Cash flow is the backbone of any agency. Struggling with late payments, project delays, or unpredictable revenue? Here’s the solution: seven proven systems that can double your working capital in just 60 days. Here’s a quick overview:

• Cash Flow Forecasting: Predict revenue and expenses with precision.
• Better Billing Methods: Speed up invoicing and payment collection.
• Monthly Retainer Setup: Ensure steady, predictable income.
• Payment Terms Optimization: Align payment schedules to your advantage.
• Cash Reserves Building: Create a financial cushion for tough times.
• Financial Dashboard: Track real-time metrics for smarter decisions.
• Service Package Review: Adjust offerings to boost profitability.

These strategies address common cash flow issues like project delays, client concentration, and seasonal swings. Start implementing today to stabilize your finances and fuel growth.

System 1: Cash Flow Forecasting

Building Your Forecast Model

Start by dividing your forecast into three key streams. This approach ensures you have a clear picture of your cash flow and helps you allocate funds effectively – critical if you’re aiming to double your working capital in just 60 days.

1. Recurring Revenue
Keep track of all monthly retainers and ongoing client agreements. These provide your baseline income. Regularly review contracts to factor in upcoming renewals or changes.

2. Project Pipeline Revenue
Evaluate deals in progress and upcoming projects. Use your CRM to translate pipeline stages into dollar amounts, based on historical win rates.

3. Fixed and Variable Costs
Include everything from salaries and freelancer fees to software subscriptions, rent, and equipment. Adjust for seasonal trends using past financial data.

Tools to Simplify Cash Flow Forecasting

Float
Many agencies rely on Float for its real-time connection with Xero. It eliminates the need for manual spreadsheets and helps you make informed financial decisions.

CashFlowTool
This tool uses AI to create forecasts and sends alerts for potential cash flow issues – helping you avoid surprises.

With your projections in place, the next step is ensuring timely billing to turn forecasts into actual cash in the bank.

System 2: Better Billing Methods

Once your cash flow forecast is in place, it’s time to tighten up invoicing. The goal? Turn projections into actual cash in the bank.

Setting Clear Payment Rules

Your forecast gives you the roadmap; now you need payment terms that support it. Spell out clear rules to ensure steady cash flow and encourage prompt payments.

• Milestone Payments: Break payments into stages – 40% upfront, 40% at milestones, and 20% upon delivery.
• Early Payment Incentives: Offer a 2% discount for payments made within 15 days.
• Late Fees: Apply penalties for overdue payments to deter delays.

Faster Invoice Processing

Your billing schedule should match your cash flow needs. A weekly billing cycle can help you close the gap between service costs and incoming payments.

• Weekly Billing: Shift to a weekly invoicing rhythm. This keeps cash moving faster and aligns income with expenses.

"A more frequent and effective billing process has the potential to improve your cash flow by aligning clients’ payments for services with your service-related expenses." – GrowthForce

• Automated Invoicing: Leverage invoicing software to send bills immediately after delivery. Use auto-reminders and multiple payment options to shorten payment cycles.

With these steps, you’re not just billing – you’re building a system for reliable cash flow. Next, focus on locking in monthly retainers to stabilize inflows.

System 3: Monthly Retainer Setup

Speeding up invoices is just the start. The next step? Locking in steady income with monthly retainers. These agreements create consistent cash flow and strengthen your working capital.

Monthly retainers give you predictable revenue and upfront cash. In fact, 90% of agencies rely on retainers to stabilize their finances and avoid payment delays.

Crafting Effective Retainer Agreements

A solid retainer agreement is more than just a handshake. It’s a long-term, recurring contract. Here’s what it must include:

• Scope Definition – Clearly outline deliverables and set boundaries.
• Resource Planning – Assign the right team and allocate hours.
• Compensation Structure – Set a fixed monthly or quarterly fee.
• Evaluation Process – Schedule regular reviews and renewal discussions.

Pricing your retainer correctly is critical. Use this formula to ensure you cover costs and hit your profit targets:

Retainer Price = Team Cost / (1 – Desired Margin)

For example, if your monthly team cost is $10,000 and you aim for a 40% margin, your retainer price would be $10,000 / (1 – 0.4) = $16,667.

Handling Upfront Payments

Retainers are paid upfront, either as a lump sum or a recurring monthly fee. To keep your cash flow healthy:

• Require payment before each billing period.
• Tie fees to outcomes, where applicable.
• Conduct quarterly performance reviews to maintain alignment.

On average, agencies manage 21 retainer clients. By collecting fees in advance, you turn future income into immediate cash, helping you hit your 60-day working capital goals faster.

System 4: Payment Terms That Work

Smart payment terms can speed up cash flow while keeping clients happy. Once you’ve secured those retainers, focus on turning invoices into cash quickly and efficiently.

Early Payment Rewards

Offering discounts for early payments can motivate clients to settle invoices faster.

• Match invoice dates with your clients’ billing cycles for smoother processing.
• Clearly highlight early payment discounts on invoices to make them stand out.
• Accept multiple payment methods – credit cards, checks, ACH – to eliminate payment hurdles.

Late Fees and Progress Payments

Late fees and progress-based billing keep payments on track and reduce delays.

• Set clear project milestones and bill based on completion percentages. This ensures steady cash flow throughout the project.
• Use automated reminders to notify clients about upcoming discounts or penalties. This keeps them engaged and reduces late payments.

Monitor how these payment terms impact your cash flow using a financial dashboard. Adjust as needed to keep your system running smoothly.

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System 5: Building Cash Reserves

Once your payment terms are optimized, it’s time to focus on your financial safety net. Cash reserves act as a buffer against market volatility and provide the resources needed to drive growth.

Setting Money Aside

Use the Rule of Thirds to allocate profits: one-third for team bonuses, one-third for taxes, and one-third for reserves. Treat your reserve contributions like any other fixed expense. This approach ensures your financial cushion grows consistently over time.

"Having cash on hand prevents the ‘we ran out of money’ panic." – Dan Delmain

Reserve Fund Rules

Stick to these key practices when managing your reserves:

• Open separate accounts for bonuses, taxes, and reserves to avoid mixing funds.
• Use reserves strategically during market downturns and ensure you carefully evaluate clients before tapping into them.

A disciplined approach to building reserves not only protects your business during tough times but also sets the stage for future growth.

System 6: Financial Tracking Dashboard

System 6 puts your cash flow under a microscope. It’s all about spotting trends early and avoiding cash shortfalls before they become a crisis. A clear, real-time dashboard keeps you in control. Check it daily to stay ahead.

Key Metrics to Watch

There are two types of numbers you can’t afford to ignore: performance and security.

Performance Metrics:

• Billings per FTE: Top agencies hit $275,000 per full-time employee. The industry average lags at $150,000–$160,000.
• Utilization Rate: Compare projected fees to actuals. A 45% utilization rate instead of 60% could cost you $1 million annually.
• Salary Load: Keep salary expenses below 45% of total fees.
• Net Profit: Target 15–30% of total fees to fuel growth without overextending.

Security Metrics:

• Client Concentration: No single client should account for more than 25% of revenue.
• Cash Reserves: Maintain liquid assets to cover two to four months of overhead.
• Debt Ratio: Keep your total debt under 60% of assets.

Building Your Dashboard

1. Pick the Right Tools
Tools like Fathom can sync your accounting data for reporting, forecasting, KPI tracking, and benchmarking.

2. Commit to Regular Reviews
Trevor Shirk of Terrayn reviews his dashboard weekly to pinpoint reinvestment opportunities and ensure payroll stays on track.

3. Set KPIs and Adjust
Use benchmarks and historical data to set realistic targets. Compare actual performance to your goals, then tweak forecasts as needed.

System 7: Service Package Review

Now that your dashboard provides real-time metrics, it’s time to fine-tune what you’re offering.

Measuring Service Profits

Use the Agency Value Chain framework to identify where profits are slipping through the cracks. This approach helps you evaluate every stage – from how you position your services to how you retain clients.

"If your net profit margins are below 20%, your agency is ‘leaking’ profits." – Karl Sakas, Sakas and Company

Here are the key metrics you need to track:

• Revenue Distribution
  Break down revenue by client and service type. No single client should make up more than 15% of your total revenue.
• Service Delivery Costs
  Compare the actual costs of delivering services (including resources and overhead) against your estimates.
• Client Retention Value
  Track both revenue retention and the number of clients retained. Retention is one of the easiest ways to plug profit leaks.

Feed these insights back into your financial dashboard to keep an eye on progress and make adjustments.

Payment-Optimized Services

To avoid the rollercoaster of inconsistent cash flow, structure your offerings for steady income:

• Retainer-First Approach: Turn one-off projects into ongoing retainers. Require upfront deposits and clear milestone payments. Make sure your contracts enforce these terms.
• Post-Project Debriefs: After every engagement, conduct a debrief. Use this to improve future cost estimates and reduce cash flow surprises.

60-Day Implementation Plan

Here’s your step-by-step guide to activate all seven cash-flow systems in just 60 days.

Week 1: Review and Plan

Start with a clear picture of where you stand. Evaluate your current financial processes and build a 13-week cash-flow model. This should detail both expenses and inflows. Use this to identify cash-flow needs, set a realistic budget, and pinpoint areas where you can cut unnecessary expenses.

Weeks 2–4: Quick Wins

Focus on actions that immediately improve cash flow. Speed up collections and secure steady, predictable income.

Key Steps:

• Require 50% deposits for all new projects, with the remaining balance due within 10–30 days of completion.
• Shift suitable clients to retainer agreements to stabilize monthly revenue.
• Tighten up payment terms. Make sure clients agree to them upfront and stick to them.
• Collect payments quickly using secure methods to improve cash inflows.

Set aside an emergency fund during this period to handle unexpected expenses.

"Remember that cash flow is money that you have, not money you’ve billed. It has to be ‘in the bank’ to count as cash flow." – Andy Strote

Weeks 5–8: Complete Setup

Now it’s time to lock in long-term systems and fine-tune your processes for sustainable cash flow.

• Finalize your cash-flow forecasting model and make it part of regular reviews.
• Build a budget framework to guide every spending decision.
• Conduct recurring expense audits. Cut waste or renegotiate terms where possible.
• Work with vendors to negotiate flexible payment terms to free up capital.
• Monitor key performance indicators regularly to spot areas for improvement.

Review cash flow weekly or monthly, and adjust your strategies as needed. This ensures you stay ahead of potential issues and maintain control.

Conclusion: Next Steps

Main Points Review

• Cash Flow Forecasting
• Better Billing Methods
• Monthly Retainer Setup
• Payment Terms That Work
• Cash Reserves Building
• Financial Tracking Dashboard
• Service Package Review

Getting Started Today

Your next move is simple: take action and start improving your cash flow immediately.

• Set Up a Cash Flow Tracker
  Don’t overthink it. Begin with a basic tracker today. This small step gives you clarity on your numbers and builds momentum.
• Secure Quick Wins
  • Require upfront payments using retainer or deposit agreements.
  • Transition current projects to retainer models wherever possible.
  • Use automated invoicing tools to speed up collections.
• Monitor the Right Metrics
  Schedule regular reviews of critical metrics like days sales outstanding (DSO), operating cash flow, and free cash flow. This keeps you in control and eliminates surprises.

The clock is ticking – start today and aim to double your working capital in the next 60 days.

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