This describes a pattern we see repeatedly rather than one client. No client name, figure or result appears on this page.
The situation
An agency buys media on behalf of its clients. The client's budget arrives in the agency's bank account, the agency pays the platform, and the agency keeps a fee. Because the whole amount passed through the account, the whole amount ends up in revenue.
The result is a business that reports several times the revenue it actually earns, at a gross margin that looks alarming, and a growth rate that tracks client media budgets rather than anything the agency did.
Why it matters more than it looks
- Valuation and lending conversations key off revenue, and an inflated figure invites questions that are uncomfortable to answer late
- Margin percentages are meaningless, so nobody can tell a good month from a bad one
- Thresholds that depend on turnover, in tax, registration and reporting, can be crossed on money that was never the agency's
- Staff costs measured against inflated revenue make the team look far cheaper than it is
The question that decides the treatment
Whether the agency is acting as principal or as agent. The test is not who holds the money, it is who carries the risk and controls the service: who is responsible if the media does not deliver, who sets the price, who the platform treats as its customer, and who bears the loss if the client does not pay.
Where the agency is genuinely buying and reselling on its own account, gross is right. Where it is arranging a purchase for the client and taking a fee, net is right. The contracts usually answer this more clearly than the bank statements do, which is why the review starts there.
How it gets fixed
Read the client contracts
Establish, per client, who is contracting with the platform and who carries the risk. Agencies frequently find both arrangements exist across their book, and the treatment then differs by client rather than being one policy.
Split the accounts
Pass-through media gets its own income and cost accounts, separate from fee income, so gross and net are both visible without restating anything.
Report net as the headline
The revenue figure the business runs on is fee income. The gross figure is disclosed alongside it, because it is real money the agency is responsible for, but it is not what the business earns.
Bill and hold the money accordingly
Client funds held for future media are a liability until spent, not income. Treating them as income is what causes the painful correction when a client pauses a campaign.
What changes afterwards
- The profit and loss shows what the agency earns, at a margin that can be compared with other agencies
- Growth is measured on fee income, so it reflects the agency's own work
- Cash held on behalf of clients is visible as a liability rather than spendable
- Diligence for a raise or a sale starts from a figure that survives scrutiny
Explore related services
Clients usually add Catch Up Bookkeeping Backlog, Finance Cost Comparison Calculator, Monthly Reporting Pack and Year Round Tax Ready Records.
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