Audit readiness checklist for PPC agencies with large ad budgets

Key takeaways

• Start preparing months in advance. An audit or due diligence process for a PPC agency is not a last-minute task. Gathering and organising years of financial documentation takes time, especially when reconciling large ad spends.
• Your ad spend reconciliation is your biggest risk area. Auditors and buyers will scrutinise how you track, report, and reconcile client ad budgets. A clear, documented process is non-negotiable for agencies with large budgets.
• Readiness reporting proves your control. Creating internal reports that show your profit margins, utilisation rates, and client profitability before an audit demonstrates strong financial management and builds immediate trust.
• Professional help saves time and stress. Specialist accountants for PPC agencies understand the unique challenges of audit preparation and can guide you through the entire checklist efficiently.

What is a PPC agency audit preparation checklist?

A PPC agency audit preparation checklist is a step-by-step guide to get your agency's finances in order for a formal review. This review could be a statutory audit, a due diligence process for selling your agency, or a client-mandated check on their ad spend.

For PPC agencies, this isn't just about general bookkeeping. It's specifically about proving you have tight control over the large sums of client money you manage. The checklist covers everything from your bank statements to how you track every penny of Google Ads or Facebook Ads spend.

Having this checklist ready turns a stressful, invasive process into a smooth, professional one. It shows you run a compliant, well-managed business. This protects your agency's reputation and can significantly increase its value if you're looking to sell.

Why do PPC agencies with large budgets need a special checklist?

PPC agencies with large client ad budgets face unique scrutiny that other marketing agencies don't. You are responsible for managing and reporting on significant third-party funds. An auditor's main job is to verify that those funds were used correctly and accounted for properly.

The risk is higher. A mistake in a £50,000 client ad budget looks very different to a mistake in a £5,000 creative project fee. Your financial documentation must be impeccable to prove there was no misuse of funds, whether accidental or otherwise.

Furthermore, your profitability model is different. Your gross margin (the money left after paying for your team and the ad platforms) depends on accurate tracking of costs against client retainers. A messy chart of accounts makes it impossible to prove your true profitability, which is a red flag in any due diligence process.

How far in advance should a PPC agency start audit preparation?

Start preparing at least three to six months before you expect any review. If you think you might sell your agency in the next year, start now.

Good financial hygiene is a daily habit, not a quarterly panic. However, formal preparation involves pulling together consistent records from the last two to three years. For PPC agencies, this means reconciling ad spend across hundreds of campaigns and clients, which is time-consuming.

Starting early gives you time to fix problems. You might discover missing invoices, unreconciled platform fees, or unclear client agreements. Finding these issues with weeks to spare is manageable. Finding them the night before an audit is a crisis.

What financial documentation is absolutely essential?

Essential financial documentation includes three years of profit and loss statements, balance sheets, tax returns, and detailed bank reconciliations. For PPC agencies, you must also have complete records of all client ad spend.

This means invoices from Google, Meta, and other ad platforms, matched to client payments and your own bank records. You need a clear audit trail showing that a client paid you £10,000, you paid £9,500 to Google Ads, and the remaining £500 was your management fee.

Also crucial are your client contracts and statements of work. These documents prove what you agreed to charge and what services you promised. They are key evidence if an auditor questions your revenue recognition or looks for scope creep.

Organise this documentation digitally in a secure, logical folder structure. Label files clearly (e.g., "2024-Q1-Bank-Reconciliation", "Client-X-Google-Invoices-July-2024"). This simple step massively speeds up the due diligence process.

How should PPC agencies prepare their ad spend reconciliation?

Ad spend reconciliation is the core of your PPC agency audit preparation checklist. You must be able to prove, for every client, that the money they gave you for ads was spent exactly as intended.

Start by ensuring every single platform payment is recorded in your accounting software. Each invoice from Google Ads or Microsoft Advertising should be entered as a bill, coded to the specific client job. Use a consistent system, like adding the client name to the bill memo field.

Then, match these platform costs directly to the client income. The best practice is to use a dedicated liability account in your chart of accounts, often called "Client Ad Funds" or "Funds Held on Behalf of Clients". When a client pays you, the money goes into this liability account. When you pay the platform, the money comes out of it.

This method clearly separates client money from your agency's revenue (your management fee). It provides a crystal-clear audit trail that any accountant or buyer can follow instantly. A study by the Association of Chartered Certified Accountants highlights the importance of such clear fund segregation for businesses handling client money.

What does strong readiness reporting look like?

Strong readiness reporting means creating internal management reports that tell the story of your agency's financial health before anyone asks for it. This goes beyond basic profit and loss statements.

For a PPC agency, key reports include client profitability analysis. This report shows the gross margin for each client after accounting for all platform spend, team time, and software costs. It proves you know which clients are truly profitable.

Another vital report is team utilisation. This shows what percentage of your team's paid time is billed to clients. A healthy, sustainable agency typically aims for 70-80% utilisation. This report demonstrates you have control over your largest cost—your people.

Finally, create a cash flow forecast. This shows you understand the timing of money in and out, which is critical when you're holding client ad funds. This type of proactive readiness reporting shows incredible financial discipline and turns a potential weakness into a strength.

What are the most common mistakes in the due diligence process?

The most common mistake is poor reconciliation of client ad spend. This often appears as platform costs sitting in a generic "advertising costs" account, with no link to which client they belong to. It creates a black hole that destroys trust instantly.

Another major error is inconsistent revenue recognition. Do you record your management fee when you invoice the client, or when the ad spend actually happens? Without a clear, documented policy applied consistently, your reported profits will be questioned.

PPC agencies also often fail to document their internal processes. How do you onboard a client's ad account? How do you approve and release ad spend? How do you report to clients? An auditor wants to see written procedures that prove you have systems to prevent errors and fraud.

These mistakes make the due diligence process longer, more expensive, and more stressful. They can also lead to a lower valuation or even cause a deal to fall apart. Getting your PPC agency finances organised with specialist help avoids these pitfalls.

How can a PPC agency streamline client contract review?

Streamline contract review by creating a centralised digital repository of all active and historical client agreements. For each contract, highlight key financial clauses.

Pay special attention to payment terms, ad budget authorisation limits, and your fee structure. Is your fee a percentage of spend, a fixed monthly retainer, or a hybrid? The auditor will check your invoices match these terms exactly.

Also note any clauses about audit rights. Many large client contracts give the client the right to audit your work and spending on their account. Your preparation for a financial audit should also ensure you're ready for a client audit.

Having this information indexed and easily accessible shows you are professionally managed. It turns a tedious document hunt into a simple, five-minute task during the due diligence process.

What internal controls should be documented?

Document the internal controls that govern how client money moves through your agency. This is critical for your PPC agency audit preparation checklist.

First, document your ad spend approval process. Who can authorise a new campaign? What spending limit do they have? Who reviews and approves the actual payment to the platform? A clear, multi-person approval process is a strong control.

Second, document your client reporting process. Show the templates you use, how often reports are sent, and who prepares and reviews them. This demonstrates transparency and consistency.

Third, document how you handle client funds. This includes your bank account structure (using separate client money accounts if necessary), how you track funds in your accounting software, and how you reconcile these accounts monthly. Written procedures here are a sign of a mature, low-risk agency.

When should a PPC agency seek professional accounting help?

Seek professional accounting help at the moment you start thinking about an audit, due diligence, or selling your agency. Trying to navigate a PPC agency audit preparation checklist alone is high-risk.

Specialist accountants understand the unique pressures of your business model. They know the questions auditors will ask about ad spend reconciliation and client money handling. They can review your financial documentation and readiness reporting months in advance, giving you time to fix issues.

In our experience working with performance marketing agencies, the most successful audit processes are those where the accountant is involved from the very start of planning. They act as a guide, translating complex requirements into simple actions.

This support is an investment that pays for itself. It reduces the time you spend on preparation, minimises disruption to your team, and ultimately protects the value you've built. To understand where your agency currently stands financially and identify any gaps before an audit, try our free Agency Profit Score — a quick 5-minute assessment that gives you a personalised report on your financial health across five key areas.

What final steps complete the audit preparation checklist?

The final steps involve a pre-audit review and team briefing. First, do a mock audit with your accountant or a senior team member. Use your completed checklist to test if you can quickly produce every document requested.

Second, prepare a summary pack for the auditors. This includes a brief overview of your agency, your business model, your chart of accounts explanation, and summaries of your key financial controls. This pack speeds up their understanding and builds rapport.

Third, brief your team. Let them know an audit is happening, what it involves, and that they may be asked questions. Assure them it's a standard process. A calm, informed team is less likely to be stressed or give inconsistent answers.

Completing this full PPC agency audit preparation checklist transforms audit fear into confidence. It positions your agency as a professionally run, financially sound business that is a safe pair of hands for large client budgets. This reputation is priceless.