Agency WIP and payment terms
Work in progress is client work you have delivered and not yet invoiced. Add the time your invoices then spend unpaid and you have the full distance between doing the work and banking the fee. Most agencies can shorten that distance by weeks without a single difficult conversation about price.
Written for founder-led UK agencies of roughly £500k–£2M. A profitable agency can still run out of money, and the two problems have different fixes.
The four places cash gets stuck
| Stage | What holds it | What shortens it |
|---|---|---|
| Delivered but unrecorded | Hours booked late, so nobody knows what is billable yet. | Weekly time booking with a deadline, the same discipline utilisation needs. |
| Recorded but uninvoiced | Invoicing runs monthly in arrears, and a query on one line holds the whole invoice. | Invoice on a fixed date regardless of queries, and raise disputed lines separately. |
| Invoiced but unapproved | Your client's purchase order, approver or portal adds a step nobody accounted for. | Capture the approval route at onboarding, including the name and the deadline. |
| Approved but unpaid | Payment terms agreed by whoever signed, often longer than your own terms with freelancers. | Standard terms, written into the contract, with a named owner chasing on a schedule. |
Measure each stage separately. An agency that knows only its debtor days is looking at the last stage and missing three earlier ones that it controls more directly.
Terms that shorten the cycle
Four changes to how you bill, none of which require a price rise. Each is a term in a contract or a date in a calendar. Together they typically move cash forward by two to four weeks in an agency that has never examined them.
Bill retainers in advance
Monthly retainers invoiced at the start of the period rather than the end. This is the single largest improvement available to most agencies, and clients rarely resist it at renewal.
Stage-bill projects
A deposit, then payments tied to milestones you control, rather than one invoice on completion. Your cost is incurred throughout, so the billing should be too.
Bill pass-through costs before you pay them
Media, print, freelancers. Invoice the client before your own supplier payment leaves. An agency should not fund a client's media spend.
Name the chaser and the schedule
One person, fixed days, a written escalation route. Collections improve most when they stop being the founder's job done when it becomes urgent.
Cash and profit are different problems
Shortening the cycle changes when money arrives, not how much of it you keep. An agency with a margin problem will still have one after fixing its billing, and an agency with a cash problem does not need to raise prices. Work out which one you have before you act.
If the profit line is healthy and the bank is empty, the fixes are on this page. If the profit line has flattened while revenue grew, start with busier than ever and the bank balance disagrees, then come back here.
Both sit on the same forward view: a rolling 30 to 90 day cash forecast, covered in Financial Visibility. Without it, a collections problem announces itself on the day payroll is due.
Common questions
Should agencies bill retainers in advance or in arrears?
In advance. You are reserving capacity for that period whether or not the client uses it, and billing at the start aligns the cash with the commitment. Most clients accept it at renewal when you explain it that way, and the change alone moves a month of fees forward permanently.
How do we get paid faster without annoying clients?
Fix your own steps first: book time weekly, invoice on a fixed date, and capture the approval route when you onboard the client. Those three shorten the cycle without any conversation about terms. Raising terms with an existing client is a renewal conversation rather than a collections one.
Should we charge interest on late payment?
Keep the right in the contract and use it rarely. The threat is more useful than the charge, and a named person chasing on a schedule recovers more than any penalty clause. Reserve escalation for clients who have stopped responding, where the relationship question has already been answered.
What about clients who insist on long payment terms?
Price for it. A client on ninety-day terms is borrowing from you, and the fee should reflect the cost of carrying it, or the work should be stage-billed so the balance never grows that far. Accepting long terms at standard rates is a discount you have not counted.
Related reading: Fractional COO for agencies · Agency project and retainer margin · Profitable on paper, broke in the bank · Financial Visibility
Measure the distance, stage by stage
Bring your last three months of invoicing. Splitting the delay into four stages usually shows that most of it sits inside the agency itself.
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