Agency billing: retainers, overages and unbilled work
7 min readUpdated By the thruflow team
The short answer
Bill a retainer's contracted amount at the start of each period, and track the hours logged against what it includes. When the team goes over, bill the overage at the agreed rate only if the contract says so, or raise a change order first. Bill pass-through costs (freelancers, production, media) with your agreed markup, against a purchase order. And review work that's ready to bill but on no invoice, your work in progress, every week, because it only gets harder to bill as it ages.
Kinds of retainer
- A fixed monthly fee for an agreed scope, whatever the hours.
- A bank of hours a month at an agreed rate, with overage billed above it.
- A minimum commitment, with work above it billed as it's done.
Whichever you use, write down what the retainer includes, what happens to unused hours, and how overage is billed. Most billing arguments start where the contract is vague.
A worked example
| Calculation | Amount | |
|---|---|---|
| Retainer | $12,000.00 a month for up to 80 hours | $12,000.00 |
| Hours logged | 92 hours | |
| Overage | 12 hours at $150.00 | $1,800.00 |
| Freelance designer | $3,000.00 plus a 15% markup | $3,450.00 |
| Invoice for the month | $17,250.00 |
Inside the retainer the effective rate is $12,000.00 ÷ 80, which is $150.00 an hour, so the overage is billed at the same rate. Had the team logged only 70 hours, the effective rate would have been about $171.43.
Overages and change orders
- Agree before the work: if a request falls outside scope, raise a change order with the extra fee and have the client accept it.
- Bill overage only where the contract allows it, and show the hours behind it.
- Track hours against the retainer during the month, not after it, so nobody is surprised.
Unbilled work, or work in progress
Unbilled work is anything delivered and billable that isn't on an invoice yet: hours logged, costs approved, a milestone the client signed off. Every agency has some; the risk is when it ages. A month later the client questions it, the person who did it has moved on, and it's quietly written off.
- Each week, list everything ready to bill and not invoiced, by client and campaign.
- Bill what's ready, or write down why it's waiting.
- Anything older than a few weeks gets a decision: bill it, agree it with the client, or write it off on purpose.
Pass-through costs
- Raise a purchase order for freelancers, shoots and media before the work, with the amount you've agreed.
- Check each vendor bill against its purchase order, so a bill past the PO is caught before it's paid.
- Bill the client the cost plus your agreed markup, with each fee on its own line.
How thruflow does it
thruflow's agency edition prices estimates from a versioned rate card (with client-specific rates), turns accepted estimates into campaigns, tracks time against each scope and retainer, bills overage and change orders as agreed, and raises purchase orders for freelancers and media. Work that's ready and not billed is on Today, and Recover counts it as money at risk until it's invoiced.
Request accessQuestions
- What is WIP in an agency?
- Work in progress: time and costs that are delivered and billable but not yet invoiced. It's money the agency has earned and not yet asked for.
- Should overage be billed automatically?
- Only if the contract says how. Otherwise raise a change order, have the client accept it, then bill it.
- How do we stop vendors billing more than we agreed?
- Raise a purchase order before the work, with a tolerance, and check each bill against it before it's approved and paid.