Specialist accountants for UK
digital marketing agencies

Books showed £2.35m turnover. VAT, corporation tax forecasts and bank covenants were all running off an inflated number. Founders couldn't explain to a finance partner what their actual margin was.

Restructure chart of accounts so client media is a balance-sheet item until reconciled, retainer revenue earns monthly, and project fees flow through the P&L cleanly. Monthly reconciliation between ad platforms and client invoicing.

VAT registration crept up on them after Q2: rolling 12-month turnover crossed £90,000 mid-quarter. Late registration meant back-VAT on three months of invoices already sent without it.

12-month rolling threshold monitoring inside Xero with a 30-day alert, plus a flat-rate vs cash scheme review when they crossed. Going forward, the directors' salaries use the £12,570 personal allowance and the £500 dividend allowance before any higher-rate exposure kicks in.

First quarterly payment of £150k landed in the bank and looked like a great month. Four months later, with no reserve set aside, the corporation tax and VAT on that quarter's earnings hit at the same time as a soft month for new business.

Move quarterly retainers onto deferred income recognition so revenue earns each month it's delivered. Build a tax-and-VAT reserve account funded automatically off each payment. Add IR35 status determinations on every contractor brought in for the new account.