CREDIT WHERE DUE
The Waiting Game
Delayed payments have escalated since COVID-19 first struck. But there are ways to counteract this unfortunate trend. BY RICK WEIR
W
hen considering the best terms, late payments tripled from an average digital media suppliers saw much needed reveways to stem the growing of three days to nine days late in 2020. nue from election-year spending. tide of late payments owed, FastPay data for full-year 2020 shows a it pays to first understand the 38% average increase in delays across all ACTIONS TO TAKE mindset and difficulties that agency clients media, compared with the prior year. Even So how do media companies reverse the are facing and overarching payment trends as ad spending began to rebound in the downward spirals? The first thing they should that occurred over the last year. third and fourth quarters, most of the gains focus on are their current payments terms Consider that 97% of all media plans went to digital channels to reach consumers with agencies and in some cases the brands themselves. An assessment of all your current were halted in the second quarter of 2020, on mobile devices and streaming services. according to the Interactive Advertising BuAccording to a report issued last Novem- policies and existing contracts will provide reau. While most industry projections esti- ber from the global marketing research firm visibility into areas where terms should be mated a 10-15% drop in overall ad spend for WARC, several traditional media channels re-evaluated. Alignment between the business development and finance teams is critical last year, the impact on traditionwhen working with the agency teams. al media suppliers has been even Another option is to look at the politgreater. ical model and evaluate additional areas Even before the pandemic, paywhere pre or partial payment should ment delays were a major problem, become policy. There are also accounts causing friction across the media receivable and accounts payable visibility supply chain. Back in January solutions available to suppliers that can au2020, before the pandemic tighttomate and digitize payment data. They ened its grip, a survey commiscan help media vendors get paid faster and sioned by FastPay and conducted provide meaningful reconciliation data. by Prodege showed troubling reExpanding options such as credit sults. Among 155 media suppliers card and ACH (automated clearing that responded, 71% stated that house) payments is an additional way they are negatively impacted by for suppliers to get paid faster. discrepancies and their ability to Alignment between the business development and finance teams is critical Finally, suppliers can leverage their receive payment. membership with MFM and BCCA There’s a major reason why: when working with the agency teams. to spotlight broader industry issues remedia agencies are still using checks for nearly a third of all media pay- – including outdoor, radio and linear TV – lated to delayed payments and work jointly ments, and 66% of suppliers experience are not expected to fully recover until 2022. to create alternative arrangements with the late payments when processing checks from During 2020, the brands themselves were agencies and brands. As vaccinations become more prevalent agencies. responsible for the majority of the delays, According to data from the January 2020 leaving the agencies and suppliers to fight and the economy improves, the media inFastPay survey, 76% of media suppliers said for every ad dollar available. Because of se- dustry will rebound. But we should take this they were willing to improve efficiency and quential liability terms, most agencies can time to focus on how visibility in the invoicing process within the be exposed and will not pay for ads until and where we can adapt next 12 months. In fact, 83% were even dollars are received from their brand clients. and evolve together. It’s willing to pay a fee to receive payment ear- So even though ad spending started to re- up to the industry as a lier if it was lower than the cost of credit bound in the second half of 2020, payment whole to find common solutions that can ease cards. delays continued as well. Payment delays grew even further as the Of course, one area that bucked the trend in the friction points across pandemic spread. The average media invoice 2020 was political advertising; media compa- the media supply chain. payment terms increased from 49 days in nies garnered a record $10 billion in revenue in Rick Weir is chief marketing officer of 2019 to 59 days in 2020 according to data that ad category, according to some estimates. FastPay, which provides media payment and from Oarex published in a Digiday article Because political media requires pre-payment automation solutions for agencies and suppliers. He can be reached at rick@gofastpay.com. last June. In addition to longer payment prior to running an ad, both traditional and
8 The Financial Manager • March/April 2021