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The most suitable marketing agency payment solution for each agency will depend on how they prefer to charge their clients.
Different agencies use different methods to charge their clients either via manual payments or automatic payments. Each method has its pros and cons, so understanding the different pricing models, charging methods and payment options is crucial.
In this guide to marketing agency payment solutions, we explain the different marketing agency payment terms and how they might benefit your business.
How to charge manual payments
Charging your client with a manual payment might be necessary if the amount being charged differs every month. There are some direct debit systems which allow you to change the amount to be charged each time which makes it much simpler and easier.
Charging an hourly-rate
Charging an hourly rate is one of the most popular methods for marketing agencies. The workers simply keep track of the hours worked on the project and charge the client for them once it's complete. The best agencies will likely be able to offer a prediction as to how long they think the project will take. Smart agencies will also incorporate some slack or wiggle room in the prediction.
Charging by the hour may often require a manual payment if a direct debit system isn’t set up. This is because the amount to be charged is impossible to know until the project is complete. However, hourly pricing is advantageous as a marketing agency payment solution as it ensures each project is profitable. The profit is calculated into the hourly rate so no project should leave the agency out of pocket.
The drawback to this is there is no incentive to finish a project earlier than forecast.
How to charge automatic payments
When the amount being charged is likely to be the same every month, then automatic payments are even easier and usually preferable for both parties.
There are excellent online payment systems that can make the invoicing and charging process very simple and straightforward. There are also recurring payment technologies that allow you to receive credit card payments without a merchant account.
Exactly how you charge for automatic payments can also vary, and there are three main options:
This option sees the marketing agency charge a fixed price for a specific project. This payment model is simple and transparent and allows both the agency and the client to accurately forecast their finances.
A potential problem with this option is that any issues that arise during the project will be the responsibility of the agency. There can sometimes be a workaround for this, with certain extra work simply charged to the client via their business credit card.
The retainer-based charging option has the client paying the marketing agency a fixed amount every month. It works similarly to a subscription, and can be both advantageous and disadvantageous depending on what the client’s requirements are each month.
For example, one month may be quiet while the next month may require the agency to do much more work for the same pay as the previous quiet month. It is a predictable source of income for the agency, but the time and energy requirements will fluctuate from month to month according to the client’s needs.
The marketing agency payment solution based on commission sees the agency receive a fixed percentage of the client’s marketing budget. It is another option that offers predictability when it comes to forecasting finances.
Commission-based charging is a common option for securing adverts, with the agency able to secure a discount which they receive as the commission. This method is favoured by larger clients, as smaller clients tend to have smaller marketing budgets.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.