Pass-through costs
Third-party expenses an agency incurs on a client's behalf - media spend, software, print, stock - then bills back, often with a markup.
For example, an agency buys $5,000 of ad media and $400 of stock photography for a campaign and passes both to the client. Whether it adds a management markup or bills them at cost is a pricing decision with real margin impact.
Why it matters to your firm: pass-through costs can quietly become a large share of an invoice, so how you handle them - at cost, or marked up to cover management and risk - matters to margin. Being clear about them in the contract avoids disputes and protects you from financing the client's spend.
Common mistakes
- Absorbing them instead of billing them on.
- Adding no markup for the overhead of managing them.
- Keeping no receipts or paper trail, so they get disputed.