Fractional CFO for UK Marketing, Digital and Creative Agencies
Know which clients make you money, what cash looks like in 13 weeks, and whether the next hire pays for itself. A senior finance lead for founder-led agencies, on a fixed monthly retainer. We build the numbers and run the close, not just advise on them.
- For founder-led UK agencies with £1m-£15m revenue, 10-80 staff and no finance director.
- Every month you get an owner pack: profit by client and service line, profit per head, utilisation, WIP and debtor days.
- A 13-week cash flow built from your debtor book, milestone billing and payroll dates, updated weekly.
- Project accounting done properly: revenue counted as the work is done, work in progress and deferred income booked every month, and pass-through costs like media spend kept out of your revenue.
- Pricing, utilisation and hiring decisions made on numbers, and books an EOT, MBO or buyer will pay a proper EBITDA multiple for.
- Fixed retainer of £2,000-5,000 a month, no day rates. We do the set-up work and the monthly close, not just the advice.
Who This Is For
Founder-led UK agencies with £1m-£15m of revenue and 10-80 staff. Marketing, digital, creative, PR, design and media agencies that sell time, projects and retainers. You have an external accountant and a bookkeeper or office manager, and no finance director, CFO or financial controller. The founder reads the P&L once a quarter and runs the agency on the bank balance in between.
Most agencies get in touch when one of these is true:
Revenue has grown past the point where quarterly numbers from your accountant are enough.
You moved from hourly billing to retainers or fixed fees and margin got harder to see.
You lost money on a big project and only found out at year end.
The agency is profitable on paper but the overdraft keeps growing.
You are about to make your first senior non-founder hire and are not sure you can afford it.
You took a bank loan or invoice finance and want to know when it can be repaid.
An EOT, MBO or sale is in view in the next two or three years.
You are the finance function, and it is taking time you should spend on clients.
Consultancies, recruitment firms and other professional services firms with the same shape are welcome too. The numbers that matter are the same: margin per client, utilisation, WIP, debtor days and EBITDA.
Why Agency Finance Is Harder Than It Looks
The profit and loss report that comes out of Xero or QuickBooks was designed for a business that sells a thing and gets paid for it. An agency does not work like that. It runs several large projects at the same time, each billed in a different way, with other people's money passing through its bank account. A standard P&L hides all of this. Here is what it hides, in plain English, and what we do about each one.
1. Several big projects, each with its own milestones
Say you are running three £700k projects for three clients. Each one has its own milestones: the points where you are allowed to send an invoice, such as a signed-off strategy, a launched website or a campaign going live. One client pays 40 percent up front. Another pays only at the end. A standard P&L counts revenue when the invoice goes out, so it shows a brilliant month followed by a terrible one, even though the team did the same amount of work in both.
The fix is called revenue recognition: counting revenue when the work is done rather than when the invoice is raised. Every month we estimate how far each project has got, usually from hours spent against the hours planned, and book the revenue that matches. Your monthly profit then reflects the work, not the billing calendar.
2. Work done but not billed, and billed but not done
Two things fall out of milestone billing. Work in progress, or WIP, is work your team has finished but you have not invoiced yet, because the milestone is not due. Deferred income is the opposite: money you have invoiced, or been paid, for work you have not done yet. Most agencies have both at the same time on different projects. If neither is booked, the P&L swings with your invoice dates and tells you nothing about the month. We book both, project by project, at every month end.
3. Pass-through costs: money that is not yours
Media spend, print, photography, freelancers, software bought for a client. The client pays you, and you pay the supplier. This is a pass-through cost: it goes through your books, but it was never your income. If it runs through your revenue line, your turnover looks huge and your margin looks tiny, and a buyer will strip it out later anyway.
The timing is the part that catches people out. When a client pays you for media before the supplier has billed you, that cash is not your revenue, and it is not deferred income either, because it was never going to be your income. It belongs on the balance sheet as money held for the client, and it should only move to the P&L on the day the matching supplier cost arrives. The trap is that the matching cost is not sitting on the balance sheet anywhere to remind you, so nothing warns you when the two get out of step. Get this wrong and you either spend client money as if it were yours, or report revenue and tax on money that was never yours.
The accounting rules ask one plain question: are you selling this, or arranging it? If you are selling it, it is your revenue (called gross). If you are arranging it for a fee, only the fee is your revenue (called net). We set the answer for each type of cost once, build the tracking so it is booked the same way every month, and keep client money visible as a separate line.
4. Over-servicing hides inside salaries
A fixed-fee project scoped for 300 hours that takes 450 shows exactly the same revenue and exactly the same payroll as one that ran to plan. The 150 extra hours are invisible on a standard P&L. The only way to see them is to put timesheet hours next to revenue, client by client. That is what margin per client means, and it is usually the first number in the owner pack that changes how an agency prices.
5. Cash moves before revenue does
You pay freelancers and media suppliers on 30-day terms. Clients pay on 60 or 90 days, after a milestone is signed off, and large clients pay when their process allows. So an agency can be profitable on paper and overdrawn in practice for weeks at a time. The 13-week cash flow is built from these real dates, invoice by invoice, rather than from the P&L.
6. Retainers smooth revenue and hide scope creep
A retainer makes revenue steady, which is why agencies like them. It also lets the work grow quietly while the fee stays the same. Each retainer needs its hours tracked against its fee so you know its real margin, and so you know when to have the repricing conversation rather than finding out at year end.
None of this needs new software. It needs the chart of accounts set up for projects and pass-through costs, timesheets that feed the numbers, and a month-end close that books revenue, WIP, deferred income and client money properly. That set-up is the work we do in the first 30 days, and the owner pack below is what it produces.
The Monthly Owner Pack
Agencies know their revenue. Few know their margin per client, because over-servicing hides inside salaries. The owner pack is a short monthly report, built for the founder rather than a board, that puts six numbers in front of you every month with a plain-English note on what changed and what to do about it.
Profit by client
Revenue per client less the people hours, freelancers and pass-through costs that served them. Built from tracking categories in Xero and your timesheet export. Shows which accounts carry the agency and which quietly lose money through over-servicing.
Profit by service line
Strategy, creative, paid media, web, retainers and projects, each with its own margin. Tells you what to sell more of, what to reprice and what to stop doing.
Profit per head
Gross profit divided by fee-earning headcount. The one number that says whether the team is the right size for the fee base, and whether the next hire pays for itself.
Utilisation
Billable hours as a share of available hours, by person and by team. Shows whether you are hiring ahead of revenue or turning work away while people sit on the bench.
WIP and debtor days
Work done but not yet invoiced, and invoices not yet paid. Together they explain why a profitable agency can still be overdrawn, and which clients to chase first.
Owner pay and reinvestment
Drawings, dividends, the bonus pool and the dates big bills fall due, set against a forecast rather than the bank balance on the day.
The pack comes from the tools you already use. Revenue and costs are coded to clients and service lines with tracking categories in Xero or QuickBooks. Hours come from your timesheet export, whatever tool it is in. We set this up in month one and run the monthly close from then on.
A 13-Week Cash Flow Built From Your Debtor Book
Agency cash is lumpy. Retainers land on one date, project milestones land when the client signs them off, and payroll lands whether they did or not. A profitable agency can be overdrawn for weeks at a time and the founder only finds out when the bank calls.
The 13-week cash flow starts from what is real: the debtor book, invoice by invoice, with each client's actual payment habit rather than the terms on the invoice. Milestone billing goes in on the dates the work is due to be signed off. Payroll, freelancers, rent, VAT and corporation tax go in on the dates they fall due. The result is a week-by-week view of the balance that shows a squeeze weeks before it arrives.
We update it every week. It tells you when to chase, when you can afford to hire, how much the owners can draw, and whether a loan or invoice finance is needed or can be repaid. It is the agency version of the cash flow forecasting we run for every client.
Pricing and Utilisation Model
Most agencies set their day rates years ago and have not looked since. Meanwhile salaries went up, retainers replaced hourly billing, and nobody knows what utilisation the rate card assumes. The pricing and utilisation model answers four questions: what rate do we need to charge to make the margin we want, what utilisation does that assume, how many people can the fee base support, and what is left for the bonus pool and owner drawings.
It links the rate card, target utilisation by role, the hiring plan and the retainer book into one view. When a client asks for a discount, when someone hands in their notice, or when you are tempted to hire ahead of a pitch, you can see the effect on margin and cash before you decide. Pricing changes are modelled by client and by service line, so you know which accounts to reprice first and which to let go.
EOT, MBO or Sale Readiness on EBITDA
An agency is bought, or sold to its own team through an employee ownership trust or a management buyout, on a multiple of EBITDA. The multiple depends on how much the buyer trusts the number. Two or three years of clean, consistent monthly accounts earn a better multiple than one good year and a story.
Readiness work starts well before any deal. We normalise EBITDA so owner pay, one-off costs and personal expenses are adjusted and explained. We track client concentration and contract terms, because a buyer will ask whether the top clients can walk and whether their contracts can be assigned. We keep the monthly close consistent so the numbers in the data room match the numbers in the accounts. When the time comes, a buyer's due diligence takes days rather than months, and the valuation holds.
Read more about preparing for an exit.
Most fractional CFOs give you advice. We give you advice AND do the work.
Agency founders have usually already paid for advice they could not act on. A report that says “track margin by client” is no use if nobody sets up the tracking categories, fixes the timesheet process and runs the close every month. We do that part.
That means we set up Xero so costs and revenue code to clients and service lines, build the owner pack and the 13-week cash flow, run the month-end close on a fixed date, and sit in your leadership meeting to talk through what the numbers say. You get an operational finance function within 90 days, run by the person you spoke to on the first call.
How the First 90 Days Run
Every engagement follows the same process. This is the work we do, in the order we do it.
- Review the P&L, balance sheet, debtor book and WIP as they stand today
- Map how time is recorded, how work is billed and where the gaps are
- Agree the client and service line categories the owner pack will use
- Name the two or three decisions you need numbers for first
- Set up tracking categories in Xero so costs and revenue code to clients and service lines
- Set up project and pass-through cost accounting so revenue is counted as work is done and client money stays separate
- Build the timesheet to invoice process so WIP is visible every week
- Produce the first monthly owner pack, including the first view of margin per client
- Start the 13-week cash flow from the debtor book, milestone billing and payroll dates
- Monthly close on a fixed date, with the owner pack and a short written commentary
- Pricing and capacity model: day rates, target utilisation, hiring plan and owner drawings
- Weekly cash flow update with the decisions it points to
- Where an EOT, MBO or sale is in view, start the EBITDA adjustments and the readiness list
What It Costs
A fixed monthly retainer of £2,000-5,000 a month. No day rates, no billable hours and no surprise invoices. The exact figure is scoped in writing after the discovery call, an NDA and access to your books, once we both know what the work is.
Month-to-month terms with 30 days notice. The retainer includes the monthly owner pack, the weekly cash flow update, the pricing and utilisation model, regular review calls and unlimited email support in between. It scales up for a sale or EOT process and back down afterwards.
Frequently Asked Questions
A fractional CFO runs the finance function of your agency without being a full-time hire. For an agency that means a monthly owner pack with profit by client and service line, profit per head, utilisation, WIP and debtor days; a 13-week cash flow; a pricing and capacity model; and the clean, consistent numbers you need before an EOT, MBO or sale. We also do the set-up work: tracking categories in Xero, the timesheet to invoice process and the monthly close.
Your accountant looks backwards and reports what happened, usually once a quarter and at year end. We look forward. We tell you which clients make money, what rate to charge, whether you can afford the next hire and what cash looks like in 13 weeks. You keep your accountant for statutory accounts and tax. We work alongside them.
No. We work from Xero or QuickBooks plus the timesheet tool you already use, or a spreadsheet if that is what you have. Profit by client comes from tracking categories in your accounting software and a timesheet export. There is nothing new to buy or learn.
A fixed monthly retainer of £2,000-5,000 a month, scoped in writing after a discovery call. No day rates and no billable hours. Month-to-month terms with 30 days notice.
Yes. The owner pack is for you, not for a board. Most agency founders see the P&L once a quarter from their accountant and run the business on the bank balance in between. A monthly pack with margin per client, utilisation and debtor days lets you fix a loss-making account or a slow payer in the month it happens, not six months later.
The first version comes from the first month-end close after we set up tracking categories in Xero and get a timesheet export from you. It gets more accurate each month as the team codes time and costs consistently. We do that set-up work, not you.
Now. Buyers and EOT trustees price an agency on EBITDA, and they pay more for clean, consistent monthly numbers going back two to three years. Starting the monthly close, the client profitability view and the EBITDA adjustments early is what makes a good multiple possible later.
Yes, and it is usually the first thing we fix. Each project gets its own revenue recognition, so revenue is counted as the work is done rather than when a milestone invoice goes out, and work in progress and deferred income are booked every month. The owner pack then shows each project's margin to date against its budget, so you know a project is going over before the end, not after.
Outside your revenue, and outside deferred income. A pass-through cost is money a client gives you to pay a supplier on their behalf. Until the supplier cost arrives it is money held for the client, a liability on the balance sheet, and it moves to the P&L only when the matching cost is booked. We decide once, for each type of cost, whether you are selling it (your revenue, gross) or arranging it (only your fee is revenue, net), then set the tracking so it is booked the same way every month.
Yes. The same owner pack and cash flow apply to any founder-led UK firm that sells time, projects or retainers: consultancies, recruitment, design, legal and engineering firms. Agencies are the focus of this page because that is where the questions we get start.
Want to know which of your clients made money last year?
Free 15-minute call. No pitch, no day rates. Bring your Xero login and a timesheet export if you want a first read.