Unpredictable cash flow stifles US agency growth & profits

A recent survey has shown that unpredictable cash flow is suppressing the growth prospects of United States-based marketing and advertising agencies.

According to new findings released by Ignition, a provider of revenue and billing automation solutions, 63% of surveyed agencies experience unpredictable monthly cash flow, identified as either "Very unpredictable" or "somewhat unpredictable". As a result, 82% of these agencies have been compelled to delay or cancel growth initiatives such as hiring staff, investing in software, or expanding their operational capacity.

Greg Strickland, Chief Executive Officer of Ignition, commented, "In today's economy, it's the unpredictability of cash flow that can be most damaging. Many agencies get stuck in a frustrating cycle. They want to scale, but inconsistent cash flow holds them back. When critical decisions like hiring or investing in new software are delayed due to volatility, growth slows, and opportunities to attract larger clients slip away.

Our goal with this study was to help agencies identify where revenue is slipping through the cracks and provide actionable strategies to escape the cycle of unpredictable cash flow. With better data, proven cash flow practices, and the support of automation technology, we believe agencies can scale more efficiently and sustainably."

The survey, which covered 273 managers and executives from agencies engaged in branding, creative, digital marketing, PR, social media, or web development and hosting, highlighted scope creep as a significant financial concern. Data show that 57% of agencies report monthly revenue losses between USD $1,000 and USD $5,000 due to unbilled additional work, known as scope creep. A further 30% of respondents indicated monthly losses in excess of USD $5,000. In addition, 78% of the agencies surveyed stated they rarely or only sometimes charge clients for work that falls outside the agreed scope, suggesting substantial potential for revenue loss remains unaddressed.

Late client payments constitute another major factor contributing to cash flow uncertainty. The survey found that 97% of agencies encounter late payments from clients, with 65% reporting that at least 25% to 30% of invoices are settled past their due dates. More than half (56%) of the respondents reported delays ranging from two weeks to two months after the invoices have become due. In connection to these delays, 84% of agencies spend between three and more than ten hours each month pursuing outstanding payments.

The prevailing "pay later" culture, where only 16% of agencies require full payment upfront and 49% request partial payment in advance, has also been cited as exacerbating cash flow risks. The report links this practice to a Federal Reserve Banks survey, which found slow-paying customers are more common in businesses that receive payment after delivery of services.

Jordan Snider, co-founder of digital agency Token Creative Services and an Ignition client, outlined the practical implications. He stated, "We used to be one of the 71% of agencies that struggled with late payments. We were doing great work, but we weren't getting paid on time and spending hours chasing payments. My advice to agencies: Stop wasting time on manual admin work. If you want to scale your business, get a solution that automates proposals, invoices, and payments. Now we get paid on time, every time, with zero overdue invoices."

The findings also emphasise the increasing adoption of modern pricing models within the agency sector. While hourly billing remains prevalent at 28%, an equal proportion of agencies has shifted towards productised or subscription-based packages or tiered service bundles. Retainer models account for 10% and the remaining 25% rely on project-based pricing.

Automation in billing and collections is also gaining traction. Nearly half (49%) of surveyed agencies use accounting software for billing, while 20% have moved to platforms that collect payment details in advance and process charges automatically.

The data further show that price increases are widespread, with 97% of agencies indicating they are raising their prices during this year.