Agencies and studios: why busy projects still lose money, and how to see it sooner
Extra rounds of amends, unbilled hours and late invoices quietly eat the margin on creative work. Tracking time and budget by project, and billing in stages, shows the problem while there is still time to fix it.
A creative business can be busy, admired and short of cash, all at once. The reason is rarely that the work was priced too low at the start. More often the margin leaks away during the project: a few more rounds of amends, hours nobody bills, and an invoice that goes out weeks after the work was delivered.
A hundred unbilled hours, under three weeks of one person’s time, takes more than a third of the margin.
Illustrative: a £40,000 fee, £26,000 of budgeted cost, and extra hours costing £50 each that are not billed.
Show the data
| As agreed | 35% |
|---|---|
| +20 hours | 32.5% |
| +40 hours | 30% |
| +60 hours | 27.5% |
| +80 hours | 25% |
| +100 hours | 22.5% |
Measure each project, not just the year
Profit for the whole business hides the projects that lose money. Record time against every job, compare it with the budget each month, and look at the margin on each client and each kind of work. The patterns show up quickly: the client who always needs three extra rounds, the type of project that always overruns, the retainer that quietly costs more than it brings in.
Control scope as you go
Write down what is included: the deliverables, the number of revisions and the timetable. When the brief changes, say so and price it then, with a short change note the client approves. Absorbing a change to keep a client happy is sometimes the right call, but it should be a decision, not a habit.
Bill as the work is done
- Take a deposit at the start, especially from a new client.
- Invoice against agreed milestones rather than at the end.
- Bill retainers in advance, at the start of each month.
- Review work in progress monthly: anything earned but not yet billed is cash you are lending your client.
In the accounts, work done but not yet billed is income once it is earned, which can move profit, and tax, from one year to another. A consistent way of valuing work in progress keeps both the accounts and your decisions honest.
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This insight is general information, not advice for your circumstances. Talk to us before acting on it.