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Your invoicing has to produce one invoice out of four different billing models: a retainer billed in advance, pre-paid overages, hourly work from approved time in arrears, and media passed through at cost or with markup. Most generic invoicing tools manage a flat fee and an hourly line, then get the other two wrong in ways that cost you money.
What are the four billing models?
Almost every invoice you send is some mix of these four. The awkward part is that each one is calculated from a different source at a different time, and a tool that only understands "amount times quantity" cannot tell them apart.
| Model | When it is invoiced | What it is computed from | Common failure |
|---|---|---|---|
| Retainer | In advance, before the period | The engagement's monthly value and cap | Billed in arrears, or the cap is not on the invoice |
| Pre-paid overage | Before the extra work happens | Approved hours above the cap at the billing rate | Work done first, invoice disputed later |
| Hourly | In arrears, after period close | Approved time entries at each rate | Unapproved or still-open hours billed |
| Media pass-through | With the retainer or monthly | Actual spend, at cost or with markup | Counted as agency revenue |
The retainer is your base. The overage rule lives in the agreement: if the client needs more than the cap this month, they approve and pay before the work starts, and the cap rises for that period only. Hourly lines come from approved time, never from raw running timers. And media is money passing through you on its way somewhere else, so it belongs on its own line.
What does a generic invoicing tool get wrong?
Four things, each of which costs you money differently. First, no cap. A generic tool has no idea the retainer was for 100 hours, so it cannot show the client what they used or tell your account manager the team hit 90% on day 15. The retainer invoicing guide goes into the cap in detail.
Second, no usage statement. Retainer clients want to see where the money went by department, and an invoice with one line reading "monthly retainer" leaves your account manager rebuilding that statement in a spreadsheet every single month.
Third, no approval gate. Pull hours straight from a timer and you will bill entries nobody reviewed, plus a few that are going to change next week. Hourly lines should only ever come from approved, locked time. Fourth, media counted as revenue. A $23,000 invoice with $8,000 of media in it is $15,000 of revenue. A tool that reports the full $23,000 makes you look 53% bigger than you are and hides what your margin is really doing.
What does a real agency invoice look like?
Take a $15,000 retainer at a $150 blended rate, which buys a 100-hour cap. In month one the client asks for 15 extra hours of content, approved as an overage before anyone starts. You also run $8,000 of paid social through your own ad accounts at cost. Next period's invoice looks like this:
| Line | Description | Quantity | Rate | Amount | Revenue |
|---|---|---|---|---|---|
| 1 | Monthly retainer, September, 100-hour cap | 1 | $15,000 | $15,000 | Yes |
| 2 | Pre-paid overage, content, approved 28 Aug | 15 h | $150 | $2,250 | Yes |
| 3 | Paid social media spend, August, at cost | 1 | $8,000 | $8,000 | No, pass-through |
| Total due | $25,250 | $17,250 revenue |
The client pays $25,250. Your revenue is $17,250. Add a 10% markup on media and a fourth line for $800 shows up, which is revenue, while the $8,000 still is not. Lines 1 and 2 go out in advance. Line 3 is billed in arrears from real spend, and your client should be able to match it against the ad platform's own billing report without calling you. See pass-through costs for how to present the markup.
What payment terms and dunning schedule work?
Your payment terms decide when the invoice is due. Your reminder schedule decides whether it actually gets paid. An agency on net 30 that sends no reminders collects later than one on net 15 that sends four.
| Item | Retainer and overage | Hourly and media |
|---|---|---|
| Terms | Net 15, or due on receipt for overages | Net 30 |
| Reminder 1 | 3 days before due | 3 days before due |
| Reminder 2 | On the due date | On the due date |
| Reminder 3 | 7 days late, from the account manager | 7 days late |
| Escalation | 14 days late: pause new work, notify approver | 14 days late: late fee if contracted |
| Hold | 30 days late: retainer paused until paid | 30 days late: collections review |
Pausing work on a late retainer is the lever most owners hate to pull, and understandably so. The good news is you rarely need it: send the reminders to the billing contact and the escalation to the approver, who are usually two different people, and most late invoices sort themselves out.
Which payment methods should an agency accept?
Card is the fastest and the most expensive, usually 2.9% plus a fixed fee. Bank transfer is the cheapest and slowest, and your international clients will often prefer it. Stablecoins come up regularly with web3 and fintech clients, and they settle in minutes with no wire fees. Verbial takes card through Stripe, bank transfer, and USDC/USDT on the same invoice.
How does revenue recognition apply?
The invoice date and the revenue date are not the same thing. A retainer invoiced on 25 August for September is September revenue, spread straight-line across the month. The pre-paid overage is recognized when the extra hours are actually delivered, usually in the same period. The media line is never revenue, and the markup on it lands when the spend does.
This matters more than it sounds. A month where you invoiced two retainers early looks like a record on a cash view and a perfectly ordinary month on a recognized one. The recognized view is the one telling you the truth about margin. Revenue recognition for retainers covers the messier cases, where the retainer and the delivery period do not line up.
Verbial puts all four models on one invoice and starts the first one at signature. Start free and run next month's billing through it.
Questions
Should a retainer be invoiced in advance or in arrears?
In advance. The retainer buys a cap of hours or value for the coming period, so the invoice should go out before that period starts. Bill a retainer in arrears and you have quietly turned it into discounted hourly work, with your cash flow riding on collections.
How should media spend appear on an agency invoice?
On its own line, labeled as pass-through, with any markup shown separately. The client pays the total, but only your fee and the markup are revenue. Booking the whole media amount as revenue inflates your top line and wrecks your margin numbers.
What payment terms do marketing agencies use?
Net 15 is common for retainers billed in advance and net 30 for hourly and project work. Due on receipt suits pre-paid overages, since the work is waiting on the payment anyway. Whatever you pick, your reminder schedule matters more than the number of days.