Agency Basics - Keeping Track of Spending

Out-of-pocket or OOPs, are expenses that come in two forms.

One, where goods and services are bought outside of the agency for the sole use of the client, and accordingly, must be billed to the client.

Two, where goods and services are bought outside of the agency for use solely by the agency.
Both forms of expenses, however, should be tracked and approved prior to purchasing.  For your clients, you are contractually obligated to have prior approval, and clients have the right to refuse payment if the costs exceed the pre-approved amount. For internal costs, the agency needs to keep track of what it spends.

Approval of purchases starts by issuing a purchase order request that will initiate an approval process and a generation of a purchase order. In many cases, the production/media manager for the agency can issue approval and purchase orders on behalf of the client/agency by confirming the agency has a signed agreement or estimate from the client the covers the costs on the purchase order request.

Costs for the agency should only be approved by the assigned supervisors and acquired by issuing a purchase order generated by the accounting department (or authorized production person).

This sounds like a rather simple concept, but having worked in many agencies, this is one of the most easiest traps that people fall into. Someone on the staff authorizes purchasing something, doesn't issue a po, the client never gets a chance to approve it, and then the client refuses to pay it.