Five Reports Every Ad Agency Needs
Knowledge is Power! The most successful businesses regularly analyze reports that provide actionable insights. In other words, the most relevant reports help leaders make informed decisions to improve and grow their business. Advertising agencies are service firms whose business includes creative projects and media buying, facilitating the need for unique information to stay fully informed.Here is a list of must-have reports for Advertising Agencies:
The Income Statement, along with the Balance Sheet and Cash Flow Statement, is one of the primary financial reports. Also known as the Profit and Loss (P&L) statement, its basic equation is Revenues – Expenses = Net Income over a period of time (such as a quarter or a year).
Client Profitability & Distribution
After determining your agency’s overall profitability, determine client distribution. Take the percentage of your adjusted gross income each client represents. In a pie chart, does one client comprise half or a third of the pie? If so, does that make you uncomfortable? To determine client profitability, analyze deeper and measure the profits from each client to gain more valuable insights. Because you are investing time and resources into each client, you want to track the rate of that investment. If some have a much lower profit margin when you consider the amount of time employees must spend to maintain them, it may suggest a need to raise rates for the client. It also may be a symptom of needing to improve your agency process.
A WIP, short for Work-in-Progress, is a must for companies that perform contract work. It looks at whether contracts have been over or under billed. For example, if your projects are 75% complete, but only 50% billed, it is under billed. This would mean your agency is funding project costs. Also, this causes inflated reported-income resulting in higher taxes (yikes!). The WIP report should be prepared monthly to know true profitability.
Quote vs Actual
If you bill clients estimated fees on a per project basis, you certainly would want to have the full picture of project costs. A Quote vs Actual report allows you to monitor the financial status of projects by comparing current actuals to the estimated hours. Reviewing actual costs can make your estimating more accurate. Even if you bill clients by retainer, it’s a good idea to create an internal estimate of employee hours for each project to provide a benchmark. At the end of the year, you’ll know if retainer fees cover all client project costs, and will be able to better plan your business moving forward.
Most business types need to know how employees are spending their time to set rates and determine if they are over or understaffed. As a service-based business, this is even more important for advertising agencies. The Employee Utilization report shows the percentage of a staff member’s available time spent on billable projects. For example, if an employee had 180 eligible hours in one month and spent 90 hours on billable projects, their utilization rate is 50%.
Bonus: Media Reports
If your agency does media planning and buying, then these reports are for you. The Media Current Status Summary contains media order details for all media types. It should also include order status details or ordered data compared to Billed and Accounts Payable amounts. This will help you catch inconsistencies. Including total spending details by market, by month and by vendor will ensure your media spend aligns with your goals. A Media Plan Comparison Summary is Media Plan and order details together for a top line summary by media type. Similar to the Media Current Status Summary, it ensures your actual spend aligns with Media Plan estimates. The Media Specifications Report outlines order details for trafficking and production. Information on Insertion and Material Due Dates, vendor ad specs and delivery information should be included. A member of the media team can run the report for the internal Production or Project Manager or outside contractors who produce ad files.
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