Beyond Billable: Accounting for Digital Marketing Agencies

Content marketing, interactive design, and search marketing, oh my!

As creatives, digital marketing agencies — and their owners — are experts in developing and executing compelling campaigns that help generate leads, drive revenue, and increase visibility.

Despite their expertise in a vast number of fields, finances are not always the specialty of digital marketing agencies. Regardless of expertise, there are consequences to putting finances aside. Receipts can pile up, billable hours can go untracked, and the books may even fall by the wayside.

By partnering with an accounting and bookkeeping firm like KeyLin Advisors, digital marketing agencies across industries and niches will get ahead of their financial challenges, leading to better decisions and outcomes.

Unique Ads, Unique Finances: The Challenges of Accounting for Digital Marketing Agencies

From the emails in our inboxes to the advertisements we see when scrolling, digital marketing agencies have no problem with creating compelling content. However, there are definitely things that are uniquely challenging for these agencies, especially when it comes to finances.

Diverse Revenue Streams

Unlike other businesses, digital marketing agencies often have diverse revenue streams. With diverse revenue comes revenue variability, which can make accounting more challenging.

For example, consider a digital marketing agency that accepts a variety of types of work, from retainers to project-based work. If just one of those retainers changes or a project gets delayed, the agency’s revenue could shift significantly over the course of just a few months.

Fluctuating Expenses

Like with revenue, expenses at a digital marketing agency can get complex quickly, changing from month to month.

Costs like subscriptions, advertising spend, and contractors add up over time, and can change monthly, depending on Client needs and campaign performance.

Billable Hours

As with any services-based organization, tracking time — especially billable hours — is crucial to the long-term financial success of a digital marketing agency.

With an accurate representation of billable hours, businesses can better track and understand other metrics, like profitability and resource management, leading to better decision-making.

Best Practices: Key Accounting Practices for Digital Marketing Agencies

At KeyLin, we’re committed to supporting our Clients on their financial journeys, no matter where they are. Not sure how to structure your business? We can help. Need to update your cash flow management processes? No problem. There are no bad questions when it comes to your finances, and we’re here to answer them all. Together.

To get started, we’ve put together our recommendations for the best ways to ensure your digital marketing agency stays ahead financially, and how we can help you along the way.

Cash Flow Management

As discussed previously, variable revenue can cause challenges when it comes to accounting for digital marketing agencies. Seasonal demand and project-based work may cause irregular revenue, while upfront costs like advertising campaigns may impact cash flow.

Nonetheless, managing cash flow is particularly important for covering operating expenses, paying employees, and investing back into your firm. Without good cash flow management, even day-to-day expenses may be challenging to pay.

An accounting partner like KeyLin Advisors can help you manage your cash flow — and all the factors that affect it — to level the playing field. We’d recommend strategies like setting up a reserve or “buffer” fund, and regularly reviewing your cash flow statements with an expert who can anticipate and address potential problems before they arise.

Expense Tracking

What, exactly, are you paying for? There are a variety of software subscriptions, advertising costs, employee salaries, and even office overhead costs that can add up quickly.

With such a wide range of expenses, accounting for digital marketing agencies can get complicated fast. Keeping track of these expenses is crucial to understanding profitability and making informed business decisions. However, with poor bookkeeping, costs can easily spiral out of control.

By engaging with a financial partner, you can better track and categorize expenses in real time, giving you a better understanding of where your money — and your business — is going. That way, you can work to reduce costs, optimize spending, and, ultimately, improve your bottom line.

Financial Reporting

Having a detailed understanding of your most up-to-date financial information is essential for making informed decisions about your business. Whether you’re looking to expand operations, secure financing, or even understand the agency’s financial health, accurate and timely financial reports are a must.

An accounting partner can support your business by generating and explaining regular financial statements, like profit and loss statements, balance sheets, and cash flow statements. In turn, these reports and the insight from your accountant can provide valuable information about the agency’s financial performance, enabling data-driven decision-making for growth and profitability.

Budgeting and Forecasting

Effective budgeting and forecasting are key to the long-term success of any business. For digital marketing agencies in particular, this means planning for future growth while managing current resources effectively.

Working with an accounting firm or partner can help you create realistic budgets and accurate financial forecasts that align with your agency’s goals. By analyzing historical data and industry trends, your partner can provide insights into potential opportunities and challenges. In turn, you can be better equipped to stay on track and achieve your financial goals.

Client Billing and Collections

Managing Client billing and ensuring timely collection of payment can be difficult, and the consequences of not doing it well can be wide-reaching.

Streamline your invoicing process with an accounting firm like KeyLin Advisors. We can ensure your Clients are billed accurately and on time, as well as manage accounts receivable and implement collection strategies to reduce the risk of bad debt. That way, you can be sure you receive the revenue you’re owed, without unnecessary delays.

Mastering Accounting for Digital Marketing Agencies

Having effective financial practices in place isn’t just helpful when it comes to paying salaries and taxes; it’s about creating a sustainable, profitable business that can withstand industry change and grow alongside your goals. By implementing some basic best practices for accounting for digital marketing agencies, you can unlock a future of long-term financial success.

Are you ready to take your agency’s finances to the next level? Learn more about KeyLin’s specialized accounting for digital marketing agencies and schedule your free first consultation today. Together, we can go beyond crunching numbers.