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Agency bookkeeping

Agency books need clear revenue timing, project or client profitability, contractor costs, retainers, reimbursements, receivables, and cash visibility.

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CLOSE FILE · ILLUSTRATIVE USD EXAMPLE

A funded retainer is not a completed project

June 1 · Client pays $12,000

For this accrual example, the contract buys three distinct monthly service periods. Record cash and a contract liability before performance.

June 30 · First month delivered

Recognize $4,000 for the completed service period. The remaining $8,000 stays deferred under the assumed contract terms.

Project review · $1,600 direct contractor cost

June contribution before agency overhead is $2,400, or 60% of the $4,000 recognized revenue—not a margin calculated against the entire retainer.

Retain the contract, delivery evidence and contractor invoice together. Milestones, acceptance clauses, refundable deposits and pass-through costs can require a different analysis; equal monthly recognition is an assumption here, not a universal retainer rule.

Explore the difference between earning and collecting →

What the monthly close has to prove

  • Match invoices and collections to customers.
  • Separate retainers, deposits, earned fees, and reimbursable costs.
  • Track contractor and direct project costs consistently.
  • Review aged receivables and project profitability.

Documents to collect

  • Customer invoices
  • Bank and card statements
  • Contractor bills
  • Payroll reports
  • Payment processor reports
  • Project or time-tracking summary

Common failure points

  • Customer deposits recorded as earned revenue too early
  • Contractor costs buried in general expenses
  • Unapplied customer payments
  • Owner reimbursements mixed with business expenses
  • Old receivables left open

Example

A $12,000 retainer may be cash received before all related work is earned, depending on the contract and accounting method.

Sources

Keep learning

Accounts receivableAccounts receivable is money customers owe a business for goods or services already delivered.RevenueRevenue is income earned from a business's ordinary activities before subtracting expenses.Cash receivedCash received is money deposited or otherwise collected, regardless of whether it is current-period revenue.Gross profitGross profit is revenue minus the direct cost of producing the goods or services sold.Accrual basis accountingAccrual basis accounting generally records income when earned and expenses when incurred.

Educational information only. Booksmrt provides bookkeeping services, not tax, legal, audit, or investment advice. Confirm material accounting and tax decisions with the appropriate professional.