It depends on the contract, specifically whether the agency has pricing authority over the client, holds cancellation liability if a placement goes unused, and contracts directly with the media vendor. Agencies acting purely as an authorized buyer on behalf of the client, without inventory risk or pricing discretion, typically recognize only their fee or commission as revenue, with the pass-through spend excluded from the top line. In marketing agency accounting this decision is documented once and applied to every client, because inconsistent gross versus net reporting is the single most common marketing agency accounting error we correct.

Recognizing a full retainer payment as revenue immediately overstates performance for that period, since the service hasn’t been delivered yet. GAAP based accounting requires recognizing retainer revenue gradually as services are performed across the retainer term, which is why a deferred revenue schedule matters for any agency billing this way, and why marketing agency accounting treats retainers as deferred revenue by default.

WIP represents work that’s been performed but not yet billed to the client, and tracking it ensures the related cost of delivering that work shows up on the books in the same month as the revenue it will eventually generate. Agencies that skip WIP tracking often see revenue and cost land in different months, which distorts true project profitability, so WIP tracking is a standard part of marketing agency accounting rather than an optional add-on.

Yes, if a freelancer works set hours, uses agency-provided tools, and takes ongoing direction similar to an employee, the IRS can determine the relationship functions as employment regardless of the 1099 designation, which creates back payroll tax, penalty, and benefits exposure for the agency. Agencies with a large freelancer bench should have their contractor relationships reviewed periodically, since classification risk builds gradually as working arrangements evolve over time, and marketing agency accounting should include that review on a set schedule.

Pricing typically depends on transaction volume, number of active clients, and whether media pass-through or WIP tracking is included, with most agencies paying a monthly fixed fee for marketing agency accounting. A small creative studio usually pays less than a full-service agency managing multiple retainers and media budgets, and hiring an accountant for marketing agency work in-house almost always costs more than outsourced marketing agency accounting at the same scope.