Every type of business faces different challenges. Solo operations are tricky, with limited resources and without established branding. Budding entrepreneurs need to fight tooth and nail to find relevant prospects and convince them to convert.
Conventional B2C companies struggle to continue their growth, needing to prioritize customer retention to safeguard their revenue streams, while also finding ways to attract new customers.
But what about agencies? Well, they tend to have solid resources, slick branding, and strong relationships with reliable clients. But they still have issues, and perhaps the most common area of difficulty is financial management.
Dealing with late-paying clients, complex deals and big budgets isn’t a simple task. And it scales proportionately with agency size - it only gets harder.
If you’re the owner and/or manager of an agency, you need to have a sophisticated and robust system in place to ensure that you keep financial matters firmly under control. Fail to do this and you invite chaos that could do major damage to your prospects.
In this article, we’re going to set out some key suggestions for how you can stabilize your agency’s financial management, ultimately resulting in a rock-solid business foundation. Let’s get started.
Use software to centralize and streamline key tasks
Doing pretty much anything at the agency level is no mean feat. And that’s particularly true now that the classic model of gathering everyone in a large office has become outdated. Remote working is the norm in this pandemic era (and will likely remain so once it passes), making it markedly harder for teams to communicate and ensure that they’re taking appropriate steps.
Due to this, the need for software that can facilitate improved productivity and data reliability is greater than ever before. It’s common for startups to lean on ad-hoc combinations of business tools - that’s pragmatic at a small scale. But it’s a disastrous prospect for an agency where everything needs to be seamless.
Consider the versatility that makes Spendesk an all-in-one solution: the features are extensive and scalable, allowing users to proceed safe in the knowledge that they have core tasks such as budget monitoring and spend tracking under control.
Accurate financial calculations require huge amounts of data from throughout your organization, and much can go wrong in the process of trying to draw the data from disparate sources. Centralization is ideal.
Make time each week for relevant research
The global economy is in an odd position, with a lot of uncertainty about where things are going. You can’t predict the future, of course, but you can pay close attention to the present. And there’s often valuable information to be gleaned from the podcasting world in particular.
|MoneyLens has a list of money podcasts laden with insight from finance journalists and economists, and it’s absolutely worth adding some of them to your playlist.|
Don’t forget to follow related industries, though, with marketing in particular being a core concern for agencies. It’s your biggest revenue generator, but also among the biggest resource drains. Drawing upon the latest marketing tactics to maximize ROI and cut down on spending is a high-priority venture.
Marketing Speak is a podcast featuring marketing geniuses and successful entrepreneurs, and it often features advice relevant to finance.
If you can make a commitment to weekly learning, it’ll prove greatly beneficial.
Focus on clearly documenting essential processes
What happens when someone needs to log an employee expense but they haven’t followed that particular procedure before? If they can’t find the guidance they need, they can take far longer to get it done and/or make a costly mistake.
This is why you need your financial management tasks (those to be carried out by your regular employees, at least) to be carefully documented.
SOPs, or standard operating procedures, aren’t that difficult to produce. You just need to get the people most familiar with the processes to describe them in sufficient detail. You can then edit and tweak their work to make it optimally easy to follow, then make it available to everyone in your agency (most likely through an intranet). This will save a lot of time and confusion.
|Further reading: Learn how to craft a successful company expense policy.|
Hire finance personnel you can trust
Despite the wonders of today’s technology, one of the most effective problem-solving tactics in the business world is still to hire fresh talent. If you don’t currently have anyone to address a problem, you have an obvious need.
And if you do have such an employee (a financial controller, for example), then they may simply be overworked and need assistance and/or guidance.
Given the immense complexity of everything that goes into financial management, leaving it to the CEO or agency parters to manage the finances poses a clear risk. A slight error made in haste or ignorance can snowball into a huge problem.
It also adds a huge amount of stress, and agency leaders have enough of that without tacking on the intimidating prospect of balancing the books.
Hire full-time financial personnel if you think they’ll be needed so regularly. You can also consider an outsourced CFO service or part-time accountant if that suits you better.
Either way, the vital ingredient is trust. Having a fully-qualified expert in place won’t assuage your fears if you don’t trust their work ethic. So get recommendations from professionals you know to be reliable.
Reduce unnecessary costs and over-delivery
Agencies tend to build up wasteful spending habits. It’s an inevitable part of scaling up following positive results. When you can afford to do better marketing and go for bigger clients, you can also afford to get a bigger office and spend more on lunches.
That’s part of agency life, isn’t it? And while it can definitely make the working day more pleasant, it can also make it significantly harder to keep your finances in order.
By dialing back on your unnecessary expenditure (Procurify has some good tips for this), you grant yourself more leeway.
But you shouldn’t stop there. You should also look for over-delivery in your working patterns. There may be instances in which you’ve spent far more time on a project than was warranted by how much you were getting paid. If you do more than you’re paid for, it undermines the value of your services and damages your brand image.
Train your client-facing workers in financial matters
Having financial experts overseeing things will make a big difference. But the actions of all your employees will matter, and those in client-facing roles need to be making the right decisions.
Given that client representatives are often incentivized to make new sales, they can get into the habit of promising results that can’t be achieved, or charging far too little for projects because they want to keep things moving.
To prevent these mistakes, you need to arrange training sessions to clarify what all your services cost and the extent to which your client-facing employees can tweak your propositions to secure valuable deals. There should be a healthy margin built into every one of your services to accommodate this. And there’s a reasonable chance that one of your first moves will be to raise your prices.
Prioritize client retention and diversification
In the introduction, we considered that B2C companies have to balance new prospects with loyal customers, and noted that agencies often have well-established client relationships. It bears noting, though, that clients can and do leave for greener pastures, and that’s even when they’re treated well. If you get too lax, you will lose high-value clients.
Perhaps more than anything else, this can lead to financial disaster. An agency can grow to a formidable size while relying on the work from one large company. And if that work suddenly dries up, everything can collapse.
There are two lessons to take from this: The first is that you need to do what you can to keep clients around. Earning new clients is always a long and challenging process, and relying on potential income won’t help you for long. Communicate well, hit your deadlines, get all your documentation right (including invoicing), and be friendly.
The second lesson is that you should aim for a diversified client portfolio. This will take away the work that would have stemmed from the need to make your numbers add up after the loss of one core client. If you can reach the point of being able to lose several clients without running into revenue problems, you’ll find it so much easier to keep your finances in pristine condition.
In this piece, we’ve looked at numerous tips that can help you improve the stability of your agency’s financial management processes. It isn’t an exhaustive list, naturally, but it should give you a lot to work on as you seek to shore up your savings and give your agency the best possible chance of enduring whatever turbulence the near future has to bring.