Marketing and advertising agencies face the same challenges as most other project-based companies: controlling spend. The complexity of most campaigns creates added challenges for agencies who must control channel, content, creative, and media spend, usually with a singular topline budget. To add to the inherent campaign challenges, there is also the customer, whose adjustments during the campaign can lead to extensive rework that the customer doesn’t recognize as something beyond the scope of the original contract.
Many agencies manage their projects in a very informal manner. Tracking time and media spend are typically done but this information is often in multiple places requiring project managers to login to different systems and mentally reconciling financial data. This is a recipe for scope creep that will eat at your profit margins and make future forecasting almost impossible. Most agencies recognize the need to improve their project management. Here are 5 best practices to help you get started.
Track all aspects of your project spend. First and foremost, you need to get a handle on tracking your time and spend against your specific campaign. You can’t improve what you can’t measure. Most agencies will have a topline budget for creative and a topline budget for media spend. It’s ok to keep them separate, but ideally you can combine all your project’s data in one place. It gets tricky when you are trying to track multiple channels and making adjustments based on performance and budget. If your financial system works with your channel vendors or vendor management system, then you can sync your data and get real-time decision support for your managers. For time entry on the creative side, you must enforce daily time entry. Progress reports are only as accurate as the data they have to pull from so if your team enters at the end of the week or longer, then your decisions will always be based on old information.
Another key aspect to tracking your spend, is that you must track your write-offs per project. Any time that you spend on a job, any service you “give away,” must be tracked. Most systems will allow you to capture this as billable and then write it off. This allows you to see true project profit and helps you understand what you spent on the job. It can also show your customer the work that you did that you didn’t charge them for. (You may as well get satisfaction points if you can’t get the revenue, right?)
Set the right expectations with your customer. Your Schedule of Work (SOW) is incredibly important but rarely treated as such. Showing care and detail in your SOW not only conveys confidence to your customer, it also sets the groundwork for what types of changes can be made within the scope of the project and what will require additional charge. Customers almost always underestimate the cost of their ask for a new image, or a tweak to the tagline or a brand new company name and logo with special fonts and colors that must be used.
Build your SOW with your customer if the project scope calls for it. Be sure to call out the types of costs associated with your tasks to as detailed a level that is appropriate. It is also incredibly helpful to show your customer examples of an ask that would be acceptable and those that would require a change to the contract. Giving examples helps customers realize the scale of change that is required for what they believe to be a small request.
Bill for your work based on progress instead of month end. Everyone bills based on calendar dates. It’s easy and that’s the best way to work with your accounting system. Changing this model can have significant benefits to your projects that you may have never thought of. First, getting the invoice out the door quickly helps the customer see progress and get you paid for your work much quicker. Another benefit is allowing your project manager to view the performance of a task as it is completed. This is typically only useful during any creative engagement with your customer. Ongoing media spend can be billed based on results or ongoing calendar, as works for your business.
Changing your billing schedule can be easy. Cover this topic with your customer when discussing the SOW. It’s also helpful to show them a draft invoice so they can understand or request changes to the format. This step is small, but it can help reduce any billing questions that may delay payment. For more information on best practice for agency billing, check out our blog post and webinar on the subject.
Budget your work to the lowest level possible. You don’t have to share the detailed budget with your customer, but it can help your internal team ensure you have the resources to get the work done. Detailed budgets are a great way to get your project managers thinking about the work that will be required to complete the work as well as take more interest in tracking the spend against those tasks. Give your managers reports that track their detailed task budgets and real-time spend so they can always be up to date and confident in their decision making. Setup weekly review meetings with your managers to ensure they are tracking costs using those same reports. For more on reporting for agencies, check out our blog post and webinar on the subject.
Scheduling your employees to projects can be easily overlooked. But as agencies grow and take on more work, this becomes problematic very quickly. If you’re not using a system that allows you to track your team, their assignments, budgets and spend, you need to get one. Adopting this type of process will often shock agencies that were unaware of how their team was utilized. Generic finance software, disconnected systems, or Excel are impossible to use for real insight that is actionable.
Know when to pitch your additional services. It’s common for agencies to be terrible at sales. When working with a new customer it’s tempting to layout everything you do at the beginning. Most customers don’t understand the value of these services and have a singular focus for engaging with your agency. It’s good to introduce in the beginning but don’t push. Instead, find opportune times during the life of a project to introduce value add services that could enhance results or solve new needs for your customer.
If you can adopt these best practices, you will be sure to find hidden profits throughout your agency. It may be better insights in managing your channel spend, or a clear understanding of the effort it takes your team to build creative. Better project management will also lead to better quotes and higher customer satisfaction. Sage Intacct works with agencies of all types of customer and services to achieve success. Our focus is to connect your systems and provide real-time financial management for everyone on your team. Check out our webinar series covering 5 best practices in 30 minutes on topics such as agency billing, reporting, and scope creep.