Things move fast at agencies: ideas, projects, and the moving target of trying to achieve a timely and accurate month-end close. As if these challenges were not enough, project accounting comes with its own set of unique obstacles — often in the form of having to contend with a mountain of transactions associated with each project.

Sending proposals, getting contracts signed, collecting payments, paying vendors — all of these transactions are important, and can consume a lot of time from back-office staff (and sometimes even from project leads). This creates a perfect storm which leaves accounting at risk of remaining transactional for eternity. While transactional accounting may allow your agency to handle its day-to-day requirements, it does not give you the time or opportunity to mature to a more strategic approach of reviewing, analyzing, and reporting on data. In the absence of this higher-level reporting, you may end up making financial decisions based on outdated or incomplete information.

Forward-thinking agencies, on the other hand, rely on accurate and timely financial data that they are reviewing on a regular basis to give insight into cash flow, project profitability, and benchmarks to monitor trends. Instead of reacting to situations that have already happened, they are able to plan ahead.

The good news: it is possible to take your marketing agency’s finances from transactional to strategic. Here is what you need to know about setting up the processes and systems that will allow you to thrive operationally and get the financial results you need.

Step 1: Take stock of your current finance model

Before you can make any changes, it is critical to understand where your agency currently stands and what your strengths and weaknesses are.

Take our financial maturity assessment to help understand what level your finance function is currently operating at. The results will place you at one of the four levels on the following chart. (Note: it is possible to be at different levels in different areas, for instance, you might have great technology but have not yet put the right policies and procedures in place to govern it. Just make note of those gaps.)

Once you have these initial results, go deeper by considering the following questions:

• What are our team’s biggest pain points? i.e., We are always waiting on financial reports and closing periods. By the time we review the financials, the data is stale and often contains inaccuracies.
• Where is there complexity? Could it be simplified? i.e., Our systems are not integrated, which creates redundancies and duplicated data. We can look at different tools and get different answers to the same questions. Switching to a single tool for both the project and accounting teams or integrating existing systems would streamline this.
• What manual processes could be automated? i.e., Our invoicing process is manual and time-consuming. The finance team relies on the project team to share when projects finish, rather than just being notified automatically. This leads to a lot of unnecessary back-and-forth between teams.
• What resources (in terms of people or tools) are lacking? i.e., We have a bookkeeper, but they are only able to support day-to-day, transactional accounting. We are missing senior-level finance staff who could help support higher-order reporting and forecasting.

Once you have a clear picture of where your agency is starting from, you can start optimizing.

Step 2: Build a strong foundation

Now that you understand your starting point, you can create a foundation for a more mature finance model by focusing on achieving a timely and accurate month-end close.

Achieving this goal will vary based on the starting point you established in step one, but it might include:

• Documenting processes
• Defining roles in the back-office group
• Creating a month-end close checklist you can follow regularly

Some of these actions may feel small, but they will make a big impact. Documenting processes, for example, will set a baseline that, over time, will prevent your team from having to start from scratch with each new project.

Other actions may feel loftier or harder to handle in-house. For list items that feel ambitious, consider bringing in outside support on an as-needed basis. Using a full-service outsourcing solution like Citrin Cooperman allows you to access just what you need. Rather than hiring a full-time controller, CFO, or project accountant, our team can provide industry professionals to assist with filling the open responsibilities on a fractional basis.

Step 3: Continue to invest in incremental improvements

Once you achieve a timely and accurate month-end close, you want to maintain this effort while continuing to invest in additional improvements. At this point, you can start to leverage the strong foundation you created with the month-end close process to develop additional value-add functions — like more advanced reporting and financial forecasting — that will help your team make better decisions and ultimately become more strategic over time.

For instance, you might focus on building out a reporting model that focuses on the key strategic areas that leadership needs to effectively run the business and capitalize on new opportunities. You may decide that in an ideal state, your agency would be looking at its financial and accounting metrics weekly and on an accrual basis, so that you can gain a better understanding of how your projects are performing in real time. To make this happen, you might need to invest in new technology or leverage the expertise of more specialized finance staff.

It may be helpful to think of this step as a process of continuous improvement. There are four levels of financial maturity for a reason. You cannot go from level one to four overnight (or even within the span of one month), but you can make incremental improvements that, over time, will help you reach financial maturity.

Achieving strategic financial decision-making is within reach

Project accounting will always have its fair share of challenges, but this does not mean your agency has to stay stuck in a transactional state forever. Citrin Cooperman is well equipped to assist you with developing and navigating a roadmap to financial maturity.

Please contact Meghan Schmidtlein at mschmidtlein@citrincooperman.com or Mike Zyborowicz at mzyborowicz@citrincooperman.com to find out how we can help you build a custom plan to transform your agency’s accounting from transactional to strategic.