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

When considering the best ways to stem the growing tide of late payments owed, it pays to first understand the mindset and difficulties that agency clients are facing and overarching payment trends that occurred over the last year.

Consider that 97% of all media plans were halted in the second quarter of 2020, according to the Interactive Advertising Bureau. While most industry projections estimated a 10-15% drop in overall ad spend for last year, the impact on traditional media suppliers has been even greater.

Even before the pandemic, payment delays were a major problem, causing friction across the media supply chain. Back in January 2020, before the pandemic tightened its grip, a survey commissioned by FastPay and conducted by Prodege showed troubling results. Among 155 media suppliers that responded, 71% stated that they are negatively impacted by discrepancies and their ability to receive payment.

There’s a major reason why: media agencies are still using checks for nearly a third of all media payments, and 66% of suppliers experience late payments when processing checks from agencies.

According to data from the January 2020 FastPay survey, 76% of media suppliers said they were willing to improve efficiency and visibility in the invoicing process within the next 12 months. In fact, 83% were even willing to pay a fee to receive payment earlier if it was lower than the cost of credit cards.

Payment delays grew even further as the pandemic spread. The average media invoice payment terms increased from 49 days in 2019 to 59 days in 2020 according to data from Oarex published in a Digiday article last June. In addition to longer payment terms, late payments tripled from an average of three days to nine days late in 2020.

FastPay data for full-year 2020 shows a 38% average increase in delays across all media, compared with the prior year. Even as ad spending began to rebound in the third and fourth quarters, most of the gains went to digital channels to reach consumers on mobile devices and streaming services.

According to a report issued last November from the global marketing research firm WARC, several traditional media channels – including outdoor, radio and linear TV – are not expected to fully recover until 2022.

During 2020, the brands themselves were responsible for the majority of the delays, leaving the agencies and suppliers to fight for every ad dollar available. Because of sequential liability terms, most agencies can be exposed and will not pay for ads until dollars are received from their brand clients. So even though ad spending started to rebound in the second half of 2020, payment delays continued as well.

Of course, one area that bucked the trend in 2020 was political advertising; media companies garnered a record $10 billion in revenue in that ad category, according to some estimates. Because political media requires pre-payment prior to running an ad, both traditional and

digital media suppliers saw much needed revenue from election-year spending.

ACTIONS TO TAKE

So how do media companies reverse the downward spirals? The first thing they should focus on are their current payments terms with agencies and in some cases the brands themselves. An assessment of all your current policies and existing contracts will provide visibility into areas where terms should be re-evaluated. Alignment between the business development and finance teams is critical when working with the agency teams. Another option is to look at the political model and evaluate additional areas where pre or partial payment should become policy. There are also accounts receivable and accounts payable visibility solutions available to suppliers that can automate and digitize payment data. They can help media vendors get paid faster and provide meaningful reconciliation data. Expanding options such as credit card and ACH (automated clearing Alignment between the business house) payments is an additional way for suppliers to get paid faster. development and finance teams is critical Finally, suppliers can leverage their when working with the agency teams. membership with MFM and BCCA to spotlight broader industry issues related to delayed payments and work jointly to create alternative arrangements with the agencies and brands. As vaccinations become more prevalent and the economy improves, the media industry will rebound. But we should take this time to focus on how and where we can adapt and evolve together. It’s up to the industry as a whole to find common solutions that can ease the friction points across the media supply chain. Rick Weir is chief marketing officer of FastPay, which provides media payment and automation solutions for agencies and suppliers. He can be reached at rick@gofastpay.com.