Accountability: Putting the colour back into Agency Finance

For all the creativity and expertise in executing costly and memorable advertising, the slick, cutting-edge, technology-savvy image that defines the client view of agencies is often a thin veneer.

For many agencies, whilst their front-of-house seeks to project laser-beams of product consciousness directly into their client's consumer brains, their back office is often a dark place. The back office is more often a Dickensian workhouse where off-the-shelf general ledger systems, separate workflow and timesheet systems, and a plethora of spreadsheets are operated by grey prickly men and women. These individuals are (not) living the dream of working in the fast moving and exciting world of advertising and communications.

A new client for them is a nightmare of even more spreadsheets linked to the ones they have so carefully nurtured to produce a version of "the truth" for management. The ever-present risk of these falling over with the catastrophic consequence of them having no idea of where they are financially speaking, just got worse.

That these businesses make any money is typically assumed to be testament to management's orchestration of the talent and output to deliver on the clients promise. This is twinned with a commercial robustness that has allowed them some slack, and this is probably right. Up to a point.

What this view overlooks is the underlying (sometimes undying) loyalty of the grey finance people, who are daily tested to the extreme in bringing the commercial picture of the agency's creative effort into management's view.
However, given the web tangle of data being reported in yet another smart looking spreadsheet, can agency managers be confident the view they are receiving is derived from "one source of the truth"?

In many cases they're not. Some typical quotes I've heard from agency CFO's go along the lines of:
"Our systems are not integrated, we've got plenty of data it's just not all in the one place", to "I know our figures are not 100% right."
How did it get like this?
Perhaps it has always been this way.

Many agencies set-up in business with the talent to conceive and execute outstanding creative work, yet leave their financial systems to be upgraded at later stage. This is typically when their first major client starts demanding greater analysis and evidence they can control and manage their multi-million-dollar/pound account.

Some agencies upgrade even later when they're looking to step up a gear, move into new territories, raise capital or they cannot continue without fully knowing the facts that only a real-time and integrated system can bring.

It is not untypical that up to this point, most (if not all) client budgeting, reporting and analysis is done in spreadsheets. With these financial data views not coming directly from a transaction system, there is no one source of the truth, and this disconnect carries risk.
Client job budgets can be thousands of dollars/pounds, sometimes millions. This is split between the value of the agency time determined to deliver the job, the third party costs and a fee comprising most of the profit element.

Without integration between the spreadsheet budget and general ledger, the time spent on the job may not be known, the agency can lose sight of third party costs and, very soon, the expected profit and working capital positions are exposed.

Integrated systems provide visibility over client jobs at any stage and so help ensure agency's management stay in control of their jobs. It also ensures they can earn the profit needed to continue employing the creative talent which has set them apart in the first place.

One big reason why agencies delay going with an integrated system from the outset is cost, with legacy systems requiring an intensive capital investment in licensing, hardware, and implementation consultancy.

The current compromise is for start up agencies to go with an off-the-shelf product, such as SAGE, Quickbooks, and supplemented by spreadsheets until the need to upgrade arises. They hope to manage the disconnection.
As these start-ups grow, the choice of integrated systems opens up for agencies in the 25 to 100 headcount (user) range. Although these carry their own restrictions on functionality and scalability, meaning they are still likely to be faced with another upgrade, at say more than 100 users. Here the cost becomes truly significant.

Another typical factor for delay is the disruption associated with a systems upgrade, and a "leap of faith" that management needs to go with one vendor or another.

Early on and the disruption can be contained to a small number of people, although even here there will still be a step change when the need for a "grown up" finance system becomes an urgent imperative.
It has been my long held objective to redefine the systems landscape for creative agencies and make the decision on which system to choose a "no-brainer".

Enter AccountAbility 
With AccountAbility, this "holy grail" is close to becoming a reality.

Peer-group functionality 
Agency management can now take-on a very grown-up, fully integrated system with the functionality and real time reporting built into the core architecture of AccountAbility. This gives the agency visibility and control over their business from day one.

Variable-cost model 
An agency's subscription to AccountAbility is based on the numbers of users in any given month. This is ideal where freelancers make up a high proportion of the headcount at various times. With the exception of a few days consulting and training, there is no upfront capital outlay. Total cost of system ownership is low.

Scalability 
No-one is saying agencies will never have to contemplate a systems upgrade, but with a current client rolling out the system globally for all of its 1,000 users, this will satisfy the life-time needs of most agencies.

User-ability 
The system was purpose built for agencies and every part of the workflow has been developed carefully with agency people in mind. With an intuitive system comes an encouragement to use, and this improves the chance for timely and accurate information.
Agency management can achieve greater control over job profitability, because they can now know where they are on a job at any stage, without having to call in the grey men.

Cloud solution
The system comes with all the benefits of a cloud solution, providing instant access 24/7, seamless version upgrades and automatic functionality improvements. This is delivered with no reliance on IT support for updating hardware, maintaining servers and managing the back-up processes.
These benefits and a future savings pot growing as the money that would have to have been set aside for a finance systems upgrade can now be provisioned to invest in creative or other productive staff.
This can also translate to turning the grey men and women in Finance into valuable business analysts, removing them from repetitive data entry and spreadsheet hell. Instead, rewarding them with the fulfilled roles they have so long desired in the fast and colourful world of advertising that they chose to join.

By Chris Lever

 

Chris Lever, Founder

20+ years experience in professional services.  Former Finance Director of WCRS (now The Engine Group) and BLM (now Arena Media), two of the UK's most successful independent advertising and media agencies, assisting WCRS through its 2004 MBO and BLM through a trade sale in 2008.  Whilst the transactions featured heavily in these roles, a key personal driver was a determination to promote finance functions with people and systems capable of handling the change and growth these groups faced under their new ownership structures.  An Australian CPA, Chris is an all-sports enthusiast, although participation is generally now limited to pedaling a road bike.