You started a marketing agency because you wanted to help other businesses tell their story. You wanted to create insightful content, imagine colorful video campaigns, and design eye-catching ads.
Your strengths lie in your creative abilities. Cash flow management? Not so much.
Too often, small marketing agencies put so much effort into crafting campaigns for their clients, only to be dragged downward because of cash flow issues.
To combat those problems, you first have to understand why so many marketing agencies find themselves scrambling for cash. From there, it comes down to finding the right accounting technology to get your agency back on track.
Let’s dig deeper into what some of those issues are and how to solve them.
Why marketing agencies stress over cash flow
You can only keep offering your services if you have the money to pay your staff, cover your bills, and spend a little promoting your business. Unfortunately, too many micro-marketing agencies struggle with some all-too-common problems that make that difficult.
1. Inconsistent client payments
You’ve kept your roster to a small number of core clients. Those contracts are enough to keep your firm busy without overwhelming your team’s bandwidth. Everyone’s happy!
Except, when one of those clients goes through budget cuts and cancels, you’re left scrambling to make up that revenue.
While working with only a few key clients seems great, it can leave you vulnerable to delayed payments, project cancellation, and longer payment cycles, like net-60 or even net-90.
For bigger agencies, that might not have as big of an impact, but for your smaller agency, that unreliable cash flow can result in business-busting gaps.
2. Poor financial management
As a micro marketing agency, your teams might include:
- Executive leadership
- Sales and account managers
- Content marketers
- Growth and demand gen marketers
- Visual and motion designers
- Project coordinators
- Human resource managers
- Office coordinator
Notice that you don’t see a Chief Financial Officer or any financial manager on that list. That’s because most small marketing agencies lack a dedicated finance team.
That’s when things start to snowball.
Without a finance team, you can’t efficiently budget, forecast, and manage your expenses. And without those financial tools and oversight in place, you can’t allocate resources properly or accurately track your profit margins or cash burn rate.
3. Project-based revenue model
In theory, having clients come on board for one-off campaigns or sign agreements to pay per project is fine. After all, you’re still making money, right?
Sure, that’s sort of true, but this model means your revenue streams fluctuate.
If a client doesn’t have a new project for you to take on after you finish the original one, you have no guarantee of continued work to bill for. What’s more, if you put way more time and effort into the project than initially planned, you’re technically losing money.
In either scenario, you have no way to maintain a steady cash flow between projects.
So, how do you fix all of this and get to a place where you don’t have to stress about cash coming in and out?
We have a few ideas.
Solving the inconsistent client payments problem
This seems like a hard issue to get around, right? It’s not like you can pull payment directly from your client’s pocket.
No, but you can make it easier to encourage on-time (or even early payment) and better understand what you’re bringing in. Here’s how:
1. Use 13-week cash flow forecasts
Thirteen-week cash flow forecasts give you a better understanding of your liquidity in the immediate short-term.
When you have that visibility into your financial future, you can spot gaps in your cash flow and take steps to manage client payments and avoid those gaps.
The best place to get started with a 13-week cash flow is a simple template. We’ve created one for you here, or reach out and we’ll set up and manage a more comprehensive version of this for you!
2. Automate payment reminders
Some clients — probably like you as a small business owner — have a lot going on and can simply forget to fulfill the invoice you sent over 30 days ago.
By setting up payment reminders through an accounts payable solution, you can give them the check-in they need to get you what you’re owed on time.
3. Explore different payment options
It’s your business. You don’t have to tie yourself to stoic payment options if you don’t want to.
Consider getting partial or full payment up-front, especially for bigger projects that will eat up a lot of your team’s resources.
Solving the poor financial management problem
Okay, payment problems done. Now, to fix your money management issue.
The last thing you want to do when you’re trying to keep your business running smoothly is be an ostrich. Don’t bury your head in the sand and hope for the best. Take an active (and necessary) role in your financial management using these steps:
1. Get smarter about your AP system
Even as a small agency, manual AP processes aren’t going to cut it.
By investing in better account payable platforms, you can increase organization and streamline invoicing. On top of that, you can use the systems to get cash flow insights so you always have the awareness you need.
2. Switch up your spend management system
Make sure your spend management system actually delivers what you need.
Certain systems, like BILL and Ramp, create budgets for individual projects and card owners, keeping you from overspending. These systems also provide insight that let you see where you get smarter about your spending.
3. Use AI to get better insights
If you still need more awareness, AI can help connect all of your financial platforms together to give you the ability to understand your business's financial health at any moment. And we’re not talking about a suped-up spreadsheet here.
The future of small business finance isn't in static spreadsheets or quarterly meetings. It's in AI-powered insights that help you:
- Spot trends before they become problems
- Track cash flow in real-time
- Make decisions based on data, not hunches
- Answer financial questions instantly (without playing email tag with your accountant)
And this isnt’ the future. Real-time accounting is happening right now with Hiline and Digits!
Solving the project-based revenue problem
Last but not least, let’s improve your revenue models.
While you can’t always change the way clients want to do business, you can change the way you manage project resources and charge for your skills with these tips:
1. Track your project costs
You need a way to definitively know every cost associated with specific projects.
By setting up front-end accounts payable and credit card spend systems, like BILL and Divvy, you can code project costs and cleanly report them all to QuickBooks Online.
In the end, you get a much stronger understanding of your overall company gross margins and project margins.
2. Adjust project pricing
What do you do with that improved knowledge of project margins? You adjust your pricing accordingly.
Maybe project dashboards show you that you’re spending way more completing a project than you realized, so your margins are slimmer than anticipated. You can use that data to adjust how much you charge for that project and increase profit margins.
Create a financial command center for your marketing agency
You might think that cooking up some financial statements and having a high-level view of your agency’s finances will keep you in the black. But they’re only part of the puzzle.
What you really need is a multi-project management system that lets you track various financial needs, automate client invoicing and billing, and stabilize your revenue streams. It also doesn’t hurt to have a partner who’s in the same boat as you.
Hiline’s comprehensive financial services help you maximize billable hours and keep your agency growing so you can focus on delivering top-tier results for your clients. We’ll handle the financial side. Get started with us today.
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