Bookkeeper for Content Agencies

How does money come in, and when is it earned?

Content agencies run three revenue streams at the same time, retainers, projects, and hourly work, and each one earns on a different schedule, so the books have to keep them apart.

Retainers are the main recurring stream. One industry survey puts 38 percent of agency retainers between $1,001 and $2,500 a month, and full-service programs for mid-market clients run $5,000 to $15,000 a month. Your client pays at the start of the month for the work you produce over the next four weeks. We record that check as unearned revenue at first, then move it into income as the deliverables go out. If it lands as income on the first of the month, your income statement shows a great first two weeks and a shortfall later, because the production spend shows up in the month the work happens.

Projects are the second stream. A fixed fee of around $10,000 for a single focused deliverable, and much more for a full brand build, usually collected against milestones. We recognize revenue against each milestone as you hit it, so the money belongs to the month the work happened.

Hourly work is the third, typically $100 to $250 an hour, for audits, strategy workshops, and one-off editorial jobs. It is the simplest stream of the three. We track hours, bill them, and the money is earned when the invoice goes out.

Where does the production money go?

Freelancers are the direct cost at a content agency, and if those payments get mixed into office overhead, the per-client profit becomes unknowable.

Most content agencies outsource the largest creative work, and the piece rates are the biggest number on the cost side:

Add a fractional content strategist to run the program at $2,000 to $8,000 a month and the freelancer bucket is very often the biggest expense in the business. All of that is a direct cost. It belongs to the campaign it was produced for. The office software, the rent, the cameras, and the office equipment are overhead, and they belong in their own bucket. We will cost every freelancer invoice to the right client, and keep the overhead separate, so the margin per account stays visible.

What usually goes wrong in the books?

Three patterns show up over and over in this trade's books: revenue counted before it is earned, media and freelancers bought ahead of the cash, and fixed-price projects that quietly grew past the original invoice.

• Taking the retainer as income on the day it lands. The client pays $5,000 on the first, it is booked in full, and the month the work actually ships looks like it came from nowhere. The numbers then read like the business only worked when the money arrived, not when the content went out.
• Prepaying media and booking it as a current expense. Agencies pay media vendors in advance for a client's schedule. That is an asset until the campaign runs. If the books treat it as a cost on the day of the a thousands of dollars in harm in a month that has not happened yet, and the campaign month shows no cost even though it is the month that earns.
• Letting scope change without a change order. A fixed-fee project starts growing in the third week, you do the extra work to keep the project alive, and the invoice never changes. That is unbilled hours leaving the production running out, and no charge goes to the client. The books show the cost and not the revenue.
• Not managing 1099 season openly. With dozens of $400 to $1,000 blog posts and the occasional ($2,500 to $7,000) ebook, a small agency quickly tracks past the threshold and a lot of 1099s. That is a direct cost, needs clean independent details, and your year-end closure depends on the books having them.

What should the books track separately?

Service lines, each client, and media cost need their own buckets already, and pooling them together makes the numbers measure nothing.

• Retainers, projects, and hourly work in separate revenue accounts, so you can see which part of the business is a recurring base and which is one-off wins. A lost retainer line is a huge difference when you look at the row and not the total.
• Each client as its own profit center. Every freelancer invoice, every designed piece, and every media purchase gets coded to the campaign or client it belongs to, not to a generic writing line.
• Prepaid media as an asset, not an expense. Money paid in advance for future campaigns sits on the balance sheet and moves to expense in the month the campaign runs.
• Strategy work apart from production, for clients who sell retained production and floor the strategy on an add-on in a separate line. Otherwise the strategy, the smallest column in the trade, sells for the price of the production and the client gets overvalue.

Which reports matter for a content agency?

A deferred revenue report, a gross margin per client, and a cash flow statement are the three that speak the truest in this trade.

The deferred revenue report shows what portion of the money sitting in your account is actually work owed. It keeps January from looking like a gold mine when half of the December checks are for the January work that has not been printed yet.

The gross margin per client is the one that supports the client review. It tells you which accounts actually pay for the content, media, designer, and strategy changes. The monthly P&L gets you the total, and the per-client gross margin tells you who to keep, who to push back on, and who to let go.

The cash flow statement is the one that holds the timing. A retainer received counts as cash this month but not yet as income, and a paid media slot counts as cash out this month without a cost to the campaign. In a business where retainer bills run ahead of production and media bills run before the campaigns, the owner who only looks at the income statement is planning from a false position. Looking at the cash flow along with the deferred and the prepaid balances keeps the planning honest.

What should the books tell you about pricing?

The books tell show whether a retainer covers the content that is actually being shipped, and that is the honest answer of whether to raise the rate.

Take the numbers above. One freelanced blog at $400 to $1,000 each and one case study at $1,500 to $2,500, and the month costs you $2,300 to $4,500 on freelancers alone. A retainer priced below that loses money on the direct cost before strategy, design, software, or your own time ever gets invoiced. The research flags that the broker retainer tier is production-only, with strategy billed separately, which is exactly the thing to check in your books: are embedded hours that a client thinks are included, and does your contract say they are?

Work the same calculation per client. One client costs $1,500 a month to produce and owes your $2,000 retainer, and another costs $4,800 for the same $2,000. That is not a pricing reality in your own books, and it points you directly at which conversation to have: raise the rate, shrink the scope, or (if the other data you can add is the full pricing model) move the client to a higher offering.