QuickBooks for agencies, where a settings toggle decides your revenue.

It depends on a setting, which is exactly the problem. QuickBooks lets you record a reimbursed cost either as income or as a reduction of the expense. Recorded as income, a year of pass-through media appears in your top line; recorded against the expense, it does not appear at all. Both are legitimate presentations of the same underlying transactions — but they produce revenue figures that can differ by a multiple, so the choice has to be deliberate and consistent, not whatever the file was left on.

It is the income side of a reimbursed cost. When the billable-expense setting is on, a cost you incur on a client's behalf posts to your expense account, and the reimbursement posts as income — so the profit and loss shows both, grossed up, netting to roughly zero on that transaction. With the setting off, the reimbursement posts back against the expense account instead, and the expense reads as though you never incurred it.

In QuickBooks Online it sits under the gear icon, in Account and settings, on the Expenses tab, in the Bills and expenses section — the option is 'Track billable expenses and items as income'. Turning it on offers a further choice between tracking everything in a single account, which QuickBooks names Billable Expense Income, or across multiple accounts, which adds a checkbox to each income account so you can mark which ones may receive billable expense income.

That is a reporting decision for you and your CPA, and it usually follows how you talk about the business to lenders, investors or a buyer. What we will say plainly is that the wrong failure mode is not choosing either one — it is a file where the setting changed part-way through, or where some pass-through was grossed up and some was netted, so no year compares to any other. We set whichever position you take and apply it consistently across the whole file.

Most often because pass-through cost is grossed up into revenue and nobody flagged it. An agency that bills a large media budget and a modest fee will report the whole budget as revenue under one treatment and only the fee under the other. Neither figure is wrong; reading the first one as though it were the second is what causes the shock. Separating fee income from billable expense income into their own lines is what makes the top line legible again.

Yes, and for most agencies it matters more than the top line. QuickBooks can attribute income and cost to a customer, and class or location tracking adds a second axis for offices, service lines or brands. What makes it work is discipline at entry — every cost tagged when it is recorded, not reconstructed at quarter-end — and a chart of accounts that separates fee income, pass-through, and internal overhead in the first place.

A retainer collected before work is done is unearned, so it sits as a liability and moves into income as the work is delivered. The mechanics are the same as any advance payment. Where it gets specific to agencies is that a retainer is often part fee and part budget for pass-through spend, and those two components behave differently — so a retainer that is not broken into its parts will misstate both revenue and the cost sitting against it.

No. What you charge, how you structure a scope, and what your client agreements say are yours. We record what actually happened — what was billed, what was spent on whose behalf, what was reimbursed, and what is outstanding — so that the reporting reflects your commercial arrangements rather than reshaping them.

Yes, and the catch-up can come first. Agencies fall behind because pass-through volume is high, cost arrives from many vendors on many cycles, and the person who knows which client a charge belonged to is usually the busiest person in the building. A catch-up attributes the costs, applies the reimbursements, and rebuilds a top line that means one thing throughout the period.

No. We keep the books — the pass-through treatment, the client attribution, the retainer position — so the file is accurate and current. Your CPA sets the reporting and tax positions, including the gross-versus-net question itself, and files returns. Good bookkeeping makes that work faster; it does not replace it.