Agency life is never boring. Built on the back of creativity, digital marketers and advertising gurus spend hours pouring over strategies, pitches, and messaging for clients. When a campaign takes off and clients see return on their investment, everybody celebrates the win. Creative agencies still require someone to operate the back office, maybe not-so-fun, part of the business.
Here are B2B accounting tips for Digital Marketing and Ad Agencies to stay successful beyond campaign wins.
In House or Outsource
When starting any small business or agency, bookkeeping can easily be managed with accounting software programs such as Quickbooks, FreshBooks, or Microsoft Dynamics. When more clients come on board or you begin to hire employees, accounting can become quite complex. Tax time can be especially confusing to small business owners. The agency owner must decide whether to keep the accounting in house, hire an an accountant for yearly or monthly assistance, or outsource to an accounting service.
Keep Track of Everything
Tax time, again, will remind the small business owner of what they forgot to track. The easiest way to avoid this is to keep track of it all. Keep receipts, copies of checks and deposit slips, purchase orders, contracts, or any other evidence of cash flow or expenses. Manage all company inventory including computer hardware and software, desks and office equipment. Maintaining these records may also save money if something needs to be replaced and is still under warranty. Your accounting software may also offer a way to store all receipts in a digital format. Pay extra close attention to labor costs. If you're taking the crew out to lunch or paying for overtime, keep track of employee hours and expenses.
Schedule Time for Upkeep
Bookkeeping and accounting means taking care of your agency financials. Block out time every week or once a month to revisit your books including:
- Invoicing at regular intervals
- Depositing checks
- Paying bills and expenses
- Paying vendors
- Following up on receivables
The best way to improve is to assess where you are now. Agencies should be able to account for sales, expenses, and other finances in order to predict future profitability. Agencies must also account for time spent on projects compared to estimated time and whether that time was billable or not. Accounting software programs may integrate with your agency management software for ease in invoicing. Part of predicting future growth is generating not only accounting reports, but also an analysis of your staff and statements of work.
Determine which projects or services are cost-efficient and profitable.
Some reports to consider running are:
- Balance sheet - A balance sheet report is a good indicator of what you've invested in the company, what you currently own, and who owes money (accounts receivable).
- Profit and loss - Profit and loss will give an overall view of company income and expenses, it is also a good idea to review monthly fixed costs and variable costs to determine if any costs will go up as sales increase. For example, more clients may mean more employees and larger office space.
- Staff utilization - While this report may not come directly from an accounting software package, agency owners should have some idea of the efficiency of their staff and the number of hours that were billable to the client. Agencies
The best way for agencies to ensure they're charging a fair price for their services is to have a good idea of overhead costs and how many hours agency employees are expected to bill annually. While this part of the job may not be considered "creative", it is necessary for the success of the digital marketing or ad agency.
Read more about Best Practices for your Accounts Receivable Department so your agency's invoices get paid faster.
If you have clients who are regularly behind on payments, learn more about Accounts Receivable Cleanup by clicking the button below.