Agency glossary

Accrued income

Work done ahead of billing: fee times percentage complete, less what has been invoiced, when positive. Earned income of the month whether or not the invoice exists yet.

Bad debt relief

The VAT route back when a client never pays: relief once the invoice is six months past due. Chasing in month eleven remains cheaper than relief in month thirteen.

Bench

The freelancers an agency flexes with: engaged per project, briefed for outcomes, paid on time, papered so the flexibility survives an HMRC status review.

Billable hour

An hour a client is charged for, as opposed to an hour worked. The demo fee-earner has 1,144 of them a year at the 65 per cent target, and each one costs £55.61 before any margin.

Blended rate

One rate averaged across the team instead of the tier card. Useful for quick quotes, dangerous in contracts: senior-heavy projects lose money at a blend the juniors set.

Bonus timing

The year-end rule: a bonus minuted by the year end and paid within nine months deducts in the year it rewards. Decided in the audit, it deducts a year late.

Break-even day rate

The day rate at which a hire stops costing money: full cost over billable days, £412 for the demo £38,000 hire at honest utilisation. The pipeline has to promise the days; the rate just prices them.

Change order

The five-minute form that turns scope drift into revenue: one paragraph, hours, price, signature. The alternative is delivering the change free and resenting it.

Cost multiple

Fee billed per pound of salary: the classic health test wants around three. The demo £700 rack at 65 per cent utilisation reaches 2.38; the day that reaches three is £881.

Cost rate

The loaded hourly cost of the team, overheads included: £58 blended in the demo agency. Every project margin is measured against it, which is why flattering it flatters everything.

Deferred income

Billing ahead of the work: the December retainer invoice for January service, the deposit on an unstarted project. A liability until earned, and the honest year end holds it as one.

Fee-earner

A head whose hours are sold: the demo agency runs six, plus two heads whose work makes the six possible. The overhead share spreads across all eight; the billing lands on six.

Free pitching

Speculative creative delivered at the agency's cost: sometimes worth it, never free. The ledger decides which beauty parades deserve a deck.

Full cost

Salary plus employer NIC plus pension plus the overhead share: £63,623 for the demo £42,000 fee-earner. The number under every rate argument.

Kill fee

The clause that prices a cancelled campaign: work done plus committed costs plus a stated share. Campaigns get pulled; the clause decides whose problem that is.

Non-billable time

Real work at zero utilisation: pitching, internal projects, admin. It needs a budget of its own, because unbudgeted it eats the billable target quietly.

Over-servicing

Delivering more hours than the retainer scopes, one polite yes at a time. The demo retainer runs 37.8 per cent over, which slides the rate from £100 to £72.58 and gives away £11,832 a year at cost.

Overburn

Hours burned past the budget: 32.5 per cent on the demo project, which turned a 51.7 per cent planned margin into 36. Caught weekly it is a change order; caught at the end it is this definition.

Percentage of completion

The project lead's honest estimate of work done against the plan, never the hours burned, because hours measure cost. It drives the WIP cut and therefore the month's truth.

Pitch cost

Team hours at the cost rate plus hard costs: £3,880 for the demo pitch. At a one-in-four win rate every win carries three losses: £15,520 per client won.

Professional indemnity

The insurance for being wrong on purpose: advice, designs and code that cause a client loss. The agency carries its own; the bench carries theirs, certificate on file.

Rack rate

The card price of a day before real life discounts it. The demo card says £700; the invoices realise £610, and the gap has its own definition below.

Rate card

Prices by tier, built from cost and utilisation rather than folklore, rounded up, repriced when salaries move. A card unmoved for three years is a pay cut the agency gave itself.

Realised rate

What a billed day actually collected: £610 against the £700 card in the demo, an 87 per cent recovery. The politest discount in the accounts.

Recovery

Realised over rack: the share of the card price that survives amends, drift and quiet shaving. The demo agency's 13-point gap costs £68,904 a year across the billed hours.

Retainer

Recurring fee for recurring scope: the steadiest money in the agency and the easiest to over-serve. Scoped in hours, metered monthly, renewed on the ledger.

Right of substitution

The freelancer clause with the most status weight: someone else could genuinely deliver the engagement. Only worth writing where it is true.

Scope creep

The project version of over-servicing: deliverables growing without the fee moving. The exclusions paragraph and counted rounds of amends are the antidote.

Stage payments

Cash tied to deliverables rather than the final sign-off: a third up front on projects, stages through the work. Cash follows the work or the agency lends interest-free.

Statement of work

The document margins are made in: counted deliverables, written assumptions, what is out, change control and the money terms. Signed before work starts, every time.

Statutory interest

The 8 per cent over base every business can charge on late commercial payment. Stated in the terms, it is rarely needed; unstated, it is unavailable.

The two leaks

Unbilled capacity and writedowns, measured apart because they need different medicine: £125,268 a year combined on the demo floor, more than any new-business win of the season.

Timesheet

Pricing telemetry, not surveillance: cost comes from hours, and bad hours data means underpriced work. Daily, two minutes, codes matching the portfolio tracker.

Utilisation

Billed hours over available hours: the demo floor targets 65 per cent and runs 58, and those seven points are £56,364 a year that never reached an invoice.

Win rate

Pitches won over pitches fought: the denominator of the true cost of a client. Move it by qualifying harder before moving anything else.

WIP

Work in progress: the value of half-finished projects at the month end, positive when work runs ahead of billing, negative behind. The cut that makes agency profit honest.