From the outside looking in, a small agency bringing in over $1.5M each year with 80% growth should be killing it. But often owners of fast-growing agencies have no idea if any of their projects are actually making them money.
They know they need to hire more people to handle the work, but they don't know how much they can afford to pay them and if they're pricing their projects appropriately.
They may be paying themselves a consistent salary, but when some big invoices get paid and they want to take home a bonus - probably have no idea how much they should leave in the company to cover payroll and other expenses.
So what can you do in this situation?
Start using technology to track profitability
Integrating all your business processes with cloud-based technology eliminates most of the guesswork, as you can work off real time data and be able to see exactly if a decision is going to be profitable or not. Here are some of our top tips for financial decision-making in your agency.
Keep a close eye on your projects
One of the biggest challenges faced by agencies is to deliver an amazing project while still making a profit. We see so many agencies walking the fine line between keeping the client happy and making sure the job doesn’t go over budget as a result of additional client requests. The reality is that there is no simple answer to solving this challenge, but a good place to start is to use a project management app to keep track of things.
The most popular project management tools with our clients are Teamwork, Clickup, Monday, and Asana. Many of them can take care of your quoting, project management, time tracking, CRM, invoicing and reporting. They link with your accounting software and are really easy to use. Most importantly, they’ll allow you to produce a report on your most profitable projects (and clients) at the click of a button.
Have your team actually track their time
I hear from agency owners that they don't want to force their team to do a bunch of admin work, or employees grumble about tracking everything they're working on, but it's a hugely important part of understanding how profitable your projects are.
Tracking time will also help you resource your projects more accurately and give you a heads up when it's time to hire someone to help with the workload.
If you use a simple tool that integrates seamlessly with your project management tool, tracking time doesn't have to be a huge burden. Some good options are Harvest, Toggl, or Time Doctor. Armed with time data, you'll have all the information you need to understand how profitable each project is and whether or not you need to adjust pricing to make the type of consistent money you want to make.
Take control of your finances
One of the best ways to do this is to make sure you have your important financial information at your fingertips. We love Quickbooks Online for its ease of use and integrations with most project management and productivity tools.
There’s a neat dashboard with the most important bits of financial information you need to run your business, and you can produce reports that you can easily understand at the click of a button, making it easier to be in control of your agency’s future.
Never run out of cash
The other great thing about Quickbooks is that it takes a live feed from your bank account, allowing you to easily see how your bank balance is looking and which invoices are outstanding. You can send statements to clients via email in one click, or even use a partner app, such as Invoice Sherpa, to do your invoice chasing automatically for you. Invoice Sherpa is one of several hundred apps that integrate with Quickbooks Online. They’re all designed to make your life easier and increase your profitability. Other popular apps for agencies include Float, which will help you forecast your cash flow, and Hubdoc, which will save you hours messing around with paper receipts.
It can take a bit of time to get these systems in place, but once you're set up there will be no stopping you! Working smarter, not harder is key when trying to grow a profitable and sustainable business you actually enjoy!