Prior to my role in ops, I didn’t have a full grasp on business finance. I knew how to deliver a project to time, scope and budget – and understood project profit margins. But overall business finance was an area I had to improve in.
To steer my agency in the right direction, we needed to measure how we were doing. We started by collecting robust data to track our results. But collecting data isn’t enough on its own.
The real value lies in learning how to interpret data and reports.
I decided to enroll in a course covering financial accounting, key financial formulas, and financial statement analysis. I also spent time with our Finance Director, a friend and colleague, who showed me how this course applied to our agency.
The income statement (P&L) was one of the most useful things I learned. Knowing how to read and analyze this helped me understand how the gross profit is used to cover the costs of running the business (the OpEx or operating expenses).
The P&L also showed the overall financial health of our agency. We could find trends in revenue and expenditures, and pinpoint areas to improve efficiency. For example, how freelancers and pass-through costs (supplier purchases) were impacting our profitability. This helped us set more accurate financial targets, optimize our cost structure, and make strategic decisions to boost profitability.
Next, by looking at our forecasts, we could ensure that our current strategies would keep us on track to meet our financial goals in the coming months, and make any adjustments proactively.
In a recent episode of the podcast, our guest, Alfie Wenegieme suggested that the numbers are proof that what we’re doing in operations is working.
But what do you need to know to understand your business performance? And how do you learn if you recognize this as an area for growth? We dived into this in The Handbook: The Agency Operations Podcast. Check out more details about this episode below.
In a future episode we’ll dive deeper into important metrics, but I thought the foundations was an important place to start.
Until next time,
Harv Nagra
Ops consultant & former agency ops director
🎧 The Handbook: The Agency Operations Podcast:
Aflie Wenegieme is a chartered accountant with 17+ years of commercial finance experience, and specializes in the agency space.
In this episode, Alfie explains how understanding financials is crucial – so you can measure your impact on the business. Harv and Alfie discuss:
💡 The fundamentals of agency finances
💡 Common issues, including under-pricing, poor scoping & over-servicing
💡 How to improve your team’s understanding of financials
Key Takeaways:
Define the scope of work upfront to set client expectations. This helps to prevent over-servicing and control your costs. (25:01)
Your financials help measure your impact on the business. (16:27)
For better conversations with your finance manager, aim to grasp basic terminologies – (the difference between gross profit and profit margin), metrics (utilization), and reports (profit and loss statement, balance sheet, client profitability report, and over-servicing report). These all help to measure the success of your operations. (18:49)
Pricing is the quickest and most effective way to boost profitability. You can develop robust rate cards by understanding your costs and margins. (22:20)
Learn more about Reporting & Finance:
💡 Blog Posts
Learn how to calculate agency margins.
Read about quoting profitable projects and project cost estimation.
🔎 Help Center
This video shows real-time reporting in Scoro, including utilization and profitability reports.
📕 Case Study
Learn how this agency gained visibility of project profitability & billability with Scoro.
“Now, thanks to Scoro, we can clearly see how each external provider or additional hour affects our profitability.” Izabela Wisniewska, COO of Cosmonauts & Kings.
