Why Traditional Finance Systems Get Agencies Wrong
If you’re running finance for an agency and using a COGS-based accounting system, there’s something you need to know.
It’s not built for you.
Traditional finance platforms were made for businesses that sell things. Not time, not creativity, not strategic media placements. Things. Stock in, stock out. And the finance model that underpins those systems, the “Cost of Goods Sold” (COGS) model, treats every dollar invoiced as revenue, and every supplier cost as a simple deduction.
Sounds tidy. But it doesn’t reflect how agencies actually work.
The big issue: COGS gets agency margins all wrong
Here’s the short version:
COGS-based systems treat everything you invoice as revenue, even if that includes a $10K third-party supplier cost.
They don’t recognise your real costs until the supplier invoice arrives, which might be weeks after the job is billed.
That creates a timing mismatch on your P&L and makes live margin reporting near impossible.
For a project-based agency, where you’re often billing before costs land, and your revenue might be a mix of head hours, fees, commissions or markup, the COGS model ends up giving you misleading numbers.
You look profitable on paper one month, and then tank the next when supplier costs catch up. That’s not helpful. That’s confusing.
Pegasus does it differently… and better
Pegasus was purpose-built for agencies. Instead of squashing your numbers into a product-based model, it recognises the difference between:
What you bill the client (Billings), and
What your agency actually earns (Revenue)
And crucially, it tracks them separately.
This means your reports show what you’ve invoiced and what you’ve actually earned, not just a lump sum that pretends they’re the same thing.
So, how does it work?
Let’s break it down into two core parts: Media and Production.
💡 Media: Costs and revenue recognised at billing
When you bill media to a client, Pegasus automatically records the cost (even if the supplier invoice hasn’t landed yet).
It books your agency fee or commission as revenue.
And it holds the supplier liability on the balance sheet
Your P&L? Clean. Your margin? Visible instantly. Your accountant? Thrilled.
🎬 Production: Smarter handling of timing and cost
Supplier costs go into WIP (Work in Progress) on the balance sheet.
If you bill the client before receiving supplier invoices, Pegasus creates a Prebill entry, recognising the liability, but not overstating revenue.
Once the job wraps, Pegasus “washes up” all the WIP and Prebill values, and records actual revenue — only what your agency truly earned.
You always know what’s been billed, what’s been earned, what costs are still to come, and how profitable the job really is.
Meanwhile, in a COGS system…
You bill a job: Full amount hits revenue.
You wait for supplier invoices: Costs finally hit later.
Your margins? Yo-yo all over the place.
Your reporting? Looks better or worse than reality, but rarely accurate.
These systems weren’t designed to separate margin from pass-through. So they don’t.
Why this matters to finance leaders
Agencies need financial clarity as things happen, not weeks after month-end. With Pegasus:
✅ Live margin reporting - by job, client, team or department
✅ Accurate revenue recognition - even with complex billing arrangements
✅ No overstatements, no surprises
✅ Clean P&L, healthy balance sheet
✅ No need for extra spreadsheets or bolt-ons
Whether it’s a fast-turnaround creative job or a six-month media campaign, Pegasus gives you financials that reflect real progress, not just payment status.
Built for services, not stock
Agencies don’t sell widgets. They sell ideas, hours, advice, media plans, production deliverables, and yes, sometimes they manage hefty third-party costs too.
Pegasus understands that. That’s why we:
Support partial and upfront billing
Recognise revenue based on work done, not just invoices sent
Keep timing differences where they belong: on the balance sheet, not cluttering your P&L
Provide finance teams with the tools to see what’s earned, what’s owed, and what’s still in progress
Time to ditch the COGS model?
If your finance system is making you chase down spreadsheets, explain weird margin swings, or manually reconcile costs and billing, it might be time to upgrade.
Pegasus is the agency ERP that gives finance teams exactly what they need: clarity, control, and confidence in the numbers.
Want to see how it works?
Get in touch with us to see how Pegasus can clean up your finance reporting and finally give you the visibility you’ve been chasing.