Culture, tech & a CFO – the financial transparency your agency needs to survive
The surest way to kill a business is to have the wrong data, or for the data you have to be wrong. A new white paper explores the benefits of financial transparency within agencies and the three components to create a culture of financial responsibility.
In today's economic climate, agencies need to create a culture of financial responsibility
What defines a successful agency; its awards cabinet or its longevity?
Of course, it’s a trick question. An agency might win a lot of awards for a short period, but it won’t be able to do that year after year if it goes bust. Great work might help you win business, but only by staying in business can you do great work.
That’s the underlying message of a new whitepaper published by The Drum and Sage, Financial Discipline and the Marketing Agency – the Difference Between Success and Failure. In the current financial climate, where costs are rocketing, inflation is on the increase, and staff are hard to find, agency heads have never been under greater pressure to make good business decisions. The key to doing so is financial transparency. The surest way to kill a business is to have the wrong data, or for the data you have to be wrong.
The whitepaper identifies three components to creating this transparency:
Management: the founders of an agency are rarely the people best equipped to run it from day to day. In fact, about two-thirds of UK entrepreneurs had no experience running a business before starting their own.
“In professional service companies, and in particular marketing agencies, the senior leadership are do-ers,” says Brian Siefkes, senior director for professional services industry marketing, Sage Intacct. “They’re not experts at building a business. And this starts to really become a challenge as the business grows and scales. That’s why the chief financial officer (CFO) is the first executive hire an agency should make. Somebody who knows how to build the infrastructure you need to achieve your goals.”
Culture: getting accurate, up-to-date information about what’s going on inside any professional services business means persuading employees to fill in their time sheets, a legendarily difficult task. The solution, according to the whitepaper, is education. Management needs to explain why the data contained in timesheets matters to the running of the business.
“Financial understanding needs to be the spine that runs through everything that we do, the common language that everyone speaks,” says Kevin Barrington, commercial director at Wavemaker. “It’s all about valuing the work we do and making sure we get paid for it. And if people aren’t clued up in reporting and invoicing and all those other fundamentals, the value of the work can get lost.”
Management also needs to realize that financial transparency should run both ways. Providing people with the data about how they work allows than to manage their time better, as well as helping them write better budgets and spread the workload more evenly.
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Technology: once an agency has established a culture of financial understanding, it needs the right technology in support. This is another area where an experienced CFO is vital. They can advise on the right technology for the business, but also the right times in the agency’s life to upgrade. The right technology also means the CFO can spend more time providing the founders with the sort of insights into the performance of the business that result in better decisions.
“Finance software now is cutting down bookkeeping time, which is giving finance people more time to do more of what I call finance business partnering,” explains Peter Hoole, founding partner at Cact.us. “That means working with other departments in the business, doing more analysis work and generally having a more strategic role.”
Click here to download the full white paper, Financial Discipline and the Marketing Agency – the Difference Between Success and Failure.
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