Credit Where Due

Slow-Payer Remedies

A three-step process helps to dissolve troublesome knots when agencies fail to pay their bills in a timely manner. BY C. ROBIN SZABO

Frequently I hear frustrating comments from media companies about the difficulties they face in collecting timely payments from advertising agencies. It’s no wonder when you look closely at the landscape that exists. Their ecosystem might include a lack of organizational support. There may be few or no signed contracts and liability positions that differ from what the media companies prefer. Payment terms by advertisers to agencies may be undisclosed, and agencies may refuse to pay media companies until they are paid by clients.

On top of that, there may be last-minute schedule changes; slow discrepancy resolution; difficulties in finding out what advertisers have paid agencies and when they did so; outdated misconceptions about when agencies are paid and when to begin collection; and policies or procedures that are not followed or ignored.

Head spinning for sure. And it can be hopeless unless you have a plan and execute it well. A three-step approach can help untangle the “knots.”

EXAMINE YOUR PROCESS

Review your written credit and collection policy, your payment terms, your liability position and your procedures. Make sure they are aligned with how you currently conduct business. The policy goals should be realistic and have some measure of flexibility to allow for changes in business models and economic events.

Pay special attention to the areas of accountability, authority and responsibilities so everyone involved knows their role and what is expected of them. Enlist all the stakeholders in this process – senior management, finance and sales. It is critical and well worth the time to have these stakeholders involved in the review and any revisions that are necessary. Their support will be vital once everyone is in agreement.

When there is a lack of agreement between media companies and advertising agencies concerning payment liability, have the necessary “teeth” in your policies and procedures so you are able to take the appropriate action. For example, you may refuse to grant credit to an agency if it (or its client) is not creditworthy. You might need clear unconditional payment guarantees or cash-in-advance. Additionally, include the ability to place a blanket or advertiser-specific credit hold on an agency until pastdue payments are brought current or to an acceptable level. And when necessary, have a collection process that escalates to contacting an agency’s client when the agency delays payment without a bonafide reason.

EDUCATE FOR COMPLIANCE

Communicate your policy and procedures to everyone involved in the order-to-cash process. Be thorough and informative, presenting scenarios for a better understanding. In-person communication works best. When that is not feasible, a video meeting is your next best option.

Encourage discussion and explain the whys of the policies and procedures so there is a clear understanding. Follow-up discussions may need to occur, especially if you have changed the policy or procedures significantly. Distribute hard copies of this information and post it on your intranet for easy reference. Make this information clear when new employees are on-boarded. If problems occur with personnel not following the policies and procedures, re-educate them. And if necessary, involve their manager.

EXECUTE YOUR PLAN

Identify which agencies (and which of their advertisers) are your biggest problems. Gather the facts, including length of relationship, volume of business and past cooperation level. Set specific objectives with each of the agencies and re-cap previous efforts to improve the relationship and reduce payment time.

Present the findings to the appropriate senior financial and sales management within your company with recommendations on the next communication steps to take with the agency. In the staff meeting, discuss who should lead the communication. Once that’s agreed upon, have them contact their counterpart at the agency to have a discussion. The tone of the conversation with the agency should not be adversarial, but with the goal of fostering a better working relationship benefiting all parties. Ultimately this should result in a written agreement stating how your company and the agency will do business together.

Areas of discussion may include informational needs from a credit standpoint; faster discrepancy resolution; advertiser payment disclosure; quicker payments; and other pain points. The exchange should allow the agency to explain their needs and problems, too. This will hopefully result in a mutually beneficial relationship without frustrations.

C. Robin Szabo is president of Szabo Associates Inc., media collection professionals, in Atlanta, GA. He can be contacted at robin@szabo.com or (404) 266-2464.