3-25-2013
It?s a subject that?s been discussed almost ad nauseum recently, especially in the context of the election and the entire political dialogue we?ve heard since. Debt. Too much debt. Who?s going to pay the debt? Serious stuff, actually.
How about another kind of debt? The kind when somebody, specifically an advertiser, owes you money. This may be a mundane and boring subject to talk about when you?re focused on exciting things like new formats, new business, and digital convergence. But this version of debt is very serious stuff because, at the end of the day, you need to get paid for your goods and services so you can pay your debt.
So what do you do before, during, and after a transaction to make sure you minimize bad debt and maximize your cash intake? Here are a few things I?ve found helpful.
Media?s Curse
Somewhere along the way, a certain portion of businesses, agencies, and the like put ?paying my advertising bills? at the back of the priority line. Maybe it?s the intangible nature of what we sell. If you can?t touch it, it?s harder to put a value on it. Maybe it?s the competitive nature of our business. Sometimes we?ll do anything to ?get the money.? Maybe it?s just better cash management on their part. Most radio companies do that too these days. But, for whatever reason, getting paid in 15 days has turned into 90 days, or 120 days, or worse. The bottom line: They all pay their electric bill before they pay us. I make this point to frame what needs to be the mindset about this whole subject. Simply put, our getting paid is not as important to them as it is to us. Start with that in mind, and you?ll build better processes to deal with this very impactful issue.
It all begins in your business office. Credit checks, business analysis, and so on. Sounds simple, but it?s amazing how inadequate many companies are in this area. Even if they have effective ways to assess an advertiser?s ability to pay, they deviate from the smart business decision. I?m all for judgment calls, and we?ll deal with that later. But more often than not, if someone has a bad credit history or lacks the assets to pay for what they?ve agreed to, you are going to have problems collecting. I?ve always gotten a kick out of prospective advertisers acting ?insulted? when they?re asked to go through a credit check. If that?s not a sign of what?s to come with respect to payment, I don?t know what is.
A lot of slow payout from agencies is due to discrepancies. If you have a philosophy of always running schedules as ordered and the infrastructure to make sure that happens, you?ll get faster pay over the long term as fewer invoices
get thrown into the ?problem? file. I?ve seen more than one research study that shows that advertisers put a higher premium on running schedules correctly than even price. Follow that rule, and everybody will be happier.
When Your Core Clients Run Into Problems
If you have the kind of relationships with your key clients that you should, you should be able to have candid, constructive conversations about issues regarding paying their bills. Again, this is about doing the right things up front so you have an easier time navigating any tough waters later. There are a multitude of options to get through this if you think creatively, and exploring those options with the client is the better way to go and helps you make smart judgment calls that can be very critical for your long-term business relationships.
When you have to make the decision to pull someone off the air, especially when it?s a long-time customer, it?s the GM?s job to pull the trigger. The sales manager and the business manager have different agendas, and that?s what you pay them for. The buck stops with the GM on this one. This is another reason for the GM to have relationships with key advertisers, and another reason to do due diligence on the client?s credit capabilities ? so you can make a decision based on data and not just emotion.
In some way, shape, or form, sellers, sales managers, general managers, and business managers should face financial penalties or have the ability to reap financialrewards based on the status of their receivables. I?ve seen a thousand systems to handle this, but whatever you do, make sure everyone who ?owns? a part of the sales process
is financially accountable.
Sales Based On Solutions Pay Better
If you have an advertiser who bought you because of solutions that generate ROI, as opposed to someone who bought you based on ?commodity-based? criteria like how many no-charges they get, the solutions customer will pay you first and will most likely never be a problem. Make yourself indispensable to their business and they can?t afford to lose you.
Marc Morgan is the former SVP and chief revenue officer for Cox Media Group; he retired in 2011. He can be reached at marc@marcmorganconsulting.com.
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