Accountants for creative and digital agencies
We report margin by project and by client each month, recognise revenue as the work is delivered, check freelancer status and forecast cash against your pipeline.
Call or WhatsApp 07476 989568
Margin on two projects with the same fee
Two projects billed at £20,000 each in the same quarter. Both look identical on the profit and loss. Time recorded against each job, at a £65 blended cost, shows the margin on each. Client A used £1,500 of freelance. Client B used £4,000 of freelance and went through three rounds of revisions.
The monthly accounts show £8,500 of profit on £40,000 of fees. Client A made £9,400 and Client B lost £900. Client B needs a price rise, a tighter scope or to be let go, and the recorded hours are the evidence for that conversation.
How do I know which projects are actually profitable?
By costing time against them. Revenue per project tells you nothing without the hours behind it: a £30,000 project delivered in 180 hours and one delivered in 340 hours have completely different outcomes and look identical in the profit and loss. You need recorded time — even roughly — against each job, plus freelance and subcontractor cost allocated to it. This usually shows that a minority of clients generate most of the profit.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. This is an example and your figures will differ.
Client A
Margin £9,400 (47%)
140 hours recorded
Client B
Margin −£900
260 hours recorded
Profit by project
An agency’s monthly profit and loss is hard to read on its own. Fees are invoiced on milestones that do not match when the work happened, freelance costs land in different months from the revenue they earned, and a large invoice in March can make February look like a loss.
Profit by project is usually more uneven than the owner expects. Often two or three clients carry the rest, and a large account loses money on hours nobody recorded.
Recording time against jobs and recognising revenue as the work is delivered shows the margin on each client. That margin is the basis for pricing and for deciding which clients to keep.
Revenue recognition on projects
A deposit is not income and a milestone invoice is not necessarily this month’s revenue. Recognising fees as the work is delivered rather than as it is billed is what makes a monthly profit figure mean anything in a business with lumpy invoicing.
How do we handle billing in advance and work in progress?
Revenue should be recognised as the work is delivered. Neither the invoice date nor the payment date decides it. A 50% deposit on a six-month project is cash the business has not yet earned: deferred income, sitting on the balance sheet until the work is done. Conversely, work delivered but not yet invoiced is accrued income. Without these adjustments, monthly profit follows the invoicing schedule, and hiring decisions can be based on a month that overstates it.
Retainers and project fees
Retainer
Predictable recurring revenue that supports your fixed costs.
Project
Lumpy, often collected in advance and delivered over months.
An agency with half its fees on retainer is easier to finance, staff and sell than one that starts every quarter at zero. Moving to retainers is a pricing decision, and its effect on cash and margin can be modelled before you make it.
Should retainers and project work be reported separately?
Yes. They behave completely differently: a retainer is predictable recurring revenue that supports your fixed costs, while project income is lumpy, often collected in advance and delivered over months. Blending them hides the number that actually matters, which is what proportion of your fixed cost base is covered by recurring income before you win anything new. Agencies with high retainer coverage can plan hiring with some confidence; agencies living on projects cannot, however healthy the annual total looks. Reporting them separately takes no extra work if the chart of accounts is set up for it at the start.
The four numbers an agency should watch
Can you help with utilisation and the numbers we should watch?
Yes, and for agencies it usually comes down to four. Those four decide almost everything about whether the next hire is affordable, and none of them appears on a standard profit and loss. We build them into management accounts.
Utilisation
The proportion of available time that is billable.
Revenue per head
The fastest read on whether growth is actually working or just adding cost.
Gross margin
After freelance and direct delivery cost, which is where project profitability really shows.
Recurring revenue
As a percentage of fixed costs.
Freelancers and status
A freelancer who works only for you, to your hours, on your equipment, is an employment risk regardless of what the invoice says. Agencies grow on freelance capacity, so status is worth checking before HMRC raises a PAYE settlement.
Are our freelancers employees for tax purposes?
Possibly, and it depends on the working arrangement rather than the invoice. A freelancer who works set hours, uses your equipment, is directed like a member of staff and has worked exclusively for you for two years starts to look like an employee to HMRC regardless of what the contract says. If reclassified, the agency picks up the PAYE and National Insurance that should have been deducted, plus interest and penalties. Long-standing regular freelancers are the ones to review, because the relationship drifts over time without anyone deciding it should.
R&D relief
Building a website, integrating an API or designing a campaign does not count as research and development, however technically demanding it was. Some agency work qualifies and most does not. HMRC’s enquiry rate on weak claims has risen sharply, and we will tell you whether yours qualifies.
Agency tax dates
Every month
Time against jobs closed off, and margin by project reviewed.
Every payday
RTI to HMRC, on or before you pay anyone.
Every VAT quarter
Return and payment, one month and seven days after the period ends.
Your year end
Accounts, corporation tax, and the work-in-progress figure that decides the profit.
+9 months, 1 day
Corporation tax due.
Annually
The split between retainer and project fees reviewed.
An agency pays corporation tax at 19% below £50,000 of profit and 25% above £250,000, and registers for VAT at £90,000 of rolling turnover. Source: gov.uk Corporation Tax, VAT and PAYE guidance, checked July 2026. See key tax dates.
What we do for agencies
Margin by project and by client
Produced monthly from the time recorded against each job.
Revenue recognised as delivered
So the monthly figures follow the work as it is done.
Freelance status reviewed
Checked before HMRC raises a PAYE settlement.
R&D relief checked
Claimed where the work qualifies, with the reasoning written down.
Cash forecast against the pipeline
Expected fees and costs month by month, taken from your pipeline.
Retainer modelling
What moving a third of your fees to retainer would do to cash, staffing and what the agency is worth.
Get a quote
How much does it cost?
Accounts and tax start at £29 + VAT a month for a sole trader and £49 + VAT for a limited company, the fee rises with turnover, and the instant quote shows yours in four questions. For agencies the drivers are headcount on payroll, the number of freelancers paid each month, transaction volume, VAT scheme and whether you want project-level reporting on top of the compliance work. FreeAgent is included in every package, worth up to £330 a year, though most agencies past a handful of staff end up on Xero — we are a Xero Gold Partner. Questions are covered by the monthly fee.
Call or WhatsApp 07476 989568 or email hello@buzzaccounting.co.uk
Advisory and finance support for growing businesses
Business PulseFrom £375 + VAT a monthAn annual budget, a rolling 12-month cash flow forecast, management accounts and a review meeting every month or quarter, on top of your accounts fee.
Outsourced finance teamFrom £750 + VAT a monthBookkeeping, payroll, VAT, customer invoicing and month-end, done for you in Xero.
Part-time finance directorFrom £2,000 + VAT a monthPeter Allen as your fractional finance director: an annual plan, a cash flow forecast, a KPI dashboard and a quarterly board meeting.
Accreditations and partnerships
