Pass-Through Expenses
Costs collected from clients that flow directly to third parties rather than contributing to agency revenue, such as advertising spend, print production, stock photography, or subcontractor fees.
Example
A branding agency invoices $15,000 for a logo project: $10,000 for their creative work and $5,000 for a contracted illustrator. The $5,000 is a pass-through expense—it appears on the invoice but isn’t agency revenue. They track this separately to accurately calculate their AGI and delivery margin.
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