Most of the agencies we work with sell fixed-price work. A website for £20,000. A retainer at £5,000 a month. The client pays an agreed amount, and it is then entirely down to the agency to deliver it in the time and cost that was priced in.
That is the bit that goes wrong. Not the selling, but the space in between: knowing, while the work is happening, whether it is still on track to make money.
Management accounts tell you what happened. They do not tell you what to do next.
There is a natural order to getting an agency’s finances working well. First the data has to be accurate, timely and compliant. Then you set a budget for the year and agree what good looks like. Then monthly management accounts track progress against that budget so you can see where you are on and off course.
That is all necessary. But even the best management accounts pack is reporting on things that have already happened. Once the numbers are on the table the conversation moves quickly to “so what?” If the results need to improve, what do we actually change?
For most agencies the cost base is simple and fairly fixed: team, premises, marketing, software costs. The main lever is winning more of the right work, in enough volume to keep the team busy, cover the costs and leave a margin. And once that work has landed, having the controls in place to deliver it profitably.
Fixed price moves the risk to you
When you price a £20,000 website you are estimating how long your team will take and what other costs you will incur along the way. Because the price is fixed, the risk of getting that estimate wrong sits with you, not the client. Over-service by 30 hours and the margin is gone.
So you need a way to track time and cost against each project or retainer, compare it to what was planned, and adjust while there is still time to adjust. Not a post-mortem at the end. A running view that lets someone say “I have three hours left on this if it is going to come in on budget” and have that conversation with the team today.
Why the big system so often fails
For as long as I have worked with agencies, owners and senior teams have been drawn to the big, powerful, comprehensive agency management systems. Paprika and Synergist are two well-known examples. On paper they can do everything.
In practice, the same thing happens over and over. The system is so large and so complex that the team feel overwhelmed by it. Time does not get logged properly, the data becomes patchy, and the visibility the owner paid for never materialises. The problem is not the software. It is that nobody uses it.
What you actually need to track fixed-price work well is not complicated. Allowed time and cost per project, actuals against that, and a clear view of the gap. Lighter tools such as Harvest and Xero Projects do exactly that, and because they are easy to use the team will keep using them. A less powerful system that gets adopted beats a more powerful one that does not.
The shift we are seeing now
Two things are pushing agencies to rethink this at the moment.
The first is price. Several of the larger systems have put their fees up significantly, at a point when many agencies do not have spare cash. That is prompting a hard look at what the system is really delivering for the money.
The second is that the lighter tools have improved. A few years ago I would not have put Xero Projects in the same conversation as the established names. It has been steadily developed since, and it is now a genuine contender. If you are on the top tier of Xero, Xero Projects is already included, so for a typical agency the cost comparison against a standalone system is not close.
What good looks like in Xero Projects
Set up each project or retainer with the tasks involved and the time budgeted for each stage, so the £20,000 project is broken into the work that has to fit inside it. The team track time against those tasks as they go, which also gives you a straightforward view of who is logging time and what they are working on.
Each project then has a dashboard showing what was quoted, what has been invoiced, and what has been incurred in both time and costs. Bills raised in Xero can be assigned directly to a project, so third-party spend flows through without any rekeying.
Because it lives inside the accounting system that MAP already work in every day, it also allows us to see the data alongside the agency. That opens up better conversations: how projects are tracking, why did that retainer overrun, what should the next quote look like? That challenge and guidance can quickly start to make a real difference to the profitability in the agency.
What we have heard from agencies that have switched
One agency we work with moved from one of the big complex systems to Xero Projects. Their feedback has been that team buy-in is far better than it ever was, time tracking is more consistent, and they have more visibility than before despite it being a simpler tool.
There is a learning curve, and the value depends on the discipline of actually tracking time against the jobs you have set up. Creating the retainers at the start of the month and then not logging hours against them gives you a tidy structure and no insight. Like any tool, it works when the habit sticks.
The point
Delivering fixed-price work profitably is not a complicated idea. It is a discipline: know what each piece of work is allowed to cost, track what it actually costs as you go, and adjust before the margin disappears. It may even enable you to have a conversation with the client about an increased scope and a change in the fee before it’s too late. The right tool is the one your team will use every day, and increasingly that does not need to be the most expensive one on the market.
