How much time capture detail does an agency actually need?

Enough to allocate staff cost to a project and to separate rework, and no more. A small, stable set of codes that people can apply consistently beats a detailed taxonomy that gets filled in badly at the end of the week. The accuracy of the allocation matters far more than the granularity of the categories.

Why track rework separately?

Because rework is the cost of a quality or scoping problem, and it is invisible when it is booked to the same code as original delivery. Separating it turns a vague sense that some clients are difficult into a number attached to a cause. It has to be designed into the capture from the start, since you cannot go back and work out which hours were the second attempt.

How long before project profitability data becomes reliable?

Expect a calibration period while people learn the codes and the habit forms, and treat that period's output as a test of the process rather than as evidence about clients. Acting on the first weeks of data usually means acting on inconsistent recording rather than on real differences between projects.

What should an agency do with an unprofitable service line?

Reprice it, rescope it, or stop selling it, in that order of preference, but only after checking whether the loss is structural or a pricing error. Some lines are unprofitable because they are underpriced; others are unprofitable at any price the market will pay, and those are the ones to discontinue. The distinction is only visible with allocated cost.

Should non-billable time be recorded too?

Yes, in broad categories. Without it, utilisation is a guess and the agency cannot tell the difference between being busy and being productive. It also prevents the common distortion where every unrecorded hour is implicitly treated as billable, which flatters project margins across the board.

Agencies · 🇦🇺 AustraliaScenario

Building project profitability reporting in a creative agency

Project-level profitability depends entirely on time capture, because staff cost is the largest cost in an agency and it cannot be allocated to a project that nobody recorded time against. This is an illustrative example of how Salt approaches agency profitability reporting, using a 20-person Australian creative agency as the profile.

Ask how we'd handle this

Scenario — an illustrative example of how Salt approaches this problem. Not a description of a specific client engagement.

The business shape it describes: Australian creative agency, 20 staff, project-based.

Scenario covers: Bookkeeping and controller reporting on project and service-line profitability
Jurisdiction: Australia
Sector: Agencies

The setup

Take an Australian creative agency of 20 staff measuring profitability at company level only, and assuming its service lines are broadly similar to each other.
New business focuses on whichever work is easiest to sell, with no evidence about which work is actually worth winning.

What usually turns out to be wrong

No time capture against projects, so staff cost, the largest cost in the business, cannot be allocated to anything.
One service line consuming disproportionate senior time while priced as though it did not, which is invisible at company level because the profitable lines cover it.
Rework not distinguished from first-time delivery, so a project delivered twice looks the same in the accounts as a project delivered once.
Non-billable time uncategorised, so the difference between capacity and utilisation cannot be measured.

How this would be worked

Introduce project-level time capture with a small, stable set of codes, because a complex taxonomy is the fastest way to get unreliable data.
Separate rework from first-time delivery in the capture design, since this cannot be retrofitted once the data has been collected without it.
Allocate staff cost to projects on captured time and build per-project and per-service-line profitability reporting from it.
Categorise non-billable time so utilisation is measured rather than assumed.
Treat the first weeks of data as calibration rather than reporting, and say so in advance, so nobody makes a decision on numbers that are still settling.

Why we'd be the right fit

Project profitability rests entirely on time capture, and time capture is the part studio staff resist. Getting it to a standard where the allocation can be defended matters more than the reporting built on top of it.
Separating rework from first-time delivery is a design decision that has to be made before the data is collected. Retrofitting it afterwards is not possible.

What the business would be able to do

The agency would be able to see profitability per project and per service line, so pricing and new business decisions rest on evidence.
The true cost of rework would be visible as its own figure rather than absorbed into delivery cost.
Utilisation would be measurable, which is what tells the agency whether it needs to hire or to reprice.

What we'd flag

Time capture is unpopular and takes time to become reliable. Until it is, the profitability numbers built on it cannot be trusted either, so the first period of reporting is calibration rather than evidence. Agencies that act on the first month's data usually act on noise.

Answers

Building project profitability reporting in a creative agency

Where this applies

ControllerService BookkeepingService All services in AustraliaAASB / Australian GAAP More scenarios42 illustrative, labelled examples

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