Industry · Agency accounting
Agency accounting that gets gross-vs-net right and shows what you actually earn.
An agency that buys $1M of media for a client as an agent and bills $1.15M earns a $150K fee — not $1.15M of revenue. The ASC 606 principal-vs-agent determination drives everything downstream: revenue, margins, and benchmarks. TechBrot handles gross-vs-net revenue, pass-through media spend, retainer recognition, project profitability, agency gross income (AGI), and multi-currency — producing books that tell you what the agency actually earns.
Agency accounting breaks generic bookkeeping at the revenue layer — under ASC 606’s principal-vs-agent test, an agency that doesn’t control the media or service before it reaches the client presents revenue net of pass-throughs (the fee earned), not gross, and reporting gross overstates revenue by the full pass-through amount. TechBrot performs the operational principal-vs-agent analysis at onboarding (the presentation conclusion is yours, with your CPA), configures the chart of accounts for agency economics in your own QuickBooks file, handles retainer recognition, project P&L, freelancer/1099 management, and multi-currency, and reports agency gross income (AGI) and AGI per FTE as the headline numbers. We deliver the books and coordinate with your CPA; we do not file income taxes.
Published by TechBrot.
Agency accounting, in five questions.
Why is agency accounting different?
Three structural issues: ASC 606 gross-vs-net revenue presentation (net of pass-throughs wherever the agency acts as an agent), retainer revenue recognition (ratable over the service period), and project profitability by client and engagement with separation between billable, reimbursable, and pass-through costs.
What is gross-vs-net revenue for agencies?
Under ASC 606 principal-vs-agent analysis, an agency that doesn’t control the media or production before it is transferred to the client is an agent and presents revenue net (the fee earned), not gross (the full pass-through amount). Reporting gross overstates revenue by the full pass-through amount and distorts every margin benchmark.
What is agency gross income (AGI)?
Revenue net of pass-through costs — the agency’s actual economic contribution, and the number to size and benchmark the agency on. AGI per FTE measures productivity.
Do you handle freelancers, 1099s, and multi-currency?
Yes. Freelancer management at agency scale with W-9 discipline, project allocation, and 1099-NEC generation. Multi-currency for international clients (EUR, GBP, CAD) and freelancers with FX gain/loss recognition. Pair QuickBooks with Wise or Payoneer for actual international payments.
What does it cost?
A fixed monthly fee against a written scope — driven by AGI size, client count, project volume, media-spend pass-through volume, freelancer scale, and multi-currency complexity. No hourly billing. Where books have been kept gross, an engagement can start with a cleanup to restate gross-vs-net.
Agency accounting, plainly.
Agencies break generic bookkeeping at the base layer: what counts as revenue. Under ASC 606’s principal-vs-agent analysis, an agency that arranges media or production for a client without controlling it before it reaches the client is an agent — revenue is the fee earned (net), not the gross amount flowing through. Reporting that as gross overstates revenue by the full pass-through amount and distorts every margin benchmark. Retainer revenue must recognize ratably over the service period; annual retainers paid upfront create deferred-revenue liabilities. Pass-through costs (media spend, production, reimbursables) flow through dedicated accounts, not revenue and COGS.
Agency gross income (AGI) — revenue net of pass-throughs — is the agency’s size and growth metric, with AGI per FTE measuring productivity. Freelancer management at agency scale needs W-9 discipline, project allocation, and clean 1099-NEC generation, and multi-currency matters for international clients and freelancers. We perform the operational principal-vs-agent analysis at engagement onboarding (the presentation conclusion is yours, confirmed with your CPA), configure the chart of accounts for agency economics in your own QuickBooks file, integrate your project-management and time-tracking stack, and produce monthly packages with AGI, utilization, realization, and project P&L. For agencies ready to act on the numbers, advisory turns them into pricing, hiring, and acquisition-readiness decisions.
Agency gross vs. net revenue, section by section.
The control question behind gross-versus-net, the indicators FASB uses to support it, and how pass-through accounts keep agency gross income honest — set out in full below.
Gross-to-net cleanupFractional CFOGet the free file reviewBook the discovery call
The full explanation, section by section — principal versus agent, pass-through accounts, AGI, retainers, project profit and where agency books break.
What is gross-vs-net revenue for agencies?
An agency books client pass-through costs gross or net based on one ASC 606 question: does it control the media or service before it reaches the client? A principal that controls it records the gross amount as revenue. An agent that arranges for a supplier to provide it records only its fee or commission, which is net. The call is made for each good or service, by the company with its CPA.
Agency accounting, plainly
Agencies break generic bookkeeping at the most basic layer: what counts as revenue. Pass-through costs, meaning media spend, third-party production and reimbursable expenses, belong in dedicated accounts rather than in revenue and cost of goods sold whenever the agency acts as an agent. Retainers are recognized over the service period. Beyond that, agencies need profit by client and project, agency gross income as the size measure, freelancer management and multi-currency.
Gross revenue presentation vs. net revenue presentation
Gross revenue presentation versus net revenue presentation is easiest to see on a single engagement. Presented gross, the media runs through revenue and again through cost of goods sold. Presented net, only the agency’s fee is revenue, and the media sits in neither line. Gross profit is the same dollar amount both ways. What changes is reported revenue, and with it gross margin percentage, benchmark comparisons and the picture a buyer or investor sees.
ASC 606 gross-vs-net analysis
FASB’s guidance lists indicators to help decide whether an agency controls a good or service before transfer. Is the agency primarily responsible for fulfilling the promise? Does it carry inventory risk, for example committing to buy media before any client has contracted for it? Does it have discretion in setting the price? FASB is explicit that the indicators support the control assessment rather than override it, and they are not a checklist.
Pass-through media booked as revenue
Pass-through media booked as revenue is the first of three places agencies lose the numbers. The agency buys media, bills the client for the media plus its fee, and records the whole invoice as revenue with the media as cost of goods sold. Where the analysis shows the agency acted as an agent, the fix is pass-through accounts kept separate from revenue, with prior periods restated if the books move from gross to net.
How do you handle pass-through media spend and reimbursable costs?
Pass-through accounts carry both sides of the transaction under net presentation. When the agency pays the supplier and bills the client, the amounts run through those accounts, so the agency neither earns revenue nor incurs an expense on the pass-through. Only the markup, fee or commission reaches revenue. The test applies to each good or service, so one agency can be a principal on some work and an agent on the rest.
What is agency gross income (AGI)?
Agency gross income, or AGI, is revenue net of pass-through costs: the agency’s own economic contribution. For a pure strategy or consulting agency with no pass-throughs, AGI equals revenue. AGI per full-time employee measures productivity, and the labor multiplier divides revenue by direct labor cost. Books built this way report AGI as the headline number every month, with gross billings alongside as a secondary figure.
Do you handle retainer revenue recognition correctly?
Retainer revenue is recognized over the service period. A monthly retainer collected this month for this month’s work is this month’s revenue. An annual retainer paid upfront is deferred revenue, a liability recognized month by month over the term, the same mechanics as a subscription. Project work inside a retainer needs tracking of what the fee covers versus billable overage, reported monthly against the time-tracking system.
No client-level or engagement-level P&L
No client-level or engagement-level profit and loss is the second place the numbers go missing. Generic books show total revenue and total expense, so nobody can see which clients are profitable, which projects bled labor or which retainers are underwater. The fix is class or customer tracking for every client and project, time tracking such as Harvest or Toggl Track connected to QuickBooks, and a monthly project profit and loss.
1099 sprawl and currency exposure
The third place is 1099 sprawl and currency exposure. Every freelancer needs a current W-9 on file, or a W-8 for international contractors, and payments project-coded through a payables tool such as Ramp, so the cost lands on the right engagement and year-end 1099 filing is routine. International clients and freelancers call for multi-currency QuickBooks, with exchange gains and losses recognized as rates move.
Agencies in every flavor
Agencies in every flavor face the same question with different pass-through patterns. Marketing and full-service agencies carry heavy media pass-through; creative and brand agencies pass through production costs only. PR and communications work runs on retainers with little pass-through. Digital and performance agencies add fees tied to client results, a variable-consideration question under ASC 606. Specialty boutiques need exit-ready books, and agency networks need intercompany elimination and consolidated reporting.
From gross-inflated books to AGI you can defend
From gross-inflated books to AGI you can defend, the engagement runs in four phases. Discovery maps your agency type, pass-through mix, retainer ratio and where the books are breaking. Next comes a principal-versus-agent review of each active engagement type, with the conclusion confirmed by you and your CPA, plus any gross-to-net cleanup. Monthly reconciliation and reporting follows, then advisory on pricing, hiring and acquisition readiness.
Get agency books that show real AGI
Agency engagements here are a fixed monthly fee against a written scope, set by AGI size, client and project volume, pass-through volume, freelancers and currencies, with no hourly billing. The work is reviewed by a Certified QuickBooks ProAdvisor, certified in QuickBooks Online Level 2 and Payroll, at an independent bookkeeping and advisory firm, not affiliated with Intuit. Tax filing stays with your CPA. Book the discovery call. Send this to whoever runs your agency’s finances, and subscribe for the series.
Three places agencies lose the numbers.
Messy agency files tend to fail in these three areas. Knowing which one you’re in tells us where to start.
Pass-through media booked as revenue.
An agency buying $1M of media and billing $1.15M reports $1.15M of revenue and $1M of COGS. Where the agency doesn’t control the media before it is transferred to the client — the ASC 606 test, supported by indicators such as who is primarily responsible for fulfilment, who carries inventory risk, and who has pricing discretion — it is an agent, and revenue is the $150K fee, not the $1.15M gross. The fix is the principal-vs-agent analysis at onboarding (for each specified good or service, with the conclusion confirmed with your CPA) and a chart of accounts with pass-through accounts separate from revenue, plus restated prior periods if migrating gross-to-net.
No client-level or engagement-level P&L.
Generic bookkeeping shows total agency revenue and total expenses with no separation by client or project. You can’t see which clients are profitable, which projects bled labor, which retainers are underwater — so pricing, staffing, and client-firing decisions run on intuition. The fix is Class or Customer tracking for every client and project, time tracking integrated to QuickBooks so labor cost allocates correctly, and project-level P&L produced monthly with utilization, realization, and gross margin by engagement. First honest reporting can show that a large client is losing money.
1099 sprawl and currency exposure.
Agencies can run heavy freelancer spend with no W-9 discipline, no project coding, and a January 1099 scramble. International clients generate EUR/GBP/CAD receivables booked at random rates; international freelancers paid in local currency create untracked FX exposure. The fix is a W-9 library on every active freelancer (W-8 for international), Bill.com or Ramp configured with project codes, multi-currency QuickBooks with FX gain/loss recognized monthly, and year-end 1099-NEC generation as a non-event. Clean freelancer management removes one of the easiest places to create IRS exposure unintentionally.
Agencies in every flavor.
Each agency sub-segment has its own revenue mix, pass-through pattern, and KPI emphasis. The engagement model — fixed-fee, written scope, led by TechBrot’s founder, work in your own QuickBooks file — stays consistent.
Marketing & full-service agencies
Integrated agencies running strategy, creative, and media. High pass-through (media spend dominant), AGI a fraction of gross billings, AGI per FTE the primary productivity metric. The reference case for net revenue presentation.
Creative & brand agencies
Branding, design, identity, content production. Lower pass-through (production costs only, not media), so AGI sits closer to revenue. Project-based work with strong margin requires accurate WIP and project-P&L tracking.
PR & communications
Public relations, corporate communications, executive positioning. Retainer-heavy revenue, minimal pass-through, utilization-driven profitability. Strong overlap with our professional services framework, with agency-specific KPI emphasis.
Digital & performance agencies
Paid media, SEO, programmatic, growth marketing. Heavy media-spend pass-through (net presentation where the agency acts as agent), often with performance-fee elements (revenue tied to client results) requiring careful ASC 606 variable-consideration analysis.
Specialty & boutique agencies
Influencer marketing, social-first, B2B demand-gen, account-based marketing, PR boutiques, video production studios. Distinctive workflows, often founder-led and growing toward acquisition — so the accounting needs to support exit-readiness from early.
Agency networks & holding companies
Multi-agency networks, holding-company structures, M&A roll-ups. Intercompany elimination, sister-agency referrals and revenue-share, consolidated reporting plus brand-level P&L. Can call for QuickBooks Enterprise or a dedicated agency-management platform.
Agency accounting, done by an expert.
Every engagement is scoped to your agency type, AGI size, pass-through volume, client mix, and freelancer scale, delivered in your own QuickBooks file and led by TechBrot’s founder.
ASC 606 gross-vs-net analysis
Operational principal-vs-agent analysis at engagement onboarding (the conclusion confirmed by you and your CPA), retainer recognition over the service period, and pass-through accounts configured correctly — so revenue is what you actually earn.
AGI, AGI per FTE, labor multiplier
Agency gross income reported monthly as the primary size metric, AGI per FTE, the labor multiplier, and gross margin by service line.
Client & project profitability
Time tracking integrated to QuickBooks, project-level P&L by engagement and client, utilization and realization by team member, and retainer-vs-overage reporting.
1099 & freelancer management
A W-9 library, project-coded freelancer payments through Bill.com or Ramp, and year-end 1099-NEC generation as a non-event — not a January scramble.
FX & international clients
Multi-currency QuickBooks for international client receivables and freelancer payables, FX gain/loss recognized monthly, and Wise or Payoneer integration for actual payments.
Agency growth advisory
Pricing strategy, retainer-vs-project mix optimization, account-team staffing models, M&A readiness, and valuation preparation — the judgment layer above the books.
Connected to your agency stack.
- Harvest & Toggl Track — time tracking reconciled to billable utilization
- Productive, Mavenlink & Kantata — PSA platforms mapped to project P&L
- Float & Forecast — resourcing and capacity planning
- Asana, Monday & ClickUp — project management synced to engagements
- HubSpot & Salesforce — CRM and pipeline mapped to client and service line
- Bill.com & Ramp — project-coded freelancer and vendor payments
- Wise & Payoneer — international client and freelancer payments
Different stack? If it has a QuickBooks integration or exports clean data, we work with it. Ask on a discovery call.
Gross revenue presentation vs. net revenue presentation.
For media-heavy and production-heavy agencies, the gross-vs-net question changes apparent revenue by the full pass-through amount, and every margin metric with it. Here’s what the same agency looks like under each presentation — and what decides which one applies.
| Same agency, two presentations | Gross (agency-as-principal) | Net (agency-as-agent) |
|---|---|---|
| Example: $1M media + $150K fee | Revenue $1,150,000 · COGS $1,000,000 · Gross profit $150,000 | Revenue $150,000 · no pass-through in revenue or COGS · Gross profit $150,000 |
| ASC 606 framework | Agency controls the media before transfer — the test; indicators include primary responsibility for fulfilment, inventory risk, and pricing discretion | Agency arranges for another party to provide the media; supplier controls it until placed |
| Apparent revenue | Inflated by the full pass-through amount where the agency is really an agent | Reflects actual economic earnings — matches AGI |
| Gross margin % | Distorted: 13% on $1.15M of “revenue” | 100% on $150K of true revenue |
| Industry benchmarking | Hard to compare with AGI-based agency benchmarks | Comparable with AGI-based benchmarks |
| Fundraise / M&A diligence | A buyer or investor may restate to net and question the numbers | Revenue presented the way the documented analysis supports |
| When gross is actually correct | Agency controls the good or service before transfer — e.g. it commits to buy, sets the price, and takes the loss if unsold | Where the agency doesn’t control it before transfer, it is an agent and presents net |
Under ASC 606 the principal-vs-agent analysis is performed for each specified good or service, not at the agency level, and the presentation conclusion is the company’s, made with its CPA — an agency may operate as principal on some work (production-buyout deals where it owns the deliverable) and agent on others (media buys, talent fees, third-party software resale). The chart of accounts handles both cleanly with clear separation.
From gross-inflated books to AGI you can defend.
Every agency engagement follows the same four-phase rhythm — built so AGI, retainer recognition, project P&L, and freelancer compliance are accurate before anyone makes pricing or hiring decisions from them.
Discovery
A 30-minute call to map your agency type, AGI size, pass-through mix, retainer-vs-project ratio, freelancer scale, multi-currency exposure, and where the books are breaking. No pitch.
ASC 606 analysis & cleanup
Principal-vs-agent analysis for each active engagement type, a file review and cleanup to restate prior periods if migrating gross-to-net, plus the right chart-of-accounts setup for agency economics.
Monthly reconciliation & reporting
Books reconciled monthly with retainer recognition, pass-through accounting, project P&L, freelancer allocation, multi-currency FX recognition, and the full agency KPI set.
Reporting & advisory
A monthly financial package with AGI, AGI per FTE, labor multiplier, client P&L, and project margin, plus advisory on pricing, hiring, retainer-mix optimization, and M&A readiness.
Real AGI is the start. The next acquisition offer is the point.
Once gross-vs-net is right, retainer recognition is clean, project margin is visible, and AGI per FTE is benchmarkable, the question changes from “are the books right?” to “what do we do with this clarity?” Which clients to fire, which service lines to expand, when to add senior talent vs. juniors, how to structure retainers to improve utilization, whether to bolt on a specialty agency, when an acquisition offer is fair — the decisions that actually move an agency.
That’s where agency advisory comes in: a fractional CFO who knows your AGI and unit economics turning them into pricing strategy, team-structure decisions, M&A readiness, and valuation modeling. As automation commoditizes basic bookkeeping, this judgment layer is where the value — and the multiple at exit — now lives. Explore fractional CFO & advisory →
Maintained by TechBrot.
This page reflects how TechBrot actually handles agency engagements. It is maintained by TechBrot Inc.; TechBrot Inc. is a Delaware-incorporated bookkeeping and advisory firm. The page is kept current on ASC 606 principal-vs-agent analysis (checked against FASB’s ASU 2016-08 text on September 26, 2026), pass-through cost handling, retainer revenue recognition, AGI and agency-specific KPIs, project profitability, freelancer management, and multi-currency accounting. Where our approach or scope changes, this page is updated. TechBrot delivers the books and coordinates with your CPA, who files.
Certifications
Led by a Led by a Certified QuickBooks ProAdvisor — QuickBooks Online Level 2 and QuickBooks Payroll
Scope
ASC 606 principal-vs-agent (operational), pass-throughs, retainer recognition, AGI, project P&L, freelancer management, multi-currency · income-tax filing, IRS representation, and international tax opinions coordinated with your CPA/EA/attorney
Engagement
Fixed-fee, written scope before work · delivered in your own QuickBooks file
Agency accounting questions.
Why is agency accounting different from regular bookkeeping?
What is the gross-vs-net revenue question and which applies to my agency?
Do you handle retainer revenue recognition correctly?
How do you handle pass-through media spend and reimbursable costs?
What is agency gross income (AGI) and why does it matter?
How do you handle freelancers, contractors, and 1099 management?
Can you handle multi-currency for international client and freelancer relationships?
Ready when you are
Get agency books that show real AGI.
Book a 30-minute discovery call. A QuickBooks ProAdvisor reviews your agency type, AGI size, pass-through mix, retainer structure, freelancer scale, and where the books are breaking, and sends a written fixed-fee scope within 3 business days. No pitch.