September 18-19, 2018
Gleacher Center, Chicago, IL

Gain maximum profits for your agency!

SAIL 2020
Planning for Agency Succession

Financial Statements: Timing Is Everything!

Agencies are just as surely business enterprises as they are creative and service organizations. For agencies to be behind in monthly tracking of agency finances is nothing short of irresponsible. I believe agency financial statements should be published on a monthly basis, within ten days of the close of the previous month.

Following are some best practices that you can use to make sure your agency’s financial statements are of value to the ongoing management and profitability of your agency.

“Monthly” Progress Means Monthly!

Monthly progress reports should include Profit and Loss statements, balance sheets, and any other reports that help you run the agency, e.g., personnel time analysis, project profitability, client profitability, margin reports on services, etc. Have your bookkeeper or controller publish these as a package and sit down with your partners (or alone if you wish) and study these reports each month. As noted above, this information should be in your hands no later than the 10th of the following month in order for any changes, corrections or improvements to be made that will affect the next month. Getting the reports late, or not at all, can have a dramatic, and negative, effect on how you run your agency.

Timely Timesheets, Too

Much of your billing requires a current report on time spent. It’s amazing how lax many agencies are when it comes to demanding timesheets be turned in on time. Remember, delayed timesheets cause delays in client billings, leading to further delays in your ability to release statements for client review.

Post Vendor Invoices with Each Project

Make sure you post purchase orders (pre-priced would be great) against each project they apply to. This makes billing easier. When the invoices come in from the vendor, you can simply replace the PO with the invoice. Even if the invoices from the vendors are late, as they often are, you can see where they belong and account for them.

Full Accrual Accounting for Full Accuracy

You need to make sure your statements are as accurate as they can be. The only way to do this is to record ALL the costs for every sale you book in a month in the SAME month. I’ve seen many agency statements where the sale is recorded and the costs are trailing. One month the profits look great, because you have no costs against the sale. The next month the profits look terrible, since you are listing all the costs and not the sale. This is particularly true with media. Media (traditional or digital) should be billed in advance of the publishing time. You have to make sure there are costs booked against that media even if you have yet to receive the media bill.

Partial Billing on Longer Projects

This is a good practice to adopt when your agency does a lot of project work. You are simply billing the client for work to date on a monthly basis, most likely against some sort of estimate. Remember, in all cases, “CASH IS KING.” When you wait until the end of the project to bill, you are accumulating time and purchases against the project, but you haven’t yet turned these into billed agency receivables.

Making Accurate, and Useful Comparisons

The example below offers a great way to structure your agency financial statements.

Financial Statement Example

This provides most of what you need to assess the monthly financial status of your agency on one sheet of paper. Other reports, such as timesheet analysis, etc., can be pulled separately.

Agency Software 

To maintain your agency finances in some sort of orderly way, you should invest in agency management software. This comes in two flavors: one where you have all the front-end capability—job opening, estimating, time recording, traffic, etc.—but your billing data must be ported to an “off the shelf” general ledger like QuickBooks; and the other, which includes the front-end and the general ledger in the same package, allowing full integration from order entry to financial statements.


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