Mastering Workforce Strategy in 2025: The CFO’s Guide

Transform Your Agency with Strategic Time Tracking in 2025

Why Does My Agency Need Time Tracking? A CFO’s Guide to Unlocking Profitability and Clarity

It’s a familiar story for agency owners. The team is swamped, new clients are signing on, and revenue is climbing. You’re busier than you’ve ever been. So why does cash flow still feel tight? Why doesn’t the bottom line reflect all the incredible work your team is shipping? If you’ve ever looked at your P&L statement and thought, “This doesn’t feel right,” you’re not alone. This is the agency owner’s dilemma: being busy, but not knowing if you’re truly profitable.

For many creative, marketing, and tech agencies, the mere mention of “time tracking” can trigger a collective groan. It’s often seen as a straightjacket on the fluid, non-linear creative process—an administrative burden that stifles innovation. To your team, it can feel like a tool for micromanagement, a way for “big brother” to watch their every move. And if you’re not billing by the hour, it can seem like a completely pointless exercise.

Let’s reframe the conversation.

Effective time tracking is not about surveillance. It’s about intelligence. It is the single most critical source of business data your agency can have, transforming your leadership from reactive and gut-driven to proactive and strategic. It is the foundational layer for gaining the clarity, confidence, and control you need to scale profitably.

Often, the most painful issues in an agency—like team burnout, high employee turnover, and tense client relationships—are treated as HR or account management problems. But in reality, they are lagging indicators of a deeper financial and operational issue. The chain of events is clear: without historical data on how long projects actually take, scoping is guesswork. This guesswork leads to underpricing and a constant battle with scope creep, where extra revisions and requests slowly erode your margins. The result? An overworked, burnt-out team and a profitability problem that no amount of team-building can fix. Time tracking provides the objective data needed to solve the root cause, not just treat the symptoms.

Part I: The Strategic Shift—From Tracking Hours to Tracking Value

To truly understand the power of time tracking, you have to stop seeing it as an administrative task and start seeing it as a C-suite level strategic tool. It’s not about counting minutes; it’s about understanding the fundamental economics of your business.

Uncovering Your True Profitability: The Difference Between Revenue and Sanity

Top-line revenue is a vanity metric. It feels good to say you’re a “$3 million agency,” but if your expenses are $2.95 million, that number doesn’t mean much. Profit is what funds your growth, your team’s salaries, and your own sanity. Many agencies chase revenue growth while their profitability flatlines because they don’t have visibility into their biggest cost: their team’s time.

Time data is the only way to calculate the true profitability of every client, every project, and every service you offer. It allows you to calculate your “delivery margin”—the profit you generate from client work after the full cost of your team’s labor is accounted for. For example, a flashy $100,000 project that consumes 1,000 team hours might have a lower delivery margin than a less glamorous $80,000 project that only takes 500 hours. Without time data, you might be fighting to win more of the wrong kind of work.

Mastering Your Pricing and Scoping: From Guesswork to Confidence

Underpricing is one of the most common and destructive financial mistakes an agency can make. It often happens because, without data, you’re guessing what a project will cost to deliver. Time tracking is the antidote. Having a historical record of the actual hours your team spent on similar projects is the only way to build accurate, data-driven proposals that protect your margins from day one.

This data-backed confidence is also what empowers you to move away from hourly billing and toward more profitable value-based pricing models. When you know your true costs with certainty, you can price your services based on the immense value you deliver to the client, not the hours it takes to produce the work.

Furthermore, it gives you a powerful tool to combat scope creep. When a client asks for “just one more small revision,” you can move the conversation from subjective to objective. Instead of a difficult negotiation, it becomes a simple, data-informed statement: “We’d be happy to. The original scope included 15 hours for revisions, which we’ve used. Our data shows this next round will take approximately 5 additional hours. We can add that to the project for [cost].” This protects your team, your timeline, and your profitability.

Optimizing Your Most Valuable Asset: Your Team

For any agency, your single largest investment and expense is your people. Time tracking is the primary tool for managing that investment effectively. The data it generates provides a clear picture of resource allocation across the entire agency. It instantly reveals who is consistently over-utilized and at risk of burnout, and who is under-utilized, signaling a potential inefficiency or a need to fill the sales pipeline. This allows you to balance workloads intelligently, keeping your team healthy and productive.

This data also transforms performance reviews. Instead of relying solely on subjective feedback, you have objective metrics. You can see an employee’s efficiency, identify their most profitable skills, and find opportunities for professional development. For instance, you might discover a designer who is slower on logo projects but exceptionally fast and profitable when creating website mockups. This insight allows you to channel them toward their highest-value work, benefiting both the employee and the agency’s bottom line.

Part II: The Five Pillars of a Financially Healthy Agency

Implementing time tracking isn’t just about collecting data; it’s about building a stronger, more resilient, and more profitable business. The data you gather becomes the foundation for five essential pillars of agency health.

Pillar 1: Crystal-Clear Project & Client Profitability

A standard P&L statement gives you a blended, high-level view of your business. It can tell you if you were profitable last month, but it can’t tell you why. Was it because of Client A, or in spite of Client B? To make strategic decisions, you need granular data. By tracking time and understanding the “fully loaded cost” per employee (which includes salary, benefits, and a share of overhead), you can analyze every project with surgical precision.

This simple analysis can be revolutionary. It moves the invisible cost of your team’s time onto the balance sheet for each project, revealing which clients are fueling your growth and which are silently draining your resources. If you’re not sure your data is strong, accurate data in accounting is essential to give you confidence in your results.

Pillar 2: Data-Driven Resource & Capacity Planning

Without data, key decisions like hiring are often based on “feeling busy.” Time tracking replaces that feeling with facts. When you can see that your team is consistently operating at or above capacity on billable work, you know that a new hire is not just a cost, but an investment that the business can support and requires to grow.

This data is also crucial for capacity planning. By analyzing past projects, you can understand your team’s true capacity for work, which prevents you from over-promising and under-delivering to clients. It also informs the critical hire vs. outsource decision. If your data shows a consistent need for 15 hours per week of specialized copywriting, for example, it may be far more profitable to bring on a part-time employee than to continue paying a premium for freelancers.

Pillar 3: Accurate Forecasting & Predictable Cash Flow

The “feast or famine” cycle is a classic agency struggle, and it stems from a lack of predictability. When you know precisely how long your projects take and what your true profit margins are, you can forecast future revenue and expenses with a much higher degree of accuracy.

This predictability is a game-changer. It allows you to make strategic investments in new services, technology, or marketing with the confidence that you will have the cash flow to support them. It also provides the perfect tool for managing retainers. With time tracking, you can easily see if a client is consistently using more hours than their agreement covers, giving you clear, undeniable evidence to justify a conversation about increasing the retainer or scoping a new project—and to steer the business toward predictable cash flow over time.

Pillar 4: Radical Client Transparency & Trust

Many agencies view sharing time reports with clients as a defensive move, something you only do when an invoice is questioned. This is a missed opportunity. Proactively sharing simplified reports is a powerful way to build trust and strengthen relationships.

These reports demonstrate the immense value your team is delivering behind the scenes. They justify budgets and build client confidence, turning your relationship from a simple vendor transaction into a strategic partnership. The conversation shifts from “How much does this cost?” to “How can we best allocate our budget for maximum impact?” with you positioned as the trusted, data-informed advisor.

Pillar 5: A Scalable Operational Engine

Finally, time tracking is the key to building an agency that can grow without breaking. The data it generates is a spotlight that illuminates hidden inefficiencies and bottlenecks in your delivery process. Are you spending too much time on non-billable internal meetings? Does the QA phase of every web project take 50% longer than you estimated?

Answering these questions is the foundation of continuous improvement. By identifying and fixing these operational drags, you make your service delivery more efficient. For every fixed-fee project, that increased efficiency translates directly into higher profit margins. These refined, standardized, and data-proven processes create a scalable engine that allows your agency to take on more work without sacrificing quality or profitability.

Part III: The Implementation Playbook—Making Time Tracking Stick

Knowing why you need to track time is one thing; getting your team to do it consistently is another. Success depends less on the software you choose and more on the culture you build around it.

Step 1: Gaining Team Buy-In (It’s Not Big Brother)

The single biggest obstacle to successful time tracking is employee resistance, which is almost always rooted in the fear of being micromanaged. If your team believes the data will be used to punish them for taking “too long” on a task, they will either resist the process or fudge their numbers, making the data useless.

Therefore, the rollout must be framed as a tool for empowerment, not enforcement. The conversation should focus entirely on the benefits to the team. When introducing the initiative, use talking points that address their primary concerns:

• “This is our best tool to prevent burnout.” By making workloads visible, we can see who is overloaded and rebalance tasks before anyone gets overwhelmed.
• “This will help us set more realistic deadlines.” With accurate data, we can stop over-promising and create project timelines that are achievable without late nights and weekend work.
• “This data is how we justify hiring more people.” When we can prove we’re at capacity, it builds the business case for bringing in more help to support you.
• “This helps us recognize and reward your hard work.” Objective data on efficiency and profitability provides tangible evidence to support raises and promotions.

Crucially, leadership must lead by example. Track your own time and be transparent about what you’re learning. When the team sees that time data leads directly to a new hire that eases their workload, they will become your biggest advocates.

Step 2: Designing Your Framework & Choosing Your Tools

Don’t overcomplicate the setup. The goal is consistent adoption, not forensic-level detail. Start with a simple, logical framework that everyone can understand. A great starting point is:

• Level 1: Client
• Level 2: Project
• Level 3: Task/Service Line (e.g., Strategy, Design, Development, Project Management)
• Tag: Billable vs. Non-Billable

When choosing software, user-friendliness is the most important feature. The tool should be simple, intuitive, and feel seamless. Look for solutions that integrate directly with the project management tools your team already uses, like Asana, ClickUp, or Trello. This reduces friction by allowing them to track time without constantly switching tabs. Popular and effective tools for agencies include Harvest, Toggl, and Everhour.

Step 3: From Data to Decisions—The KPIs That Matter

Collecting data is pointless if you don’t use it to make better decisions. By translating raw time data into a handful of Key Performance Indicators (KPIs), you can create a simple dashboard to monitor the health of your agency every month. And if you want to clarify the difference between finance roles, bookkeeper vs accountant vs controller vs CFO can help you understand how each position supports agency analytics and reporting.

KPI	Formula	Industry Target	What It Reveals
Billable Utilization Rate	(Total Billable Hours / Total Capacity Hours) * 100	75-80%	Are we spending enough time on revenue-generating work? A low rate signals inefficiency or overstaffing.
Average Billable Rate (ABR)	Adjusted Gross Income / Total Hours Tracked	Varies by agency	What is the effective hourly rate we earn? This helps identify your most profitable types of work.
Realization Rate	(Billed Hours / Billable Hours) * 100	>95%	Are we actually billing for all the billable work we do? A low rate indicates scope creep, write-offs, or over-servicing.
AGI per Employee	Total AGI / # of Full-Time Employees	$150,000+	Is our business model efficient? This is a key indicator of overall agency health and scalability.

Conclusion: Your Agency’s New Compass

Time tracking is not just another task to add to your team’s plate. It is your agency’s compass. It provides the objective, reliable data you need to navigate the challenges of growth, pricing, and staffing. It gives you clarity on where your profits truly come from, the confidence to make bold strategic decisions, and ultimate control over your agency’s financial future.

Ready to take the first step? Don’t worry about buying and implementing a new tool just yet. This week, ask your team to track their time for a single project on a simple shared spreadsheet. At the end of the project, use the Project Profitability Analysis template from this article to see what the data tells you. The insights will likely surprise you—and set you on the path to more predictable, profitable growth.

Gaining financial clarity is a journey. When you’re ready to turn these insights into a strategic financial plan for your agency, our team at AURA is here to help you read the map.

 

Citations

1. Goodey, Ben. “The Financial Fog: 8 Signs Your Agency’s Underperforming.” Scoro, https://www.scoro.com/blog/agency-financial-mistakes/.
2. Petitpas, Marcel. “Agency Time Tracking – The Right Way.” Parakeeto, 23 June 2025, https://parakeeto.com/blog/how-to-track-time-with-marcel-petipas-episode-42/.
3. McLellan, Drew. “How to Manage Small Business Finances as an Agency Owner with Jason Blumer.” Agency Management Institute, https://agencymanagementinstitute.com/how-to-manage-small-business-finances/.

Understanding Financial Statements: A Detailed Guide for Marketing Agency Owners 

Introduction: Why Financial Literacy is a Strategic Necessity for Agency Leaders 

If you’re running a marketing or communications agency, chances are you didn’t start your business because you love reviewing financial statements. You’re a strategist, a storyteller, a brand builder. As such, your focus is on the work: campaign launches, client pitches, creative briefs, hiring decisions, and sometimes putting out fires.  Financials often take a back seat, that is, until there’s a cash crunch or a tax surprise. 

But here’s the truth: your agency’s financial statements aren’t just for your accountant. They are strategic business tools that provide clarity, inform growth decisions, and safeguard profitability. When used properly, they can help you make smarter decisions, avoid cash flow surprises, and spot early warning signs before they become real problems.  Without them, you’re making decisions in the dark. 

The reality is that agency owners are brilliant marketers who often feel lost when they look at their balance sheet or profit & loss statement.  That’s normal, but it is also fixable. This guide is your comprehensive walkthrough of the three essential financial statements every agency leader must understand and how to use them to build a smarter, more profitable business. 

 

1. The Profit & Loss Statement (P&L): Your Agency’s Performance Barometer 

What is it? 

 

The Profit & Loss Statement, also called the Income Statement, tracks your agency’s revenues and expenses over a defined period, typically monthly, quarterly, or annually. It answers the simplest but most important question: is your agency making or losing money? 

What it includes: 

• Revenue – All income from client retainers, project work, consulting, and other services.
• Cost of Goods Sold (COGS) – Direct costs tied to producing client work and delivering services – subcontractor and freelance payments, ad spend, or media buys passed through.
• Gross Profit – Revenue minus COGS, which represents what’s left to pay your team and overhead.
• Operating Expenses – Salaries, software, rent, marketing, professional services, insurance, etc.
• Net Profit (or Loss) – Your “bottom line” – what’s left after all expenses are paid. 

What marketing agency owners need to watch: 

Gross Profit Margin 

This shows how efficiently you’re delivering services, defined as a percentage of Gross Profit divided by Revenue. A healthy gross margin for an agency is typically 60–70% depending on your service mix. 

Red Flag: If your gross margin is slipping, you may be underpricing, over-servicing, or carrying too many direct costs. This raises the question of whether you need to reclassify expenses or restructure delivery teams to restore healthy margins. 

Operating Expense Ratios 

High overhead can drown a profitable service model. Tools, subscriptions, and bloated team structures can quietly erode profits if not monitored regularly. 

Net Profit Margin 

Defined as Net Profit divided by Revenue, many marketing agencies operate at razor-thin margins or even losses without realizing it. A sustainable target should be 20% net profit after paying the owners market-rate salaries. 

Why it matters: 

The P&L shows whether your agency is operating profitably.   More importantly, it helps you identify: 

• Are your margins shrinking over time?
• Are your expenses growing faster than revenue?
• Are specific services or clients driving profit or dragging it down? 

 

2. The Balance Sheet: Your Financial Health Snapshot 

 

What is it? 

The balance sheet gives you a point-in-time view of your agency’s financial position at a specific point in time.  It tells you what your agency owns (assets), what you owe (liabilities) and what’s left over (equity or net worth).  Think of it as your business’s financial pulse check. 

What it includes: 

• Assets – Cash, accounts receivable (invoices that you have sent to clients but have not yet been collected), prepaid expenses such as software, deposits and equipment.
• Liabilities – Credit cards, unpaid vendor bills, loans, deferred revenue.
• Equity – Owner investments, retained earnings and accumulated profits and losses. 

Why it matters: 

Cash Position 

Is there enough cash in the bank to cover 1–2 months of operating expenses?  If not, your agency is financially exposed, even if profitable. 

Accounts Receivable (A/R) 

How much money is owed to you? More importantly: 

• Are clients paying on time?
• Are you offering terms that are too generous?
• Is your billing process causing delays? 

Agencies with over 30% of revenue tied up in overdue receivables often face recurring cash flow problems.  This normally triggers a need to build collection cadences and automated reminders to shorten cash cycles. 

Debt Load 

Carrying business loans or using credit lines is normal, but growth funded by excessive borrowing can cripple cash flow. If your liabilities are growing faster than assets, it’s time to pause and realign. 

3. The Cash Flow Statement: Tracking Real Money Movement  

What is it? 

 

The P&L may show a profit, but that doesn’t mean you have money in the bank. That’s where the Cash Flow Statement comes in, tracking how cash enters and exits your business over a period of time. 

This is often the most misunderstood and most important statement for agency owners. 

Why?  Because profit does not equal cash. 

You can show $100,000 in profit on your P&L and still be unable to make payroll if you have not collected your client revenue and the cash has not yet hit your bank account. 

What it includes: 

• Operating Activities – Cash from day-to-day business operations, including client payments, payroll, rent, and vendor payments.
• Investing Activities – Equipment purchases, investments in new tools or systems (also called capital expenditures).
• Financing Activities – Owner distributions, new loans, and debt repayments. 

Why it matters: 

 

This statement helps you answer key questions like: 

• Why am I profitable but still short on cash?
• Am I collecting payments fast enough to fund payroll?
• Is now a good time to make a major investment or should I wait? 

How to use it strategically: 

• Forecast cash needs 30–90 days out using a rolling forecast.
• Time investments or hiring based on available liquidity.
• Understand why your cash is decreasing even if profits look strong. 

 

An example: An agency was showing $150k in profit but struggling to pay their freelancers.  It turns out that the issue is related to a $200k spike in accounts receivable and a large upfront media spend that hadn’t yet been reimbursed. Building a rolling cash flow forecast that factors in client payment patterns, seasonal slowdowns, and major expenses will help agency owners identify gaps before they hit. 

Common Mistakes Agency Owners Make with Financial Statements 

Many agency owners fall into these traps: 

 

• Confusing profit with cash – Remember, you can show profit and still be short of funds to be able to make your payroll.
• Ignoring balance sheet trends – A growing accounts receivable balance may be hiding deeper collection issues.
• Overlooking gross margins – Revenue growth is meaningless if you’re bleeding margin on delivery.  Revenue is vanity and profit is sanity!
• Delegating too much without understanding – Bookkeepers and software can produce reports, but interpretation is where the strategic value lies. 

Mistakes can be avoided by: 

 

• Not relying solely on the P&L, as it is just one part of the puzzle.  Your cash position completes the picture and gives you greater clarity of your numbers.
• Focusing on the balance sheet to understand whether your receivables balance or growing liabilities are undermining your business.
• Looking forward and not backwards.  You should treat your financial statements as a roadmap used for planning.
• Being able to interpret your key numbers.  Without understanding these figures, you are delegating one of your most critical leadership functions. 

Best Practices for Agencies to Move from Confusion to Clarity 

Financial statements serve agency owners best when they are turned into action.  Understanding what they mean, identifying what needs attention, and implementing strategies to strengthen your financial position are all critical steps to going beyond the numbers. 

• Understand the true profitability of services, clients, and projects.
• Spot trends and flag risks early using dashboards and forecasts.
• Improve internal processes for better financial hygiene.
• Turn data into action with monthly financial review meetings that drive strategic decision-making. 

Financial Clarity Is a Competitive Advantage 

Understanding your financial statements isn’t about becoming a numbers expert. It is about taking control of your agency’s future.  If you’re serious about building a sustainable agency, one that’s not just busy but profitable, then you need to understand your numbers with enough fluency to make smart, timely decisions. 

Your P&L tells you if you’re making money. 

 
Your Balance Sheet shows what you’re worth. 

 
Your Cash Flow Statement tells you whether you can keep going. 

All three together are your business intelligence dashboard and your guide to building a smarter agency. 

If you’re a marketing agency or professional services firm that is looking to scale, contact AURA today for a complimentary consultation.  

 

Why Accurate Time Tracking Is Essential for Service-Based Businesses 

Why it matters:

In service-based businesses, and especially in the marketing and communications-based industry, your offering is creativity, strategic thinking, and time. You are not selling widgets; you are selling brainpower. That makes time your most valuable (and expensive) resource.

Yet, time tracking remains one of the most overlooked and inconsistently executed practices among small to mid-sized agencies.  Many agency heads and CEOs rely on ballpark estimates or outdated tracking systems, unaware of just how much money is lost when hours are inaccurately recorded, or worse, not tracked at all. 

Excuses abound as to why staff don’t take time tracking seriously: 

• It’s inconvenient 
• Extra work takes staff away from delivering to the client 
• It’s cumbersome to log in to software, which is often not intuitive  
• The boss just wants to micromanage  
• There is little to no understanding of why the business needs to track time in the first place 

While you may have heard all of this, the fact remains that if you want to run a profitable, scalable service-based business, accurate time tracking isn’t a nice-to-have; it is non-negotiable. 

Let’s explore why. 

Time Tracking is the Backbone of Profitability 

Starting with the basics: If you don’t know how much time it takes to execute a task, you cannot price it correctly.   And if you can’t price it correctly, you’ll either overcharge and risk client attrition or undercharge and erode your margins, both of which are financially unsustainable. 

Let’s say that your team is charging $10,000 for a brand identity project you estimate will take 80 hours; in reality, it takes 120 hours.  That’s an extra 40 hours of unbilled time or 5 full workdays of lost revenue.   Multiply that across 5 projects per year, and you’ve quickly absorbed $25,000 or more in unrecovered costs. 

Now imagine if that was happening across multiple clients and service lines.  Identifying this quickly highlights how time leakage eats away at the bottom line. 

Enables Accurate Pricing and Project Scoping 

One of the most common and potentially damaging habits we observe in agencies and other service-based businesses is “gut-based pricing”.   You price a new project or assignment based on what you feel it’s worth or what you think the client will pay, without consulting the real data on delivery time. 

Accurate time tracking transforms pricing from guesswork into a strategic approach.

By analyzing past projects, you gain clarity on: 

• How long does it really take to complete deliverables (not what your team hopes) 
• Where bottlenecks or inefficiencies occur 
• What services consistently exceed time budgets 

Armed with this information, you can develop pricing models that protect your margins and create more accurate project scopes, reducing creep and client disputes. 

Clarifies Team Utilization and Prevents Burnout 

Without detailed time tracking, it’s hard to know who’s truly at capacity, who’s underutilized, and how labor is distributed across billable and non-billable work. 

Why this matters: 

• In a marketing and service-based business, a benchmark utilization rate for employees should start at 80% 
• This rate ensures that employees are spending most of their time on billable tasks while still having time for necessary non-billable activities like training, internal meetings and administrative tasks 
• If you believe that a team member is fully utilized but they are not, you may end up making hiring decisions which cost the agency money or, miss revenue opportunities 

Tracking time by client and project type reveals: 

• How many hours are spent on revenue-generating work 
• Which tasks are draining resources without adding value 
• Whether you need to hire, outsource, or restructure your team 

This data can also help set realistic internal expectations and prevent over-promising, which often leads to team fatigue. 

Identifies Which Clients Are Profitable and Which Aren’t 

Every agency has a “problem client”.   They demand constant revisions, ignore scopes of work, and eat away at your team’s time.  Unless you are accurately tracking time, you may not realize just how big of a problem or unprofitable this client is. 

Time tracking allows you to evaluate client-level profitability, which means that you can: 

• Compare hours worked vs. hours billed 
• Identify which clients generate high-margin work 
• Justify fees, rate increases or scope renegotiations 
• Know when it is time to offload a low-value client 

Having one client lose $10,000 per year due to over-servicing is one thing; having multiple clients lose this amount is a much bigger issue. 

Improves Billing Transparency and Client Trust 

Even if you do not bill hourly, time tracking supports clear communication, reporting and transparency. 

Clients want to know they are getting value for their investment.  When you have the data to support your deliverables, you 

• Build transparency and trust 
• Reduce billing disputes 
• Make it easier to upsell new services based on demonstrated effort 

And, if you bill by the hour, consistent time tracking is your only protection against scope-related disagreements and fee challenges. 

Fosters a Culture of Accountability and Operational Excellence 

As stated earlier, many team members resist time tracking.   They feel that it is micromanagement or a lack of trust.  But the issue isn’t the concept of time tracking; it is the culture around it. 

When appropriately implemented, time tracking becomes a performance tool, not a punishment. 

• It reveals where time is being lost to inefficiency 
• It empowers team leads to better support their staff 
• It supports goal setting, resource planning and bonus structures 

Your team cannot improve what they cannot see.   Time tracking gives them the visibility they need to make smarter decisions and helps leadership build stronger businesses. 

How to Improve Your Time Tracking System 

If your agency is still relying on end-of-week spreadsheets or Teams or Slack-type recaps, it’s time to reconsider. Implementing time tracking tools can simplify daily logging and help measure agency profitability metrics with greater precision. 

Use the right tools: 

There are many integrated platforms which exist, and you should research which system is right for your company. 

Log time daily: 

End-of-day or throughout the day logging increases accuracy and reduces time memory loss, where employees underestimate what they worked on 

Track by project and task and not just by client: 

The more granular your data, the more insightful your reporting 

Educate and incentivize: 

Explain the “why” behind time tracking to your team.  Make it part of your culture and reward consistency and accuracy 

A Financial Partner Can Help You Make Sense of It All 

Having the proper financial partner will help analyze your time data alongside your financials to uncover insights like 

• Which service lines are draining profitability 
• When to hire vs. optimize 
• Whether your pricing model supports your cost structure 
• How to design a compensation model that aligns time with value 

This analysis will help your agency move from busy to profitable. 

Conclusion 

Accurate time tracking isn’t about control; it’s about clarity. 

It’s not a tool to monitor productivity; it’s a system to manage profitability. 

If you’re not confident in where your agency’s time is going or whether it is being used profitably, you’re leaving money on the table. 

Contact AURA today for a complimentary consultation and discover how we can identify the hidden time (and profit) in your business. 

In-house Accounting vs. Outsourced Accounting: the Pros and Cons

A strong accounting infrastructure is crucial for the financial health of any business. Accurate, well-organized financial records give you a clear view of your company’s performance and the confidence to make strategic decisions that enable your company to scale. When it comes to ensuring the right accounting foundation is in place, business owners face a key choice: build an in-house accounting department or outsource your accounting functions. Each approach comes with unique advantages and challenges, and determining the best fit depends on a number of factors including your company’s size, industry, budget, and long-term growth objectives.

In this post, we’ll break down the pros and cons of an in-house versus an outsourced accounting solution so you can make an informed decision that aligns with your business strategy and long-term goals. Whether you’re seeking cost efficiency, specialized expertise, or more control over financial operations, we’ve got the insights to guide you to the decision that’s right for your business.

When is the Right Time to Hire an Accountant?

An accounting team has a wide range of important responsibilities within an organization. From overseeing your company’s financial systems and ensuring tax compliance to preparing financial statements, accounting is instrumental in developing, monitoring, and managing the company’s budgets and cash flow.

Generally, a business is ready for an accountant when their financial operations become more complex and require detailed reporting, analysis, and accurate, timely financial statements. A good accountant has in-depth knowledge of accounting standards, tax laws and regulations, and is proficient in accounting software and spreadsheets.

For detailed insights on the qualifications to look for in an accounting resource, check out our Comprehensive Guide for Businesses post which covers the different financial roles your company may need at various stages of its growth and how to choose the right expertise at the right time.

What is In-House Accounting?

In-house accounting involves hiring and training accountants to handle the company’s financial tasks, such as bookkeeping, generating financial statements, and tax preparation. In-house accounting is the traditional way of handling a company’s finances, where the accounting team is an integrated part of the organization rather than an external firm. By keeping accounting in-house, businesses can maintain direct control over their financial data and processes, ensuring that all financial operations align closely with the company’s specific needs and goals.

What Are the Pros of In-house Accounting?

Managing your accounting functions internally with dedicated staff has several advantages for businesses. Below are the biggest benefits to keeping your accounting in-house.

• Control & Oversight: By managing your accounting functions in house, you have full visibility and control over your company’s financial processes. This allows for real-time adjustments and close monitoring of your financial data.
• Tailored Processes: An in-house accounting department gives you more flexibility over your processes and procedures so that they can align with the specific needs of your business.
• Immediate Availability: An in-house accounting department means that you have a team readily available to answer questions, address urgent financial concerns, and collaborate directly with your leadership team and other departments.
• Cultural Alignment: Having your own accounting department means that your team members are more closely aligned with the company culture and strategic goals. This can result in better collaboration with other departments.

While in-house accounting offers control and oversight, it can also be expensive and require careful management. The financial implications of hiring full-time or part-time accountants, along with the potential quality variations and management challenges, need to be carefully considered. 

What are the Cons of In-house Accounting?

Solely relying on in-house accountants can come with some drawbacks including the following:

• Limited Expertise: Smaller in-house accounting teams may lack the depth and specialization found in outsourced firms, potentially leading to gaps in knowledge. In addition, businesses that rely on a single in-house accounting resource can face delays and other issues if the employee is out of the office unexpectedly.
• Resource Constraints: During peak times like tax season or audits, in-house accounting staff may struggle with capacity, leading to potential burnout or errors.
• Technology Investments: Managing your accounting function in-house could mean that you need to invest heavily in accounting software and systems upgrades along with training and continuing education for your staff which could mean added expenses and loss of productivity.
• Higher Costs: The human resources side of an in-house team such as competitive salaries, benefits, training, turn-over, and overhead expenses can make an in-house accounting team significantly more expensive compared to outsourcing.

Now that you have an understanding of the advantages and disadvantages of having accounting in-house, let’s look at the benefits and drawbacks of outsourcing your accounting function to a third party.

What Does it Mean to Outsource Your Accounting?

Generally speaking, outsourced accounting means that you delegate all of your accounting responsibilities to a third party that handles all of the normal accounting services such as basic bookkeeping, financial reporting, payroll processing, accounts payable and accounts receivable, budgeting and forecasting, tax preparation, and regulatory compliance, among other functions.

Accounting services can be outsourced to an individual accountant or an outsourced accounting firm that offers all levels of support based on the business’s needs. Complete control of accounting tasks are handed off to the outsourced partner who bills an hourly rate or a fixed monthly fee or retainer depending on the scope and complexity of services provided.

Examples of Outsourced Accounting Services

Outsourced accounting services cover a broad range of services. Some examples of accounting services that can be handled by a third party include:

• Financial Statement Preparation: Creating accurate and timely financial statements to provide a clear picture of the company’s financial health.
• Budgeting and Forecasting: Developing budgets and financial forecasts to guide business planning and decision-making.
• Accounts Payable and Accounts Receivable Management: Handling the processing of invoices and payments, as well as managing incoming payments from customers.
• Payroll Processing: Managing employee payroll, including calculating wages, withholding taxes, and ensuring timely payments.
• Tax Preparation and Planning: Preparing and filing tax returns, as well as developing strategies to minimize tax liabilities.
• Financial Analysis and Reporting: Analyzing financial data to provide insights and recommendations for improving financial performance.

The Pros of Outsourcing Your Accounting Services

Outsourced accounting services provide businesses access to a broader pool of knowledge and expertise, and is especially beneficial to small and midsize companies that do not require and often can’t afford full time accounting experts.

Below are the primary benefits to outsourcing accounting services to a third party.

• Access to Expertise: With an outsourced solution, a business can access a wide range of specialists with deep knowledge in various areas of accounting, tax compliance, and financial strategy as well as expertise in cash based and accrual based accounting methods.
• Scalability: With an outsourced provider, businesses can increase services as they grow and pull back during slower times without the hassle of hiring or firing full time employees. Working with an outsourced accounting firm can also provide access to different levels of expertise from accountant to controller, to CFO services so that the partner can grow with the business.
• Focus on Core Business: Outsourcing accounting to an external firm frees up management time and resources so they can focus on strategic goals and core business functions, rather than dealing with time consuming accounting tasks.
• Latest Technology: Outsourced accounting providers often use advanced accounting software and stay up to date with industry trends, reducing the need for companies to invest in costly tech upgrades and training.
• Cost Savings: Outsourcing accounting services is typically more affordable than hiring in-house accountants, as businesses only pay for the services they need without the overhead of salaries, health insurance, holidays, sick time, or other overhead costs.

Now that we’ve covered some of the benefits of working with an outsourced accounting service provider, let’s take a look at some of the disadvantages.

The Cons of Outsourcing Accounting

Outsourced accounting has many benefits but may have some drawbacks when compared to an in house accountant. Among the biggest disadvantages are the following:

• Less Immediate Access: With an outsourced accounting process, communication and response times may not be as immediate as with an in-house team, particularly for urgent financial issues that may arise.
• Potential Security Concerns: Sharing sensitive financial information with an external provider may increase the risk of data breaches, requiring strict security protocols.
• Less Control: Businesses may have less oversight of their company’s finances and financial processes and may need to adjust to the outsourced accounting provider’s established workflows.
• Cultural Disconnect: External accounting firms may not have a thorough understanding of the business’s accounting needs nor align with the company’s culture, values, or specific business strategies.
• Dependency on Vendor: Relying on a third party firm means the business may be vulnerable to service disruptions if the provider experiences issues or if the relationship ends unexpectedly.

To mitigate these risks, businesses should:

• Establish Clear Communication Channels: Set up clear protocols for data sharing and communication to ensure transparency and accountability. Ideally you’ll have access to a team, not just one individual for better coverage and faster response times.
• Implement Robust Security Measures: Use encryption, access controls, and other security measures to protect sensitive financial data.
• Conduct Thorough Research: Investigate the outsourced accounting firm’s security measures and reputation to ensure they have robust protocols in place.
• Interview Multiple Providers: While overall reputation and experience are important, it’s equally important to find a partner that aligns well with your company culture and values. Speaking with three to five firms will ensure you find the right cultural fit.
• Regularly Review and Audit: Periodically review and audit the outsourced accounting firm’s work to ensure compliance with security standards and accuracy.

Is Outsourced Accounting Right for Your Business?

While outsourcing comes with some challenges, partnering with an external accounting expert is often a smart move for growing companies. Rapid growth, for instance, often comes with increased financial complexity and requires more advanced financial management than an in-house accounting team can provide. Businesses also turn to outsourced accounting expertise when navigating complex financial decisions or regulatory hurdles, where specialized knowledge is essential. Additionally, companies with seasonal fluctuations or unpredictable workloads benefit tremendously from outsourcing, as service levels can be scaled up or down as needed—something a single in-house accountant or team simply can’t offer.

Choosing the Right Outsourced Accounting Partner

Once you’ve decided that outsourcing is the right decision for your business, selecting a partner that can provide reliable and timely services tailored to meet your specific business requirements is crucial. Below are some key considerations to aid your search.

• Expertise & Specialization: Ensure that the outsourced accounting firm has experience working with businesses of your size and industry and can provide insights and recommendations that support your strategic goals. 
• References & Reputation: Research the provider’s track record, read reviews, and ask for client references to gauge their reliability, service quality, and responsiveness.
• Technology & Tools: Make sure the accounting firm uses modern, secure accounting software that integrates well with your existing systems and offers real-time access to financial data.
• Communication & Availability: Assess how the firm communicates and how accessible they are. You’ll want a partner who is responsive and offers multiple layers of support and clear lines of communication.
• Pricing & Service Flexibility: Understand the firm’s pricing structure and make sure it’s transparent and aligns with your budget. Look for flexibility in services so you can scale up or down as your business evolves. And remember, price should not be the main determining factor.
• Alignment with Company Values: As mentioned above, it’s important to choose a partner who understands your company’s culture and goals, and who will act as a strategic ally in supporting your long-term vision.

Key Takeaways

Deciding whether to hire in-house staff or outsource to a professional accounting firm is a significant decision that requires careful consideration. We hope this article has shed light on the advantages and disadvantages of in-house vs. outsourced accounting, helping you make an informed decision that best supports your company’s financial health and growth.

Partnering with AURA means tapping into a powerhouse team of accounting professionals, fractional controllers, and CFOs dedicated to supporting your business at every stage of growth. With a deep specialization in the marketing and communications industry, we understand how to streamline your operations, deliver precise and timely financials, and position your marketing agency to seize new growth opportunities.

If you’re a marketing agency looking to scale, please reach out to the outsourced accounting experts at AURA for a complimentary consultation.

Cash Based vs Accrual Based Accounting: Which is Right for Your Business?

Most entrepreneurs and business owners are visionaries and strategic thinkers who thrive on creativity and grand ideas, and not so much on data or numbers. They often prefer big-picture thinking over the nitty-gritty details, which is why many business owners find the financial side of running a business—like bookkeeping and accounting—challenging and unappealing. However, the financial side of the business is just as important as the creative side of running a business. Outsourcing these tasks to an accounting expert can free you from the day-to-day financial details, allowing you to focus on what you do best: growing your business.

An experienced accounting partner can manage your finances and craft a financial strategy tailored specifically to your business needs. This includes advising on key decisions like choosing the right software for your business and recommending the appropriate accounting method to ensure that your business’s financial practices align with your strategic goals.

In this article, we’ll break down the differences between the two methods of accounting – cash accounting and accrual accounting – to help you determine the best approach for your business.

What is Cash Basis Accounting?

Cash based accounting or cash accounting is a simple method of accounting in which revenue or expense transactions are recorded when cash is received or paid out, not when the revenue is earned or the expense is incurred.

This method of accounting focuses on cash flow, with a particular emphasis on cash on hand. This method is most often used by small businesses and for personal finances that don’t have a lot of complexity.

What Types of Businesses are Ideal for Cash Accounting?

The cash basis accounting method works well for businesses that don’t carry inventory, don’t buy or sell on credit, and for businesses that are paid relatively quickly after products or services are delivered.

Smaller businesses including sole proprietorships prefer cash accounting over accrual accounting. Some examples of businesses that are well suited for cash-based accounting include restaurants, retail stores, personal service businesses like hair salons, nail shops, and similar businesses.

What is Accrual Basis Accounting?

In contrast, the accrual method of accounting is more complex than cash accounting. The accrual accounting method records revenues and expenses when they are earned or incurred, regardless of when cash is actually received or expenses are actually paid. It is also known as accrual basis accounting or the accrual method. Accrual-based accounting provides a more accurate financial representation of a company’s operations by recognizing revenues and expenses as they occur and not when the cash is received or paid out.

Accrual accounting utilizes accounts payable and accounts receivable to formulate an accurate, real-time picture of a company’s financial status. Using this method generally evens out the income and expenses earned and incurred by a company and minimizes large swings created when cash exchanges hands.

What Types of Businesses are Well-suited for Accrual Accounting?

The accrual accounting method works well for medium to larger sized businesses and those that have delays between receiving cash and paying bills, accept or make credit card payments, or hold inventory are ideal candidates for accrual accounting.

Furthermore, businesses that have more than $25 million in sales over three years are required by the IRS to use accrual accounting. In addition, publicly traded businesses that are required to file audited financial statements must follow Generally Accepted Accounting Principles (GAAP) in recording and reporting their finances. GAAP sets the standard accounting rules for preparing, presenting, and reporting financial statements in the U.S. and its goal is to ensure that a company’s financial statements are complete, consistent, and conforms to an accepted set of standard accounting practices.

Many non-publicly traded companies utilize the accrual-based accounting method because it gives businesses a more accurate financial picture. This accounting method is regarded as more sophisticated than the cash method and is favored by lenders and creditors, so if the business ever needs a loan or line of credit, an accrual accounting method will increase the chances for approval.

Advantages and Disadvantages of Cash vs. Accrual Accounting Methods

There are clear advantages and disadvantages of cash basis and accrual basis accounting, and while accrual basis accounting offers most businesses a better glimpse into their overall financial health and conforms to generally accepted accounting principles, it does come with more complexity than the cash method of accounting.

The Pros and Cons of the Cash Basis Method

One of the biggest advantages of cash accounting is that it’s a much simpler method than the accrual method, and easier to manage for a business owner. Below are the biggest advantages and disadvantages to cash accounting:

Advantages:

• Simplicity: Cash basis accounting is notably simpler than the accrual method, making it easier for small business owners to implement and manage. This method directly tracks cash flow, providing a clear and immediate understanding of how much cash is available.
• Immediate Financial Overview: With transactions recorded when cash changes hands, business owners have an instant snapshot of financial activity, which simplifies the management of incoming and outgoing cash.

Disadvantages:

• Limited Financial Insight: One significant drawback is that cash basis accounting offers a narrow view of long-term financial health. It does not match revenue with the expenses incurred to generate that revenue, which can lead to misleading profit figures during periods of significant cash inflows or outflows.
• Difficulty in Long-Term Planning: Without the ability to foresee or plan for future incomes and expenses, cash basis accounting can make it challenging to perform effective business planning or forecasting. This approach also makes it difficult to measure profitability by client or project and productivity by staffing resources.
• Lacks Comprehensive Financial Controls: Unlike accrual accounting, cash basis accounting does not account for receivables, payables, and other important financial metrics like depreciation and amortization. This may necessitate additional procedures to manage credit effectively.
• Non-Compliance with GAAP: Financial statements prepared under cash basis accounting do not comply with Generally Accepted Accounting Principles (GAAP), which can be a significant drawback when seeking external financing or engaging with investors, as most prefer GAAP-compliant reporting.
  As your business matures and your financials become more complex, you can switch from cash to accrual accounting, but because the transition can be tricky, it’s advisable to lean on an accounting expert like AURA.

The Pros and Cons of the Accrual Basis Method

There are many advantages to using the accrual method including gaining a more accurate financial picture. However, it comes with some complexity. Below is a quick summary:

Advantages:

• Enhanced Accuracy: The accrual method provides a more comprehensive financial picture by aligning income with the expenses incurred to generate that income, regardless of when cash transactions occur. This alignment helps businesses match revenues with expenses, leading to smoother financial statements and more predictable cash flow patterns.
• Improved Financial Planning: By recording transactions when they are earned or incurred, accrual accounting makes forecasting and budgeting more straightforward. This is particularly advantageous for businesses engaged in project-based work, where tracking time, expenses, and profitability by client and project is crucial.
• GAAP Compliance: Accrual accounting meets Generally Accepted Accounting Principles (GAAP) standards, making it necessary for businesses that seek financing, attract investors, or are preparing for an IPO.

Disadvantages:

• Complexity: Accrual accounting is more complex than cash basis accounting. It requires a thorough understanding of accounting principles and may demand more resources to manage effectively.
• Cash Flow Tracking: While accrual accounting offers a clear view of profitability, it can complicate the direct tracking of cash flow, as revenues recorded may not immediately correspond to cash received.  Nevertheless, with accurate accounting records prepared by an organization like AURA, using accounts receivable and accounts payable records, companies can easily project their cash flow on a regular basis.
• May Be Overly Complex for Some: For small businesses that operate primarily on a cash basis without credit transactions, the benefits of accrual accounting may not justify its complexity.

Businesses that rely solely on cash payments may find accrual accounting unnecessary, as it is more beneficial for those extending credit, billing on an irregular cycle, or dealing with payment delays.

Below is a comparison chart that shows the primary differences between the two accounting methods.

Tax Implications of Cash and Accrual Accounting

Before deciding on the accounting and financial reporting method to implement for your business, it’s important to understand the tax implications of each of these accounting strategies.

Cash basis accounting may delay tax payments until cash is received while accrual accounting may require tax payments on revenue that has been recognized, even though the company has not yet received the cash for some of those transactions.

Examples of Cash Basis Accounting Method

Scenario 1: A wholesale business sells $5,000 worth of products in March, but doesn’t receive payment from the buyer until April.

Cash-Based Accounting: In this method, the transaction is recorded when cash actually changes hands. So, despite making the sale in March, the revenue is not recorded until April when the payment is received.

Scenario 2: A company pays $1,200 in advance for a year’s worth of insurance coverage in January.

Cash-Based Accounting: In cash-based accounting, the full $1,200 payment is recorded as an expense in January, the month when the payment is made. There is no recognition of prepaid expenses or allocation over the period the service covers, which impacts their cash flow in January.

Examples of Accrual Basis Accounting Method

Scenario 1: The same wholesale business sells $5,000 worth of products in March and issues an invoice, but doesn’t receive payment from the buyer until April.

Accrual-Based Accounting: Under this method, revenues and expenses are recorded when they are earned or incurred, regardless of when the cash is received or paid. Therefore, the $5,000 sale is recorded in March when the sale actually occurs, not in April when the payment is received.

Scenario 2: The same company pays $1,200 in advance for a year’s worth of insurance coverage in January.

Accrual-Based Accounting: Under accrual-based accounting, the $1,200 payment is recognized as a prepaid asset initially. Each month, $100 of this prepaid amount is expensed to reflect the insurance coverage for that month. Therefore, the expense is spread evenly over 12 months, recognizing $100 each month as the actual expense.

These scenarios further demonstrate how the timing of expense recognition can differ significantly between the two methods, affecting how financial statements reflect the company’s financial position and operations.

Choosing the Right Accounting Method for Your Business

As illustrated, several key factors influence whether cash or accrual accounting is the better method for your business. Gaining a clear understanding of these differences is crucial for business owners to make well-informed decisions regarding their accounting practices. This knowledge ensures that the selected method aligns with your business’s financial goals, reporting requirements, and operational needs.

If you’d like to discuss these two options in greater detail with a team of experts, contact AURA for a complimentary discussion. We can also help you transition smoothly from cash basis accounting to accrual basis accounting. We’re just a call or click away.

Accounting for Marketing Agencies: A Primer

If you’re in the advertising, creative, or branding industry, you’re focused on crafting strong, cohesive brand identities that drive client growth. But as an agency owner, are you giving the same attention to building a thriving, scalable enterprise of your own? Understanding and managing your agency’s financial health is a crucial first step.

This primer explores why good accounting and proper financial management are vital for marketing agencies, helping streamline operations, improve profit margins, and support informed decisions. We’ll also cover unique marketing industry challenges and how sound accounting practices can drive sustainable growth and success.

Why Good Accounting for Marketing Agencies is Critical

Establishing good accounting practices and proper financial management for your marketing agency enables real-time visibility into your organization’s financial well-being, which is critical as your agency grows.

Below are some of the top reasons why good accounting for marketing agencies is important.

Scalability and Growth

Scaling a marketing agency while enhancing profitability demands a thorough understanding of the agency’s financial landscape at both client and project levels. A robust accounting framework provides real-time access to financial reports and key performance indicators, enabling agencies to assess profitability at a granular level. This insight allows you to focus on high-performing areas while reducing investments in less profitable ones.

A clear understanding of your agency’s financial position and profitability empowers you to allocate cash and resources strategically. By setting aside funds to build a financial runway, you strengthen your financial stability, create a buffer to weather lean periods, and ensure you have the capital ready to invest in new opportunities. Good accounting supports informed decision-making, identifies improvement areas, and prevents costly errors.

Financial Stability and Cash Flow Management

Financial stability relies on an efficient accounting system that facilitates timely invoicing and consistent follow-up on overdue or missed payments, minimizing the risk of lost revenue. For most agencies, project-based work is a significant portion of their billings, so it’s critical that the invoicing process aligns with the payment terms specified in each client contract.

Timely payments to service providers, consultants, and freelancers is also important for agencies to keep their financial records up to date and avoid disruptions in service delivery.

Client Trust and Transparency

A well-oiled accounting machine fosters trust and loyalty with clients. Providing clear, accurate, and timely invoices helps clients maintain their own financial records and supports their efforts to achieve an accurate picture of their financial health. No business wants to be surprised by an invoice 60 days after a marketing campaign ran.

Maintaining a consistent invoicing process helps avoid unpleasant surprises and enhances the marketing agency’s trust and professionalism with their clients, fostering trust, confidence, and long-term relationships.

Risk Management

A solid accounting infrastructure includes internal controls to ensure that the marketing agency is compliant with financial regulations and tax laws, reducing the risk of legal issues that could impact an agency’s brand reputation.

Equally important is establishing automated systems and internal controls to prevent fraud and minimize errors. This includes setting up checks and balances that make it difficult for any one individual to commit fraud. Conducting regular audits to help detect unusual transactions or discrepancies can help flag issues before they happen so agencies can stay ahead of potential pitfalls and ensure long-term growth and viability.

Business Valuation

If your exit strategy involves selling your business or if you are in need of a credit facility with a financial institution, it’s important to maintain accurate and up-to-date financial statements, including balance sheets, income statements, and cash flow statements. These documents provide a clear view of your company’s assets, liabilities, revenues, and profitability—key factors that help drive the overall valuation of your business. Inaccurate accounting can distort these figures, leading to an undervaluation or overvaluation of your business, both of which can have serious consequences.

Accurate financials and strong accounting practices instill confidence in the valuation figures, paving the way for smoother negotiations and ultimately, better outcomes for you as the business owner.

Unique Accounting Challenges Faced by Marketing Agencies

Now that we’ve established the importance of good accounting practices for marketing agencies, let’s address some of the unique accounting challenges that marketing firms face.

Businesses that engage with clients on a project basis have an added layer of complexity to financial management than traditional retainer fee based businesses, which requires careful tracking and coordination to ensure accurate revenue recognition.

Cash Flow Uncertainty

Project-based billing typically involves defining key milestones and payment triggers in the scope of work agreement. Usually, there’s an upfront deposit, payments at certain milestones, and a final payment at project completion. Since milestones are reached at varying intervals and delays are common, payments are often unpredictable. This creates significant payment gaps and income uncertainty for owners, especially on large projects that span weeks or months.

Furthermore, revenue recognition generally follows milestones in the life cycle of the projects delivered to clients.  Recording your revenue properly with an accrual-based accounting system is critical to understand your true revenue and profitability as earned as opposed to on a cash flow basis.

A fine-tuned billing process, accurate cash flow forecasting, and robust financial runway can help reduce financial stress during periods of payment uncertainty.

Full-time Employees versus Freelancers and Consultants

Allocation between full-time employees (FTEs) and freelancers or consultants presents unique challenges and risks for agencies. FTEs offer consistency, deeper brand knowledge, and long-term commitment, but have higher overhead costs, including benefits, payroll taxes, and the risk of underutilization during slow periods. On the other hand, freelancers and consultants provide flexibility and specialized skills on an as-needed basis, reducing fixed costs and allowing agencies to scale quickly. However, reliance on external talent can lead to challenges in maintaining consistent quality, brand alignment, resource availability, and their base cost is often higher.

Having visibility into staff utilization by client and project and performance by individuals are key to finding the optimal workforce balance for your agency. To access this level of insight, it’s important that agencies have a solid method for tracking time and cost as discussed in the next section.

Time Tracking and Cost Allocations

To accurately measure profitability by project and client, agency owners must meticulously track time and expenses, including charges for travel, client meals, incidentals, and digital marketing campaigns. Linking all client-related costs and hours worked is essential to understanding FTE utilization and service provider productivity, enabling a clear picture of where adjustments are needed. Proper financial management supports informed decision-making, identifies improvement areas, and prevents costly errors.

While many agencies have internal systems for tracking time and resources, tools like Harvest, Toggle, Teamwork, and Clockify can enhance this process. It’s crucial for agency owners to have granular visibility into high and low performing areas at both client and project levels to know where to focus efforts and what to trim.

Client Billing and Project Billing Challenges

Proper financial management, including an automated billing system and implementation of accounting software, is essential for generating invoices on time and following up on outstanding receivables, especially if clients are on different payment schedules. An automated system also minimizes errors and payment delays often seen in manual processes.

It’s always best to research the options available, but some professional accounting software options include QuickBooks Online, Xero, and FreshBooks.

Client Dependence and Project Diversity

High client or project concentration poses significant risks to marketing firms. Agency owners must carefully evaluate the potential dangers of taking on large projects, especially considering how delays or cancellations could impact income and staff utilization. Losing a client that drives a large percentage of revenue will put significant strain on your business if that client departs with no warning. Proper financial management can help mitigate these risks by providing insights into the agency’s financial health and managing accounts receivable effectively.

How Agencies Can Get Ahead of the Challenges

Effective financial management and a solid accounting infrastructure, including timely, accurate financial reporting, automated accounting, and visibility into client and project profitability, are crucial for marketing firms’ long-term stability and profitability.

Strong risk assessment, internal controls, and financial planning safeguard operations against disruptions, enabling agencies to navigate challenges and seize new opportunities effectively.

Outsourced Accounting for Marketing Agencies

AURA specializes in providing outsourced accounting services that address the unique needs of marketing agencies and similar companies that engage in project work. We offer expert financial management that enables agency owners to focus on growth.

Comprehensive and Customized Accounting Services for Marketing Agencies

AURA’s comprehensive services include automated financial processes, accurate financial forecasting, monthly reports, profit margin analysis, and compliance with financial and tax regulations. We also implement internal controls to prevent fraud and errors, ensuring financial stability and growth readiness.

With deep marketing industry experience, AURA delivers tailored solutions by thoroughly understanding our client’s unique needs and objectives, ensuring seamless integration into their workflow.

Customization, communication, and collaboration are the cornerstones of our approach, and just a few of the many reasons our customers love us and stay with us for many years.

Conclusion

Good accounting is the backbone of your agency’s success. A partnership with AURA can give your company access to industry expertise, financial strategy and insights, and help your marketing firm increase profitability and confidently seize new opportunities.

Contact AURA today for a complimentary consultation and discover how we can customize a solution to help your marketing agency scale effectively.

Bookkeeper vs Accountant vs Controller vs CFO: A Comprehensive Guide for Businesses

For founders, owners, and CEOs, managing their company’s finances effectively is crucial for long-term sustainability and growth. Yet many executives are confused about the different financial roles and the necessary financial oversight needed for each stage of a business’s lifecycle.

This article breaks down the different accounting roles that a company owner may need along with some insights on the ideal time to hire a bookkeeper vs. an accountant vs. a controller, or a CFO.

The Role of a Bookkeeper: Day to Day Financial Record-keeping

A bookkeeper manages and records the company’s financial transactions, ensuring accurate and up-to-date monthly financials through meticulous transaction recording. While the bookkeeping needs of each business may differ, there are some common tasks that most bookkeepers perform.

Key responsibilities typically handled by bookkeepers include the following:

• Recording Transactions: Bookkeepers are responsible for day-to-day financial records and data entry, logging transactions such as sales, purchases, receipts, and payments. Organized records are typically updated in the company’s general ledger.
• Reconciling Accounts: Bookkeepers regularly reconcile bank statements and ensure that the company’s financial information and transactions are accurate and up-to-date including accounts receivable and accounts payable.
• Processing Payroll: Another common task handled by a bookkeeper is calculating and processing employee paychecks and payroll, ensuring timely and accurate payments along with necessary tax withholdings.

When Should You Hire a Bookkeeper?

There are some common triggers that indicate that a business is ready to bring on a bookkeeper. Here are some signs that it may be time to hire a bookkeeper.

• Your Company is in the Start-Up Phase: Bookkeepers are ideal for smaller companies and start-ups looking for some help early on to handle daily financial tasks and keep records well-organized from the beginning.
• You Have Basic Financial Needs: If a company needs help with basic tasks like data entry, paying invoices, tracking expenses, handling accounts receivable and accounts payable, and reconciling bank statements, bookkeepers can help.
• You’re Experiencing Increasing Transactions: When the volume of transactions increases and becomes too time-consuming for you to manage, or more errors show up in the books, it may be time to offload these responsibilities to a bookkeeper.
• You Can’t Keep Up with the Latest Accounting Software: Bookkeepers can manage and upkeep the accounting software you use to manage your transactions. Many are experts in accounting software like QuickBooks, Sage, or Xero.

Hiring a bookkeeper to handle these tasks can provide peace of mind, improve financial accuracy, and allow you to focus on increasing your revenue and meeting your corporate objectives.

When hiring a bookkeeper, you should consider several qualifications and credentials to ensure you find a competent and reliable bookkeeping professional. Here are some key factors to look for:

• Basic Accounting Knowledge: Understanding fundamental accounting principles and concepts are important for the bookkeeper to maintain accurate financial records for your business.
• Proficiency with Bookkeeping Software: Familiarity with accounting software such as QuickBooks, Xero, or FreshBooks to efficiently manage your financial data is critical.
• Professional Certifications: There are several certifications that bookkeepers can attain such as the American Institute of Professional Bookkeepers (AIPB) which demonstrates competence in bookkeeping and adherence to industry standards. The Certified Public Bookkeeper (CPB) is provided by the National Association of Certified Public Bookkeepers (NACPB) and validates the bookkeeper’s skills and knowledge. In addition, certification for accounting software like QuickBooks, Xero, Sage, or FreshBooks is also available and a huge plus.

By considering these qualifications and credentials when looking to hire a bookkeeper, business owners can feel confident that their company’s accounting function will be handled in a professional manner.

An Accountant’s Primary Role: Financial Data Analysis and Reporting

Where a bookkeeper adds a lot of value in transactional work like paying bills, processing invoices, and payroll processing, an accountant’s role encompasses a wide range of responsibilities, from overseeing your company’s accounting system to ensuring your business is fully compliant with its tax and reporting obligations, to helping you determine whether a cash-based accounting or accrual-based accounting method makes more sense for your business.

Below are the four main areas that an accountant typically handles for their clients:

• Preparing Financial Statements: Accountants prepare detailed financial statements such as income statements, balance sheets, and cash flow statements to provide a clear picture of a company’s financial health.
• Tax Preparation and Filing: Accountants prepare quarterly and annual tax returns, ensure compliance with tax laws, and develop tax strategies to minimize their clients’ liabilities.
• Conducting Audits: Accountants perform internal audits to ensure accuracy and compliance with financial regulations and accounting standards.
• Budgeting and Forecasting: Accountants develop and monitor budgets, manage cash flow, determine the best accounting method (cash or accrual), and provide financial forecasts to guide strategic business decisions.

When to Hire an Accountant

So how do you know when your business is ready for an accountant? It depends on the specific needs of your business, the complexity, and stage of growth, but here are some key indicators that your business may be ready for a financial accounting expert.

• You Have Complex Financial Needs: As your company grows, financial operations become more complex, requiring detailed analysis and reporting to make informed financial decisions.
• You Need Tax Preparation and Planning: Your accountant will handle your corporate tax preparation and filing and will ensure compliance with evolving tax laws.
• Accurate Financial Statements Become More Important: Your accountant can prepare accurate monthly financial statements such as income statements, balance sheets, and cash flow statements for stakeholders, investors, or lenders.
• Your Business is Experiencing Growth: If your business is growing and financial operations have become more complex, an accountant will assist with budgeting, forecasting, and financial planning to support your growth and strategic objectives.
• You’re Concerned with Regulatory Compliance: An important function of an accountant is ensuring your business is compliant with accounting standards (GAAP or IFRS) and other regulatory requirements, as well as preparing for and handling audits, either internal or external.

Undoubtedly, accountants play a critical role in a company’s financial stability and health as well as ensure compliance with tax regulations. By providing insightful analysis and strategic advice, accountants can help businesses achieve their financial goals and navigate complex financial landscapes.

When deciding to hire an accountant, there are several qualifications that are essential to consider.

• In-Depth Knowledge of Accounting Standards: Familiarity with GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards) is important to ensure your accountant understands financial reporting standards.
• Tax Expertise: A seasoned accountant should have a good understanding of tax laws and regulations to prepare accurate tax returns and develop effective tax strategies.
• Proficiency in Accounting Software and Spreadsheets: Advanced skills in accounting software (e.g., QuickBooks, SAP, Oracle) and spreadsheet programs (e.g., Excel) for analysis and reporting are critical skills for an accountant.
• Accounting Certifications: There are many types of certifications for accountants, even specialized certifications for specialties like auditing, financial services, or forensics. The most popular accounting certification is a CPA license which is granted by the American Institute of Certified Public Accountants (AICPA) and validates the accountant’s expertise in tax, compliance, risk management, and other areas. The CMA or Certified Management Accountant credential, provided by the Institute of Management Accountants (IMA) is a global certification that demonstrates an accountant’s expertise in accounting, financial planning, and financial analysis.

Hiring the right accounting partner is an important decision for any business. Finding someone that you like and trust is just as important as finding an accountant that has the credentials and experience.

A Controller’s Primary Function: Financial Management and Controls

A controller oversees the entire accounting function within a business and ensures the accuracy and integrity of financial data. A controller helps the business maintain its financial well-being and supports its long-term growth objectives.

Below are a controller’s key areas of focus:

• Implementing and Maintaining Internal Controls: A controller develops and implements internal controls to safeguard the company’s assets and ensure accuracy in the company financials.
• Supervising Accounting Staff: Controllers typically oversee the accounting department, ensuring efficient and accurate financial operations and management.
• Overall Financial Governance: The controller is responsible for the financial reporting and fiscal health of the company. They ensure that financial statements are prepared accurately and in a timely manner and provide insights into the company’s financial performance.
• Managing Budgets and Financial Forecasts: Controllers develop and manage budgets and financial forecasts, helping to plan for the company’s future financial needs.

When to Hire a Controller for Your Business

A business typically needs to hire a controller when it reaches a level of complexity and growth that requires more sophistication and experience than the average accountant can offer.

Key indicators that it’s time to hire a controller include:

• Business Growth and Expansion: If your business is expanding to new locations, launching a new product, or exploring new markets, a controller can help ensure you’re prepared from a reporting standpoint.
• Establishing Controls: As your company grows, it becomes necessary to establish strong internal controls and financial processes to prevent or minimize fraud and to ensure that your financial reports continue to be timely and accurate.
• Strategic Financial Planning: As the number of transactions and complexity grow, a controller can provide an added layer of expertise to develop a comprehensive budget and forecast model and financial process to support long-term planning and resource allocation.

Once you’ve made the decision to hire a controller, it’s important to review the qualifications that are necessary to ensure the right fit for your business.

A controller’s industry experience and overall familiarity with the nuances of your business are important as are the following skills:

• Leadership and Management: Experience in leading an accounting team and overseeing financial operations are critical skills in a controller.
• Advanced Accounting Knowledge: A deep understanding of complex accounting practices, financial analysis, and reporting are required skills for a controller.
• Proficiency in Financial Software: A controller should have advanced skills in financial software systems and ERP (Enterprise Resource Planning) software.
• Internal Controls Expertise: Knowledge of creating and maintaining robust internal controls to safeguard assets and ensure accuracy and timely reporting of the company’s financials is a critical skill needed in a controller.
• Certifications for Controllers: There are a variety of certifications that a controller can attain. Many controllers are certified public accountants or Certified Management Accountants (CMA) which focuses on management accounting and financial skills, including budgeting, forecasting, and strategic planning. A Certified Internal Auditor (CIA) designation is valuable for controllers responsible for internal controls and auditing.

A Chief Financial Officer’s (CFO’s) Role: Strategic Financial Leadership

Chief Financial Officers oversee the entire finance department and act as a key advisor to the CEO and executive team, helping to shape the company’s overall strategy and ensuring that financial resources are effectively allocated to support the company’s objectives.

Below are the primary responsibilities of a CFO:

• Strategic Planning and Financial Goal-setting: The Chief Financial Officer is a senior executive responsible for the strategic financial direction of the company. The CFO develops and executes financial strategies to support the company’s growth objectives.
• Risk Management: A CFO assesses the financial risks and opportunities of the organization and develops strategies to mitigate risks and capitalize on opportunities.
• Managing Investor Relations: CFOs handle relationships with investors, communicate with stakeholders, assist in raising capital, assess the organization’s investments, and communicate financial performance and strategy.
• Overseeing Mergers and Acquisitions: CFOs lead the financial aspects of mergers, acquisitions, and other significant business transactions.
• Leading Financial Planning and Analysis: CFOs conduct comprehensive financial planning and analysis to guide strategic decisions and ensure the company’s financial stability and growth.

When to Hire a Chief Financial Officer

As your company continues to grow and the financial needs of the company outgrow the skill set provided by your controller, hiring a CFO, whether part-time or full-time is the next logical step.

Below are some areas that CFOs typically oversee:

• Strategic Growth: When your organization reaches a size where strategic financial planning and risk management become critical, a CFO will help maximize growth opportunities and mitigate risk.
• Investor Relations: When you need to manage relationships with investors, raise capital, or plan for mergers and acquisitions, a CFO will be best equipped to evaluate capital raising and investment opportunities and maximize returns.
• Complex Financial Decisions: A CFO can help develop and execute long-term financial strategies and guide your business through complex financial landscapes such as global expansion and new revenue opportunities.

Once you’ve made the decision to hire a CFO, here are some important things to look for:

• Extensive Financial and Business Acumen: It’s important that the CFO has a broad understanding of financial management, business operations, and market dynamics.
• Strategic Vision: The CFO must have experience developing and executing long-term financial strategies that support the company’s growth objectives.
• Leadership and Communication Skills: Strong leadership to guide the finance team and effective communication to collaborate with executives, stakeholders, and investors are must-have skills for an effective CFO.
• Risk Management: A CFO must have demonstrated expertise in identifying financial risks and developing strategies to mitigate them.
• Fundraising and Investor Relations: A CFO should have experience in raising capital, investor relations, and communicating financial performance and strategy to investors and stakeholders.
• Mergers and Acquisitions (M&A): Knowledge of the financial aspects of M&A activities, including valuation, due diligence, and integration planning are essential skills to have in a CFO.

Comparing a Bookkeeper vs. Accountant vs. Controller vs. Chief Financial Officer

Below is a comparison table that shows the key differences between each of the accounting roles that we discussed, as well as their primary areas of focus, key responsibilities, and qualification criteria.

It’s important to note that the needs of each business is unique, and it’s up to you as the business owner to determine the level of accounting support you need in order to achieve your company’s financial objectives. The financial functions that a CFO oversees at one organization may be the same functions that a controller manages at another similarly sized organization. Finance roles differ based on the nuances of the business and the complexity of the financials. Each role provides a different level of financial oversight, ensuring that the company’s financial health is maintained at every stage of its growth.

Role	Primary Focus	Key Responsibilities	Required Skills
Bookkeeper	Day-to-day financial recording	Transaction entries, reconciling accounts	Attention to detail, knowledge of bookkeeping software
Accountant	Financial reporting and analysis	Preparing financial statements, tax preparation and filing	Analytical skills, knowledge of accounting standards
Controller	Financial management and control	Overseeing accounting, budgeting, and internal controls	Team management and advanced accounting knowledge
CFO	Strategic financial leadership	Financial strategy and risk management	Financial and business acumen, strategic vision

Role	Description
Bookkeeper	Primary Focus: Day-to-day financial recording Key Responsibilities: Transaction entries, reconciling accounts Required Skills: Attention to detail, knowledge of bookkeeping software
Accountant	Primary Focus: Financial reporting and analysis Key Responsibilities: Preparing financial statements, tax preparation and filing Required Skills: Analytical skills, knowledge of accounting standards
Controller	Primary Focus: Financial management and control Key Responsibilities: Overseeing accounting, budgeting, and internal controls Required Skills: Team management and advanced accounting knowledge
CFO	Primary Focus: Strategic financial leadership Key Responsibilities: Financial strategy and risk management Required Skills: Financial and business acumen, strategic vision

Conclusion

Hiring the right financial professional at the right time in your business ensures that you have the necessary expertise to manage and optimize the fiscal health of your company and support its growth and strategic goals. Each accounting role, whether a bookkeeper, accountant, controller, or chief financial officer, plays a critical part in different stages of your organization’s journey.

If you’d like to learn more about our outsourced accounting, controller, or CFO services, reach out to the accounting experts at AURA for a complimentary consultation.