Proper Revenue Recognition for Agencies, With Rich Brett
About this Episode In this episode of the Agency Profit Podcast, Marcel chats with Rich Brett—agency FinOps expert and LinkedIn voice on financial operations—about how to ditch surface-level revenue reporting and get serious about recognizing revenue based on actual work delivered. They dig into the messy but mission-critical topic of revenue recognition, why relying on invoice or cash dates can totally distort your P&L, and how agencies can shift to more accurate, forward-looking financial practices. Rich shares battle-tested strategies for aligning revenue with staff effort, improving forecasting, and getting project teams closer to the numbers—all with the goal of making your finances tell the truth and guide better decisions. Bottom line: if you're tired of being surprised by your agency's P&L, it’s time to nerd out on RevRec and start connecting your financials to how work really gets done.
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Show Notes
Points of Interest
- 1:09 – 2:28 – Meet Rich Brett: Rich shares his background in agency finance and how he now serves 12–15 agencies monthly by bridging gaps between finance, operations, and strategy.
- 2:29 – 4:03 – The FinOps Mindset: Rich defines FinOps as the intersection of finance and operations—connecting financial data with the reality of agency delivery for more meaningful insights.
- 4:04 – 6:02 – Rate Cards and Data Integrity: The duo explores how operational metrics like utilization and recovery must align with financial planning, especially when building rate cards.
- 6:03 – 9:03 – Revenue Recognition Fundamentals: Rich explains revenue recognition as booking revenue based on delivery progress rather than invoice or payment dates, providing a more accurate financial view.
- 9:04 – 12:08 – Cash vs. Accrual Accounting: Marcel and Rich outline the critical distinction between accrual accounting for tax, GAAP, and management purposes—and why methodology matters for insight.
- 12:09 – 15:17 – Common RevRec Mistakes: Many agencies overcomplicate revenue recognition or fail to track only fee-earned income, leading to distorted financials and misaligned reporting.
- 15:18 – 17:55 – Building a Methodology: Rich outlines a practical approach using project forecasts, resourcing, and delivery inputs to estimate monthly revenue earned from projects.
- 17:56 – 21:08 – Percent Complete Frameworks: The episode covers five models for calculating project completion—from time vs. timeline to project manager estimates—each with pros and cons.
- 21:09 – 24:47 – Operational Insights from Finance: They highlight how mismatches between recognized revenue and time tracking reveal performance issues and inform staffing decisions.
- 24:48 – 27:37 – Working with Accountants: Rich emphasizes keeping revenue recognition simple and ensuring bookkeepers support your methodology with appropriate journal entries.
- 27:38 – 36:00 – Scope Clarity and Internal Truth: The conversation turns to separating internal planning from client-facing documents and how poor internal assumptions lead to inaccurate reporting.
Show Notes
- Rich’s LinkedIn
- My Framework
- Time vs. Timeline
- Hours vs. Budget
- Burndown Chart/ Task Checked Off
- Initial Project Shape/ Resource Plan- Based Forecasting
- % Complete
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