How an animation studio manages cashflow

Animation studio manages cashflow

How an animation studio manages cashflow

Jon and Emma Draper, founders of UK animation studio, Stormy Studio, had to learn to adjust to late payment early on in the business. Plus overtime they've learnt effectively how an animation studio manages cashflow.

Jon says “Back in 2014, having taken a big leap, we moved with two young children from London to the Devonshire coastline. Our plan, to build a studio with a reputation for bespoke high-quality business animation production."

"We knew we’d need to be very competitive on price, plus put in a lot of extra hours to over-deliver, raise the bar and help us secure bigger and better projects.”

Whilst this plan ultimately worked, it did mean the company would be running with especially tight cash-flow margins for the first year or two.

“I originally believed that by only invoicing once a project was 100% completed we’d win more projects. Which had been working okay with shorter work but quickly became a problem as projects grew in size, complexity and production time.” Says Creative Director Jon Draper.

We are very proud to have been featured in The Times, contributing to an article on how small businesses can struggle with late payment.

Along with a short quote...

"Jon Draper, 37, founder of Stormy Studio, an animation Studio based in Plymouth, Devon, said that 30 percent of his revenue was tied up in late payments at any given time".

We also had a great photo included in the paper and online.

Stormy Studio in The Times article on late payment

Stormy Studio contribute to a Times article on managing late payment

For example, 6 months into the business ’Stormy Studio’ took on a business animation explainer video project for a US tech company, for around £8000. The unexpected need for lengthy rounds of legal compliance review meant it was still in production 6 months later. The slow feedback at each stage of production really stretched our studios cash-flow.

"We also borrowed and invested our remaining savings to try to keep the business up and running." Says Jon.

Once the tech animation project was 99% completed, the point of contact left the clients business. Causing a further 3-month delay before their role was filled and someone was able to sign off the project. Once invoiced, it took a further 45 days to be paid, 15 days past the due date.

The studio had to rely on other animation projects to keep it afloat and would soon change its animation project payment structure.

Jon admits, “Whilst we did successfully survive this period, it did add a lot of pressure which, despite our best efforts, would impact other areas of life”.

How an animation studio manages cashflow

"I originally believed that by only invoicing once a project was 100% completed we’d win more projects... This had some flaws"

How we manage cashflow and late payment now

A lot was learnt during this stage of the business. Now nearly 5 years on the companies cashflow and invoicing approach is much more balanced and on firmer foundations as a whole.

The accounting side of the animation studio makes use of cloud-based accounting software Xero, to keep a keen eye on our cash flow. Which whilst a little pricey for a small business, more than pays for itself in the ease of the use and time it saves.

Improved project management through the use of tools like Hubspot CRM, Slack and Clickup. Have helped ensure projects run smoothly (and within the budget) with remote clients and designers being kept in the loop throughout a project.

Jon says, “We now ALWAYS invoice for 50% prior to an animation studio project beginning. For longer projects, we’ll agree 50/25/25 payment milestones upfront. Our clients have never questioned this approach. As well as improving the cashflow it has the 2nd benefit and confirms our own confidence in the quality of animation our team are producing.”

For late payment, the studio charges an agreed small percentage each month, which even if not acted on overly strictly, does help when chasing overdue payment. We also have a large business overdraft in place just in case it’s ever needed, though to date we're pleased to have always remained in the black. 

Fortunately, Stormy Studio did survive the early year's cash flow issues and whilst it will remain a balancing act are much more sure-footed on their approach on how an animation studio manages cashflow.

The bespoke business animation Stormy Studio produces for a diverse range of industries and required the studio to be adaptable and sometimes tailor payment processes to suit clients and their own business need. The studio continues to grow with new designers and producers joining the Plymouth studio team.

About Stormy Studio:

Tucked away in the idyllic county of Devon and only a stone's throw from the sea, Plymouth based 'Stormy Studio' has quickly become one of the UK's leading animation design companies. Fielding a team of experienced writers, illustrators, designers and animators with over 15 years experience, the company is forever pushing the boundaries of creativity to constantly deliver exceptional work for clients.

Steps to manage cashflow

• Charge a 50% payment up front
• Further instalments at key milestones, for longer projects.
• Have a % fee for late payments on your contracts.
• Politely email on the due date as a reminder.
• Have a large business overdraft in place, just incase.
• Quote to enable you to deliver quality animation and remain in business.

"We now ALWAYS invoice for 50% prior to an animation project starting."

How an animation studio manages cashflow

Stormy Studio

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