Bookkeeping for Los Angeles agencies

Short answer: Bookkeeping for agencies in Los Angeles sets up clients as customers and projects as classes, so revenue, direct costs and margin line up by client. Pass-through costs like ad spend are recorded so they do not inflate revenue, and retainers paid in advance are held as deferred revenue. Freelancers get W-9s on file, so 1099-NEC forms are ready in January.

What makes agency books different

An agency can look busy and still lose money on its biggest client. The reasons are usually in the books. Media spend that you pay on a client's behalf is recorded as revenue, which makes the top line look large and the margin look tiny. Contractors are paid from a card and never tied to the project. Retainers are recorded when cash lands, not when the work is done.

Los Angeles has a deep bench of small agencies: brand studios in the Arts District, social and influencer shops in West LA, design and web teams in the Valley. Most of them run on a few retainers, a few projects and a long list of freelancers.

What we set up

• Clients as customers and projects as classes or tracking categories, so revenue and direct costs line up by client.
• Pass-through costs, such as ad spend and printing billed at cost, recorded so they do not inflate your revenue.
• Retainers billed in advance held as deferred revenue and recognized as the month is worked.
• Freelancers set up as vendors with W-9s on file, so 1099-NEC forms are ready in January.
• Software subscriptions sorted between client costs and agency overhead.
• An accounts receivable review each month, so slow payers are flagged early.

Gross receipts and the City of Los Angeles

If your agency operates inside the City of Los Angeles, it needs a Business Tax Registration Certificate, and the annual renewal is based on gross receipts. The renewal is due at the end of February. An agency that records client media spend as its own revenue can end up reporting a much bigger gross receipts figure than it should. Ask your CPA how pass-through amounts should be treated for your contracts, and we will set up the books to match that answer.

Businesses with worldwide gross receipts of $100,000 or less can claim the small business exemption, but only if they renew on time. New agencies miss this often.

Cash and runway for a small agency

Agencies can be profitable and still short on cash, because clients pay in 30 to 60 days and freelancers want to be paid now. Each month we show receivables by client and age next to upcoming payables, so you can see a gap coming and call the client who is late.

Freelancers, contractors and 1099s

Most agencies run on freelancers: designers, writers, editors, developers and producers paid by the project. The bookkeeping work is simple but has to be done all year. Each freelancer is set up as a vendor with a W-9 before the first payment. Payments are recorded to the client project they served. Payments by card or through platforms that issue their own tax forms are tracked separately, since those usually do not need a 1099 from you.

In January, the 1099-NEC list comes straight from the books instead of from a scramble through Venmo history. Whether a specific person should be a contractor or an employee is a question for your CPA or an employment attorney, and California applies a strict test.

The monthly close

1. Invoice and match Client invoices from your billing tool are matched to payments received.
2. Code direct costs Contractor bills, media and production costs are tagged to the client they served.
3. Adjust for timing Retainers paid ahead and work done but not yet billed are adjusted so the month is accurate.
4. Report margin You get revenue, direct cost and gross margin by client, plus agency overhead.

Where we work

We keep books for businesses across the City of Los Angeles, the Westside, the Eastside, the San Fernando Valley, the San Gabriel Valley, the Gateway Cities and the South Bay.

• Alhambra
• Arcadia
• City of Industry
• Commerce
• Diamond Bar
• Downey
• Downtown Los Angeles
• East Los Angeles
• El Monte
• Koreatown
• Lincoln Heights
• North Hollywood
• Pasadena
• Pomona
• San Fernando Valley
• Santa Fe Springs
• Santa Monica
• Sherman Oaks
• South Bay
• Van Nuys
• Vernon
• West Covina
• West Los Angeles
• Whittier
• Woodland Hills

Questions