A digital agency’s growth is aided by having the right processes in place at the ground level.
When talking about finance, without these fundamentals installed and working well, the data the business relies on for compliance and business reporting will be inaccurate and unreliable. The result: making insights blunt and decision making harder.
Within the Agency Maturity Curve, which is a tool digital agencies can use to assess the strength of their operating model, this falls within the first phase called Essentials.
The purpose of Essentials is to understand to what extent finance is able to tell you what is happening within the business. This should be about robust processes, as automated and real time as possible, with reporting insights delivered quickly after each month end.
It asks you to reflect specifically on whether you have the right technology in place, a good enough grip on how cash moves in and out of the agency, and whether the management team has reliable insight into current performance.
To help evaluate where you are on the Agency Maturity Curve we have created the simple to use Agency Maturity Scorecard – Take the test now
|Without the right financial rigour in place, you will never optimise your business. The scorecard shows how to prevent profit from leaking out of a business.
Hannah Eames Finance Director, Space48
Essentials step by step
The Essential phase of the Agency Maturity Curve is broken down into a number of elements, each of which should be operating at a high enough level of quality and consistency.
Appropriate and effective technology
Create a robust foundation for financial data collection and recording.
Ensuring you are leaning on the most appropriate technology in order to keep manual processing to an absolute minimum. Using the right cloud-based systems is a start, but they need to be set up to deal with your agency specifically.
Key indicators here are also if bank accounts are integrated with your accounts software, that data is uniform and in a recognisable format, and that there are regular reviews of the mapped financial processes (who/what/when/how).
Accurate Receivables and Payables Reporting
Clarity on what can be collected, and what needs to be paid
Being in control of the mechanisms of receiving money into, and spending money out of the business is not just about sending invoices and capturing receipts. This flow of cash needs careful attention if you are to have the processes and procedures in place to reconcile with your day to day running of the business, and your longer term goals.
You also want to ensure that you aren’t chasing clients for payments already made or paying a supplier twice.
The assessment needs to be on the entire receivables and payables cycle, bringing together accurately coded data so that reporting and analysis can be done in a timely way.
The goal? Always have a clear picture of what you are owed and what you owe.
Management Accounts – Essentials
Provide valuable insight based on an accurate account of past performance
The value of having your essentials in place is being able to provide your team with finance-driven insights. In reality, conversations around real business performance improvement can only begin when the intelligence is there and shared for all to see.
Meaningful profit and loss and balance sheet reporting are at the core, and the more that these can be reliably compared to prior periods, the more information is released back to the management team.
Management accounts at this level uncover inaccuracies and historical errors and highlight better ways to present the most relevant information. Once you know what you are looking at today, you can move forward more confidently tomorrow.
Making the most of the results
You might feel like you have most of the essentials in place, and if so that’s great.
However, taking another look, and asking yourself how well is finance telling you what has happened, is likely to steer you towards areas of improvement.
And realising these improvements can take time. Getting under the skin of what is happening within a complex area such as finance quickly reveals quick wins. But it will also show the importance of how the wider agency plays a role in feeding in reliable quality data.
This important phase is Essential in building financial maturity into the fabric of your model.