Agencies · 🇺🇸 United States
Profitable on paper, short of cash every March
An agency recognising retainer revenue on invoice rather than over the service period had a distorted view of both profit and seasonality.
US creative agency, 24 staff, retainer + project mix. Client identity withheld — we publish names only with written permission, so this engagement is described by its shape rather than by who it was.
12
Months restated
31%
Of revenue was deferred
13-week
Rolling cash forecast introduced
The situation
- The agency billed annual retainers up front and recognised the full amount on invoice.
- Reported profit looked strong in Q1 and weak later, and cash was tight every March despite a healthy P&L.
What we found
- Roughly 31% of reported revenue related to services not yet delivered.
- Project work billed on milestones with no work-in-progress tracking, so partially delivered projects were invisible.
- Freelancer costs recognised on payment rather than when the work was performed, compounding the mismatch.
What we did
- Introduced deferred revenue and recognised retainers over the service period.
- Added work-in-progress tracking for project work, matched to milestones.
- Aligned freelancer cost recognition to the period of the work.
- Introduced a rolling thirteen-week cash forecast separate from the P&L.
The outcome
- Monthly profit became a usable number rather than an artefact of invoicing timing, and the March cash squeeze became predictable and plannable.
- The owner changed the retainer billing cycle once the seasonality was visible.
What we'd flag
Restated profit was lower and less flattering. The agency had been making hiring decisions against the old figures.
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