One client pays promptly, needs another round of revisions and somehow fills half the team's diary. Another is straightforward to deliver for, but its invoice is still unpaid.
Calling the first one a good client and the second one a bad client will not tell you what to fix.
Use two views. The first compares the income earned from each retainer with the cost of delivering the work. The second follows the invoice through to payment. Bring them together when choosing an action, while keeping the questions separate.
This guide is for a small UK limited-company marketing agency delivering retainers and projects through employees and freelancers, with clients paying advertising platforms directly. If your agency funds media spending before the client reimburses it, that needs a separate cash and contract review.
Start with what the month's fee actually covers
Pick a completed reporting month. For each retainer, record the agreed deliverables, the fee attributable to that period and any approved changes.
If a client pays in advance, that money may cover work you have not delivered yet. Compare the month's fee with the work it actually covers, not just the date the invoice was sent or paid. Ask your accountant to confirm the treatment for your contracts and accounting basis.
For companies applying the revised FRS 102 revenue model, income follows delivery of the promised goods or services under the relevant contract criteria. FRC guidance on revenue from contracts with customers, section 2, step 5.
Match the delivery costs to that work too. A month can look unusually profitable if its freelancer bill or unfinished work has been left for the next report.
Make the delivery cost explainable
Give each client or project a consistent code across time records, freelancer bills and client-specific purchases. Include account management, meetings and revisions as well as production work where they consume delivery time.
Employee time needs a cost rate. Use payroll cost, including relevant employer costs, and a documented number of paid hours for the same period. A blended team rate can be a starting point when the mix of people is similar. But a retainer delivered by an executive and one rescued each month by a strategist or creative director can look deceptively similar at a single average rate. Include senior review and client-call time, then use role rates where that difference would change the decision.
Here is a fictional method. A team costs £14,400 for the month, including gross pay, employer National Insurance and employer pension costs. It has 480 paid hours on the chosen allocation basis. That gives £14,400 ÷ 480 = £30 per paid hour.
Assign that cost to client delivery hours, then retain the rest against other clients or non-client time. Holidays, internal meetings, business development and unused capacity do not become free because they were not put on a timesheet for a paying client.
If you use a different rate based on expected delivery capacity, document it and reconcile the allocations back to payroll. In either method, the full staff cost must still appear in the agency-wide picture.
Owner delivery time also deserves attention. If it is not captured in payroll costs, show a separate commercial estimate when considering pricing and capacity. Do not quietly present that estimate as an additional payroll expense.
Two £5,000 retainers, two different problems
The following example is fictional, not an industry benchmark or an IGO client result. It covers a completed month's work, assumed fully earned at £5,000 per client on the agreed management basis. Both clients have been invoiced. All figures below exclude VAT, and any input VAT is assumed recoverable.
The £30 hourly allocation comes from the fictional team above and assumes a comparable staff mix across the two clients. Freelancer costs cover services delivered in the month, including any agreed estimate where the bill has not yet arrived. Shared overheads, non-client staff time, financing costs and tax are outside this client contribution measure.
Scroll across the table to read every column.
| Delivery view | Retainer A | Retainer B |
|---|---|---|
| Income earned for the month | £5,000 | £5,000 |
| Recorded employee delivery hours | 100 | 70 |
| Allocated employee cost at £30 an hour | £3,000 | £2,100 |
| Freelancer delivery cost | £800 | £600 |
| Total defined delivery cost | £3,800 | £2,700 |
| Contribution before excluded costs | £1,200 | £2,300 |
Retainer A leaves £5,000 − £3,800 = £1,200. Retainer B leaves £5,000 − £2,700 = £2,300. The difference is £1,100, despite identical fees.
The two clients account for 170 of the team's 480 paid hours. The remaining £9,300 of team cost belongs to other clients or non-client time and remains in the wider report. Neither client's contribution is the agency's final profit.
Now put the collection position alongside it:
Scroll across the table to read every column.
| Invoice and cash view at the review date | Retainer A | Retainer B |
|---|---|---|
| Contractual invoice trigger | Met | Met |
| Invoice issued | Yes | Yes |
| Due date reached | Yes | Yes |
| Payment position | Paid in full | Unpaid and overdue |
| Dispute or missing approval identified | None | None identified; confirm with client |
| Immediate follow-up | Review delivery and scope | Confirm receipt and arrange payment follow-up |
In the actual collection schedule, show the full invoice and outstanding balance, including VAT where charged, together with dates and receipts.
A's payment does not change its delivery cost. B's unpaid invoice does not erase the work's contribution. Persistent non-payment can still damage the economics, so keep credit risk, collection costs and any required bad-debt adjustment visible too.
Put the scope change beside the extra hours
Before telling A that the fee needs to rise, find out what created the extra work. “Twelve social posts” is not the whole delivery promise if each post needs three format versions, scheduling, comment moderation and separate approval from two client stakeholders. Check those tasks against the agreed scope rather than treating the headline output count as the workload.
Revision rounds need the same attention. Consolidated feedback on one version and a fresh brief after sign-off are different pieces of work. Record the reason for the extra round, who authorised it and whether an additional fee was agreed. Split feedback may call for one client approver; a change in direction may need a revised brief and price.
If the client asked for more and the scope allows additional charges, agree the work and price through the contract's approval process. If your own handoff caused the rework, improve that handoff. The same extra hours can have different causes.
Also keep a visible list of deliverables carried into next month because access, assets or approval are missing. A quieter delivery month may have created a later capacity problem. Check what the retainer says about rollover or reserved availability before calling the unused time spare capacity.
Do not automatically turn every unbilled hour into extra revenue or a customer debtor. A time record supports the delivery-cost review; the contract and accounting basis determine whether there is anything to recognise or invoice. FRC guidance distinguishes contract balances from an unconditional trade receivable. FRC guidance, section 3, contract balances.
Keep future freelancer bookings in the right period
Suppose you book another £600 of freelancer work for a future delivery month. Put it in that month's expected delivery costs and the payment schedule. It does not reduce the completed month's £1,200 contribution merely because you have made the booking now.
If the £600 actually relates to work already delivered in the month under review, check whether it belongs in that month's costs even though the invoice is missing. If it is already included in the £3,800, adding the commitment again would count the cost twice.
A useful booking record therefore needs four things: the client, delivery period, amount and whether the cost is already included in the accounts. Add the expected payment date for the cash view.
Choose the action from both views
Scroll across the table to read every column.
| What the review shows | Useful next action |
|---|---|
| Delivery contribution meets your own plan; payment is current | Keep the agreed scope and delivery routine under review |
| Delivery contribution is below plan; payment is current | Examine scope, staffing mix, rework and price |
| Delivery contribution meets plan; payment is overdue | Check invoice receipt, approval, disputes and the promised payment date |
| Delivery contribution is below plan; payment is overdue | Address both issues and review further commitments under the contract |
There is no universal contribution percentage in this table. Your required result depends on overheads, capacity, risk and the work you want to take on.
Use a named person to close each month's delivery inputs and another clear responsibility for billing and payment follow-up. They may be the same person in a small agency. The important thing is that the exception reaches someone who can act.
If useful figures only appear after you rebuild timesheets, supplier bills and invoices yourself, In Good Order can help agree a recurring management reporting routine, supported by reliable customer and supplier records and clearer delivery-to-invoice handoffs.
You provide the delivery and scope information; the reporting method and responsibilities are agreed around it. Credit control, forecasts and specialist contract-accounting work need an explicit scope.
When the agency is busy but the numbers do not explain where the month went, let's talk about the work you would like to stop assembling yourself. The initial conversation is free, with any further work agreed separately.