Glossary
Invoicing
Invoicing is the formal process of requesting payment from a client for services delivered. For agencies and professional services firms, accurate and timely invoicing is critical to cash flow, client relationships, and financial reporting. The invoice is the point at which logged hours, project deliverables, and agreed fees translate into receivable revenue.
Types of agency invoices
Agencies typically generate several types of invoices. Fixed-fee invoices bill a pre-agreed amount for a defined scope of work or project milestone. Time-and-materials invoices are based on logged hours multiplied by the agreed hourly or daily rate. Retainer invoices are recurring, usually monthly, billing a pre-agreed fee for ongoing access to the team.
Pass-through invoices charge clients for expenses and third-party costs that the agency has incurred on their behalf, such as media spend, stock photography, or printing.
The invoicing process
Most agency invoicing follows a cycle: work is delivered, time is logged, the project manager reviews and approves the hours, the finance team generates the invoice, and it is sent to the client. On retainer accounts, this cycle is usually monthly and relatively automated. On project accounts, it is tied to milestones or completion.
Common invoicing failures include billing delays (invoices sent weeks after work is done), inaccurate time log data, missing purchase order numbers, and unclear descriptions of what is being billed for. All of these slow payment and create client disputes.
Invoicing and accounts receivable
Once an invoice is sent, it becomes an accounts receivable item. The gap between invoice date and payment date is the payment cycle, which varies widely by client and contract terms. Agencies with slow payment cycles can face cash flow pressure even when they are nominally profitable. Monitoring outstanding invoices and chasing late payment promptly is an important operational discipline.
Example
At the end of October, an agency's finance team generates a monthly retainer invoice for a client at the agreed fee of £12,000. They also invoice a separate project at a milestone — 50% of the fixed fee on completion of the first phase — which is £18,000. Both invoices are sent on 1 November with 30-day payment terms.