourly estimates to let them know how long it takes to produce the final product (see below). Is this the right or wrong way to go in letting the client know how much it costs to to their particular project?

Script writing for 3 commercials
Time involved: 2+ hours

Videotaping with client on camera plus videotaping raw footage of store
Time involved: 2+ hours

Post production editing of commercials including graphics, music, dubs and DVD approval copy
Time involved: 6+ hours
Total: 10+ hours
Investment: $500.00
Tax: 5.9375% $29.69
Total: $529.69


We're from the Government. We're here to help.


Return to posts index

Matt Townley
Re: The Invoice
on May 3, 2009 at 4:42:27 am

Do you charge tax for services rendered? I'm not sure where you are, but most places you do not have to charge tax for intellectual and professional services where there is no sale or exchange of tangible goods. Of course, I am not an accountant, so consult your financial professional!

In most cases, I try to advocate selling a product and not time. We do a lot of specialized transfers and conversions, which often don't take a lot of time on our part, but we are still providing a valuable service and using very expensive equipment and acquired skills that took us a lot of trial end error to master. The time we spend on something should not necessarily dictate the value of the end product.

Of course, we do have some clients where we bill them just like your example for time spent at our hourly rate. That's just my thoughts. I'm sure there are people with much better arguments for one way or another than me!


Return to posts index

John Nelson
Re: The Invoice
on May 3, 2009 at 12:25:59 pm

Thanks. I'm not crazy about the idea of listing time on the invoice but, in a small town, there has to be something on there to justify the price. Maybe I could put: "Worked real hard for a long time!"...

We're from the Government. We're here to help.


Return to posts index


Bruce Bennett
Re: The Invoice
on May 3, 2009 at 2:19:11 pm

[John Nelson] "Is this the right or wrong way to go in letting the client know how much it costs to to their particular project?"

In my opinion, it is the wrong way. An invoice should list actual numbers that represent hours, units, etc. incurred – nothing obscure like “2+ hours.” To me, it looks kind of “hokey pokey” and is not a very professional practice. If I ever got such an invoice from one of my vendors, it would be the last invoice I’d get from that vendor. Also, I’d get rid of “Investment: $500.00” and just call it what it is: “Sub Total.”

If I need to discount a project in order to bring it on/under budget, I list all actual items and time spent and then create a discounted item line with “Discount courtesy of Bennett Marketing & Media Production” (i.e., -1 x 500.00 = -$500.00). This is also a very common practice from my vendors. I do group/add up some expenses, like travel expenses, as a single line item (i.e., taxis, parking, airfare, lodging, etc.).

I suggest investing a few bucks into purchasing invoicing software such as QuickBooks. It will prove very beneficial if you ever hire an accountant to do your quarterly and year end reports, or ever get audited (a very common occurrence in our world of professional production).

As far as differentiating a “good” from “service” in determining if it gets taxed or not, I tax everything. The government can be very obscure in what it defines as a “good or service.” For instance, for “transcription services,” one would think that it should not get taxed for the final client invoice. But, the government may see it as a service that renders a physical deliverable good of a Microsoft Word file that has a tangible value (and thus should be taxed). I have friends that have been burned on this and it has cost them thousands of dollars in back taxes.

Just my opinions…

Bruce


Bruce Bennett
Bennett Marketing & Media Production, LLC


Return to posts index

Chris Blair
Re: The Invoice
on May 3, 2009 at 3:10:12 pm

We use Quickbooks but we DO list services based on the amount of time spent, typically in hours, but some services ae based on half-day or full-day rates.

We also prepare bids and estimates this way rather than just throwing out a flat amount. We've actually had dozens of clients tell us they prefer our method, usually after having been burned by other production companies that just bill a set price that ends up higher than their estimate...explaining to the client that this or that took longer, or this service wasn't specified etc.

Clients tell us, especially in this economy, that they want to see exactly what they're getting for their money and they don't want surprises.

It also allows a client to see how time is distributed on a project and we've had many corporate marketing people tell us it helps them plan future projects...since they're often handling all sorts of projects from print to point of purchase to video etc., they're often not as saavy about budgeting for video...so they pull out their previous estimates and invoices and can see exactly where they spent time and money before.

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com


Return to posts index

John Nelson
Re: The Invoice
on May 3, 2009 at 3:17:15 pm

Thanks Chris. Not to be too nosey, but does anyone care to share a 'sample' estimate/invoice so I may join the ranks of the 21st century?

Thanks again,
John

We're from the Government. We're here to help.


Return to posts index


John Nelson
Re: The Invoice
on May 3, 2009 at 3:12:41 pm

Great advice Bruce. I have Quickbooks and will look into learning it in depth. I usually print out the same thing as a 'Proposal' prior to the job and, once signed, use that as the final bill. Since the clients here in smallville aren't much for spending money, I frequently have to 'lower my britches' a bit to get the job. So I like your idea of a 'discount' on projects.

Thanks again,
John

We're from the Government. We're here to help.


Return to posts index

Todd Terry
Re: The Invoice
on May 3, 2009 at 11:59:23 pm

[Bruce Bennett] "I tax everything."

Not that Bruce is wrong, but we go 180° here... we tax nothing.

When I started this company I was told by a colleague/competitor company that we should tax, that's what they did, and was right.

My theory was that yes, we were selling the service, not the goods (and our CPA agreed). Even our dubs have a tiny fine print line on the label that says "This videotape remains property of Fantastic Plastic and must be returned upon request," just to make it clear we were not selling the videotape (and invoices list it as dubbing service rather than just "dubs"). Of course, we never intend to get them back... although a television station in another state does ship us back a big box full of Betas about once or twice a year. I keep meaning to tell them they don't have to... their dumpster is a lot closer and cheaper than our dumpster.

My colleague told me that we would eventually get bit doing it that that way, and that we should at minimum be taxing dubs.

However, a couple of years ago we went through city, county, and state audits. We did nothing to red flag them, just the luck of the draw. We did get hit for not paying enough sales tax on equipment and such that we bought out of state... but all three auditors agreed that we were providing a non-taxable service and did not have to be charging any sales tax to any of our clients.

Your milegage may vary depending on your local municipal and state laws... probably best to ask a CPA in your own area.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com






Return to posts index

John Nelson
Re: The Invoice
on May 4, 2009 at 12:25:13 am

Good to know on the tax issue. Unfortunately, our boy Bill Richardson, would rather fight than switch. Hey, he has to pay off those campaign debts somehow, you know...

We're from the Government. We're here to help.


Return to posts index


Steve Wargo
Re: The Invoice
on May 4, 2009 at 2:28:47 am

[Todd Terry] "Not that Bruce is wrong, but we go 180° here... we tax nothing."

In Arizona, we have to tax "tangible" goods but there are two items in the state tax code that conflict with each other as to what "tangible" really is. And now, with internet delivery, the issue is clouded. "Tangible" means that you can hold it in your hand. After all, you can hold a computer in your hand.

Several years ago, we got a letter from a city telling us that we had to tax everything we did. Several of my associates started doing that. I instructed him to quote the law that he is using to make such a declaration. We never heard another word.

We invoice in sections because we invoice in sections on larger jobs. Normally, we invoice for all pre-production and production first and then for post. That way, we are not forced into taxing the entire job. There are some who claim that if we put everything on a single invloice and then hand the client a master tape, we need to tax the entire amount. Others disagree. However, they all agree to invoicing in sections.

Most often, if you talk to someone from your state revenue department, they will tell you to tax everything because they are too busy to really research it. Ask a CPA that is familiar with your industry.

Our advice is to thotoughly research your responsibility and obligation and do it right from the beginning. You do not want to find out five years from now that you under taxed anything or it will cost you big time.

There are on'line classes for Quickbooks for a $65 charge. Have a CPS set you up now. It will be the smartest money you ever spend. However, be advised that the IRS has special rules for the production industry.



Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


Return to posts index

Nick Griffin
Re: The Invoice
on May 4, 2009 at 2:47:19 pm

[Steve Wargo] "However, be advised that the IRS has special rules for the production industry."

Okay, Steve. We're all on the edge of our seats. WHAT are the "special rules?" Details, dude. We want details.

Through no particular plan in recent years our business evolved to the point where none of our clients are in our state. We were told we could therefore stop filing the monthly sales and use tax reports.

Now there's the possibility that we may be again working for an in-state company and I'm intrigued by Todd's idea of claiming ownership of all physical product and only transferring the rights to the data. On this particular client it could work out well as they've already stated that they want to duplicate DVDs for themselves.

And just to chime in on the invoicing thing. I go one of two ways depending on the client and their overall operating procedures. We either give complete and excruciating detail (Log and Digitize Scenes -- 4.75 hrs) -OR- we "black box" everything into broad categories (2 days Field Production and all related expenses).



Return to posts index

Steve Wargo
Ask, and you shall receive...
on May 5, 2009 at 5:46:58 am

just for you, Nick.
http://www.mca-i.org/en/art/9/'>


Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


Return to posts index


Michael Hancock
Re: The Invoice
on May 4, 2009 at 5:26:47 pm

[Todd Terry] "Even our dubs have a tiny fine print line on the label that says "This videotape remains property of Fantastic Plastic and must be returned upon request," just to make it clear we were not selling the videotape (and invoices list it as dubbing service rather than just "dubs")."

Very, very smart. In some (maybe all?) states the dub is a tangible and if you haven't been charging, and are lacking Todd's fine print, the IRS can destroy you with back taxes. It happened to an ad agency in our town that was pulled for an audit and owed thousands because they never charged for dubs but didn't retain ownership either. If they had simply made a note on the dubs that they retained property and not the client they would have been fine.

We've always "owned" beta dubs, but since that agency got whacked we don't even list them on our invoices anymore. Instead it's added directly into the edit time, and when we do send dubs (it's mostly digital delivery now) we make a note to the stations that we own them. And we occassionally get boxes of Betas from the TV stations because of it.

As for how we do invoices--when we quote a job we break it down into rough hours - X hours to shoot, Y to edit, plus "free" DVD at the end and spot delivery (dubs). When we bill we just send them a total number. It always matches the quote (or comes under if we grossly overestimated the hours), so we don't break it down twice.

Michael

-------------------------------
I'll be working late.


Return to posts index

John Nelson
Re: The Invoice
on May 4, 2009 at 6:42:20 pm

Great advice. Thanks very much.

We're from the Government. We're here to help.


Return to posts index

Richard Herd
Re: The Invoice
on May 3, 2009 at 3:49:19 pm

Here's a good site to check out:

http://aicp.com/doingbusiness/index.html


Return to posts index


grinner hester
Re: The Invoice
on May 5, 2009 at 1:03:49 pm

Anytime I note my hours but have a price that is lower, I just add a subtolal of what it should have been then notate that I'm a cool dude, show the price subtraction and the new total.
The only reason to round down is to be a cool dude for em. May as well spell it out.



Return to posts index

Andrew Fraser
Re: The Invoice
on May 7, 2009 at 5:12:05 pm

A friend of mine offered a Music Video special to ten new clients at the end of 2008 to generate some cash flow. A rock-bottom no-frills, one-day, one-location music video shoot for $1,000 (all-in). Editing and equipment included.
(Go to http://www.undergroundplanet.com to see his amazing work!)

Anyway, as he was showing me his videos and bragging that several of his new clients want more videos, I asked how he invoiced the band/manager for the video. He said he invoiced them for $1,000. I shook my head and suggested that he should have written an invoice for the full rate: shooting day; equipment rental; X hours of editing; delivery media; etc. and then subtracted the net difference to get the invoice to $1,000. Ideally with the words "once-in-a-lifetime discount". His face drooped as he agreed.

Many folks in creative businesses (not just video production) have a hard time communicating the value of their work to their clients.

Not so with Creative Cow-hands like yourselves, of course. I often refer my colleagues to articles, discussions, and forums on this board for business advice.

Andrew Fraser

Freelance Producer/PM

Freelance Editor


Return to posts index

Dino Vince
Re: The Invoice
on May 5, 2009 at 3:46:29 pm

Sorry, but I guess I'll be the first to bring it up....WHAT? YOU'RE ONLY CHARGING $50. AN HOUR TO WRITE, SHOOT AND EDIT?

One of the most difficult issues I face running my own production company is being undercut by startups who don't know the value of production services, or a client's Uncle Joe with a Camera who works dirt cheap. Fortunately, these are usually one shot deals, as the addage 'You get what you pay for', rears up and bites the client in the 'you know where'.

My advice, in addition to restructuring your invoice to look more professional, is to do some research on average production costs in your area, and try to price accordingly. If you do good work, then you should bill for it.

Thanks and good luck!


Return to posts index

John Nelson
Re: The Invoice
on May 5, 2009 at 6:25:19 pm

Thanks for the input. My market size is very small, 45,000, with businesses not used to paying much over $200 for a finished commercial, plus dubs. There are 2 satellite stations and 1 cable outlet who charge anywhere from, free to $150 for the same service. The cable guy wanted me to chop my $350 rate for a local hospital ad by $100. or "I'll find someone else to do it!". I emailed him back to start looking... Been doing ads for 30 years and am getting tired of those kinds of comments. Been doing other, long form videos lately for individuals and businesses which I enjoy more. While I 'ain't gonna get rich' here in tinytown, I also am not going to be a victim of road rage or some crazed shooter. Life's too short, especially for me being on the downside of 60. You young bucks can go for all the riches, fame and glory. I'll be thinking of you while I'm floating on my raft with an adult beverage.

Thanks again and, If you're ever out my way, give a hollar.

Juan

We're from the Government. We're here to help.


Return to posts index

Mike Cohen
Re: The Invoice
on May 7, 2009 at 1:10:15 am

Are you saying you charge by the hour for on-location production? This is wrong and diminishes the value of your services. It is traditional to charge a half or full day rate for a shoot, even if the shoot is an hour. It in fact diminishes the value of the whole industry.

Having read the other posts and your follow-up John, I see you are dealing with the cable market, which is generally cheap or free. The cable advertising place where I interned gave a free commercial to new customers who bought time. This is why many local ads are horrible, because the time is the commodity, the ad is salad dressing.

Mike


Return to posts index

John Nelson
Re: The Invoice
on May 7, 2009 at 12:32:36 pm

Thanks Mike.
Your suggestions are well-founded and appreciated. Unfortunately, in a town of this size, charging half or full days for location shooting would not go over very well. The market has been slow for some time, with respect to commercial production. I doubt it will ever be a viable revenue source for producers.

Thanks again,
John

We're from the Government. We're here to help.


Return to posts index

<< PREVIOUS   •   VIEW ALL   •   PRINT   •   NEXT >>
© 2017 CreativeCOW.net All Rights Reserved
[TOP]