Accounting for marketing agencies is extremely important.
Without the right set up, it can become a major frustration for your time and mental game.
Good thing we’ve written this article just for you!
My name is Connor Gillivan. I’m a 10+ year Entrepreneur.
I currently run 3 B2B companies and have scaled multiple businesses online to 6, 7, and 8 figures with an exit in 2019.
I’ve also been the CMO for all of my companies so I understand how marketing agencies work and exactly what you should be looking for when handling the accounting for your marketing agency.
In this article, I’ll break it all down for you.
Here’s what we’ll cover:
- What Makes Accounting for Marketing Agencies Different?
- 7 Steps to Get Accounting for Your Marketing Agency Set Up
- Step #1: Separate Business & Personal
- Step #2: Choose Cash or Accrual Accounting
- Step #3: Purchase an Accounting Software
- Step #4: Connect Your Banks, Credit Cards, & Payment Processors
- Step #5: Categorize Transactions & Reconcile Bank Accounts Monthly
- Step #6: Create Your Financial Statements Monthly
- Step #7: Track Key Financial Metrics for your Marketing Agency
- Bonus: Outsource Accounting for your Marketing Agency
What Makes Accounting for Marketing Agencies Different?
Every business is unique when it comes to accounting and bookkeeping. Marketing agencies are no exception.
Here are 4 ways that accounting for marketing agencies is unique:
- Complex revenue recognition: Marketing agencies often have complex revenue recognition models, such as retainer-based billing or project-based billing, which can make bookkeeping a challenging task. It’s crucial to have a solid understanding of your revenue recognition model to ensure accurate financial records.
- Fluctuating revenue and expenses: Due to the nature of marketing services, revenue and expenses can fluctuate significantly from month to month. This requires careful monitoring of cash flow and expenses to ensure that your agency remains financially healthy.
- Diverse expenses: Marketing agencies often have to juggle various expenses, from payroll to software subscriptions. It can be challenging to keep track of everything, which is why having a solid accounting system in place is essential.
- Tax planning: As with any business, tax planning is essential for marketing agencies. However, marketing agencies often have unique tax considerations, such as taking advantage of deductions for advertising expenses. It’s important to work with a tax professional to ensure that you’re maximizing your tax savings and avoiding any potential penalties.
By recognizing these differences and implementing effective financial strategies, you can confidently manage your marketing agency’s finances and set your business up for continued success.
7 Steps to Get Accounting for Your Marketing Agency Set Up
Now, let’s dive into 7 steps to getting the accounting and bookkeeping set up for your marketing agency.
Note that you can do this yourself, hire a freelancer from a platform like Upwork, or outsource it to a reliable accounting and bookkeeping company like AccountsBalance.
Step #1: Separate Business & Personal
The first step to getting accounting for your marketing agency set up is to separate your business and personal finances. Mixing personal and business finances can make it difficult to track business expenses and can lead to inaccurate financial records.
To separate your finances, consider opening a separate bank account and credit card for your business. This will help you keep track of your business expenses and make it easier to reconcile your accounts.
It’s also important to establish a clear system for reimbursing yourself for any personal expenses that you may have paid for out of pocket. Keeping detailed records of all business expenses and regularly reconciling your accounts will help ensure that your financial records are accurate and up to date.
Step #2: Choose Cash or Accrual Accounting
The second step to setting up accounting for your marketing agency is to choose between cash or accrual accounting for your bookkeeping.
Cash accounting is the simplest method and records revenue and expenses when money is physically received or paid out. This method is often used by small businesses with straightforward accounting needs.
Accrual accounting, on the other hand, records revenue and expenses when they are earned or incurred, regardless of when the money is received or paid out. This method can be more complex, but it provides a more accurate representation of a company’s financial health.
Choosing the right method for your marketing agency depends on several factors, such as the size and complexity of your business and your revenue recognition model. For example, if your agency works on retainer-based billing, accrual accounting may be a better fit.
Consulting with a skilled accountant can help you determine the appropriate method for your business and ensure compliance with accounting standards.
Step #3: Purchase an Accounting Software
The third step in setting up accounting for your marketing agency is to purchase an accounting software to use for your bookkeeping and accounting.
There are many accounting software options available, each with their own features and benefits. When choosing a software, consider factors such as cost, ease of use, and integration with other software your business may use.
Popular accounting software options for small businesses include QuickBooks, Xero, and Wave. These software options offer features such as invoicing, expense tracking, and financial reporting.
Using accounting software can save time and reduce the risk of errors in bookkeeping. Additionally, many software options allow for real-time collaboration with your accountant, which can help streamline your accounting process.
It’s important to take the time to properly set up your accounting software to ensure accurate financial records. This includes entering all transactions, connecting bank accounts and credit cards, and creating a chart of accounts.
We’ll dive into this in Step #4.
Step #4: Connect Your Banks, Credit Cards, & Payment Processors
The fourth step in setting up accounting for your marketing agency is to connect your bank accounts, credit cards, and payment processors to your accounting software.
Connecting your financial accounts to your accounting software can save time and reduce the risk of errors in bookkeeping. Many accounting software options offer automatic syncing with financial accounts, which can streamline the bookkeeping process.
To connect your accounts, follow the instructions provided by your accounting software. This typically involves entering login information for your financial accounts and allowing the software to access your financial data.
Step #5: Categorize Transactions & Reconcile Bank Accounts Monthly
The fifth step in setting up accounting for your marketing agency is to categorize transactions and reconcile bank accounts each month.
Categorizing transactions involves assigning each transaction to the appropriate account in your chart of accounts. This ensures that your financial records accurately reflect your business’s financial activity.
Reconciling bank accounts involves comparing your financial statements to your accounting software and making any necessary adjustments. This can help identify errors or discrepancies in your financial records.
It’s important to complete these tasks each month to ensure that your financial records are accurate and up to date. This can help you make informed decisions about your marketing agency’s finances and improve your financial management.
Additionally, regularly categorizing transactions and reconciling accounts can help you identify areas where you may be overspending or can cut costs.
Step #6: Create Your Financial Statements Monthly
The sixth step in setting up accounting for your marketing agency is to create your financial statements each month.
Your financial statements provide an overview of your business’s financial activity, including income, expenses, assets, and liabilities. By creating these statements each month, you can track your business’s financial performance and identify areas where you may need to make adjustments.
Your financial statements typically include a balance sheet, income statement, and cash flow statement. Your accounting software should be able to generate these statements for you automatically.
Reviewing your financial statements each month can help you identify areas where you may be overspending or can cut costs. It can also help you make informed decisions about investments or other financial decisions for your marketing agency.
Here’s a free Monthly Finance Meeting Agenda you can use as you grow your marketing agency.
Step #7: Track Key Financial Metrics for your Marketing Agency
The seventh and final step in setting up accounting for your marketing agency is to track key financial metrics.
Key financial metrics can provide valuable insights into your business’s financial health and performance. Some common metrics to track for marketing agencies include revenue, profit margins, customer acquisition cost (CAC), monthly recurring revenue (MRR), and lifetime value of a customer (LTV).
By tracking these metrics, you can identify areas where you may need to make adjustments to improve your marketing agency’s profitability and growth potential. For example, if your CAC is high compared to your LTV, you may need to reevaluate your marketing strategy to improve customer retention or reduce acquisition costs.
Your accounting software should be able to generate reports and provide insights into your business’s financial metrics. Additionally, you can create custom reports to track specific metrics that are important for your marketing agency.
Bonus: Outsource Accounting for your Marketing Agency
Managing your marketing agency’s accounting and bookkeeping can be time-consuming and complex. As your business grows, it may become increasingly difficult to handle these tasks on your own. Outsourcing your accounting and bookkeeping can be a great solution to help you manage your finances more efficiently.
Here are some tips for outsourcing your marketing agency accounting and bookkeeping:
- Find a reputable accounting firm: Look for a firm that specializes in bookkeeping and accounting for marketing agencies and has experience working with businesses of your size and industry. You can ask for referrals from other business owners, search online, or check out a service like AccountsBalance.
- Assess your needs: Determine what tasks you need help with, such as bookkeeping, tax preparation, financial reporting, or budgeting. Make a list of the services you need and share it with potential accounting firms.
- Review their services and pricing: Make sure the accounting firm offers the services you need at a price that fits your budget. Consider the value of the services you’ll receive and the potential cost savings from outsourcing.
- Set clear expectations: Communicate your expectations for the services you’ll receive, including timelines, frequency of reporting, and communication channels. Make sure you and the accounting firm are on the same page before signing a contract.
- Review regularly: Check in with your accounting firm regularly to review financial reports, ask questions, and ensure everything is on track. Stay engaged in the process to ensure the best results.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
Still wondering if accounting for your marketing agency is important?
Or how you can handle the accounting and bookkeeping?
I hope not!
In summary, here are the 7 steps to get your marketing agency accounting set up:
- Step #1: Separate Business & Personal
- Step #2: Choose Cash or Accrual Accounting
- Step #3: Purchase an Accounting Software
- Step #4: Connect Your Banks, Credit Cards, & Payment Processors
- Step #5: Categorize Transactions & Reconcile Bank Accounts Monthly
- Step #6: Create Your Financial Statements Monthly
- Step #7: Track Key Financial Metrics for your Marketing Agency
If you have any questions, reach out to us at [email protected].
Cheers!
