How Digital Sales Affect Credit, Collections

Zenith used to market its television sets saying: “The quality goes in before the name goes on.” That was the time when there were three TV networks (with the promise of a fourth), when a TV set was required to watch video programming, when you planned an evening around TV programming viewing, and when there were several days between placing the ad buy and actually airing the spots.

It was a time when credit and collection teams had time to research a potential advertiser before airing the buy … the quality went in before the ad went on.

The Zenith slogan was the first thing that came to mind when I read Edward Mockus’ article about new approaches for credit and collection in the digital age. His Whole New Ballgame is included in the current issue of MFM’s The Financial Manager (TFM) magazine.

In addition to the new demands it places on ad sales teams, selling digital media also requires rethinking the roles by credit and collections departments during the sales process. Mockus, who is director of ad sales credit and collections at Scripps Networks Interactive, shared insights from a panel he moderated at last fall’s BCCA Media Credit Seminar in New York. Much like with those Zenith TV sets, the best digital ad sales collection results come from upfront teamwork and planning.

While he compares both programmatic and digital advertising credit and collection procedures to something out of the Wild West, it appears that Scripps Networks Interactive has developed some best practices, many of which involve the credit and collections team, that are taming that beast.

Tony Pernice, a campaign specialist at Scripps Networks Interactive, explained the company’s comprehensive process for managing digital campaigns to our New York audience. Mockus summarizes the process in his TFM article and I’ve included some highlights below.   

Pre-Sale Credit Team Activities

When the sales department identifies a possible sale, the credit team’s digital campaign specialist, moves into action by:

• Establishing credit approval for the prospective client and arranging to secure the appropriate credit documentation for clients that do not have established credit terms.

• Ensuring that the client (agency and/or advertiser) is registered in the systems of record.

• Creating a system record of the potential advertising campaign (also known as an “opportunity”).

During this stage, the credit department pays close attention to detail; ensuring that the correct agency, advertiser and billing contact information are populated in the campaign management software. Accurate information about where invoices are to be directed, and to whom, is an essential step for ensuring prompt payments.

Time Of Sale Responsibilities

Once a campaign is booked, the team meets to make sure that the inventory is reserved, any sponsorships are marked closed, and all appropriate information is shared with the creative team as appropriate. The sales team also follows up with the agency or advertiser to clarify any issues identified during the meeting. The objective is to make sure everyone is on the same page from the beginning.

Once the sales team, agency and/or advertiser are all in agreement, the sales team directs its focus to ad development and traffic. When the creative has been approved and finalized, the advertising that will be served is tested in the traffic system to ensure that the coding imbedded to count impressions and delivery is working correctly.

“This is certainly an area that can impact the collections process, and in our experience it often does,” Mockus says. “If the media company or client cannot accurately discern the impressions activity, it will result in discrepancies that will need to be resolved in order for the invoice(s) to be processed. That will likely result in a delay in payment.”

During The Campaign

Scripps monitors impression levels to insure it meets its delivery obligations. It also works to uncover issues such as variances between its internal impressions calculations and those calculated by a third party. If the variance exceeds the established threshold, it is addressed in a discrepancy-resolution process between the sales and buying teams.

Because digital campaigns generally run beyond a typical monthly billing cycle, discrepancies can affect one or more of the invoices related to the campaign. Mockus warns that this can cause “a domino effect, whereby a discrepancy in one billing period could necessitate a discrepancy resolution in a subsequent billed period, further disturbing the payment process.”

Post-Campaign

The post-campaign process involves a review of the impressions data in detail to ensure that the programmer has met the obligations set forth in the agency’s insertion order. If it is determined that the campaign was delivered correctly and in full, the Scripps campaign specialist provides a recap deck to the client.

This deck can be used by the agency to assist in clearing the invoices for payment. This supporting documentation is crucial to the Scripps process, “as any delay in its receipt by the agency will inevitably result in a delay in clearing the invoices, and once again, a delay in payment.”

Programmatic Peculiarities

Although less than 5% of media buying currently occurs using programmatic ad systems, automated selling represents a meaningful – and fast growing – revenue stream. 

AMC Networks’ director of yield management, Ian Seeram, covered programmatic for our New York audience. As Mockus explains to TFM readers: “Current industry practices allow programmatic vendors — like Google, AOL and Tremor — to calculate payment based on the impressions served by their operations as the transactions take place. This information is compiled periodically, and payment is based on the platform’s own data, usually 60 to 90 days afterward.”

The result is that media providers have developed a practice with programmatic that is different from traditional billing and accounts receivable. While traditional ad revenue is reported internally when a payment has been received from the agency or advertiser, programmatic sellers establish an accrual in anticipation of payment from their programmatic vendors, and then “true up” the revenue once payment is received for the accrual period.

Mockus explains: “This somewhat simplified revenue recognition process substantially impacts credit and collections, as programmatic vendors are not managed in the same way agencies and advertisers are with regard to credit approval, billing and accounts receivable.” (I should note here that the term “revenue recognition” in this context should not be confused with discussions about the new FASB revenue recognition standard.) Additionally, Mockus expects that the practice will evolve as programmatic selling practices mature.

For example, media providers typically require agencies and advertisers to obtain credit approval for ad campaigns that run before full payment is received. They also traditionally seek credit terms that enable the media seller to ensure payment by the advertiser if the media buyer fails to pass the payment along.

BCCA, the media industry’s credit association, offers a number of online credit tools that may be used to accelerate the credit approval process.

Keeping Pace With Change

As you would expect, members of BCCA are closely monitoring how the industry is integrating digital and programmatic selling into its overall credit and collections practices. In addition to the session Mockus moderated at last fall’s BCCA Media Credit Seminar, we will be addressing accounting and credit and collections considerations for new sales products and channels during Media Finance Focus 2017, the 57^th annual conference for MFM and BCCA, which will be held in Orlando, Fla., May 22-24.

In the meantime, you can learn a bit more about these issues by reading Mockus’s article (and several related stories) appearing in the March-April edition of TFM. A digital copy of the publication will be available to non-members for a limited time on MFM’s website.

Just as Zenith discovered years ago, quality comes from focusing on the finished product at the beginning of the process. With that in mind, I encourage you to foster close working relationships between your sales and credit teams, not only for digital and programmatic, for all sales activities.

These experts bring a lot to the table and can help ensure that all a stations’ media sales programs provide a high degree of advertiser satisfaction as well as revenue results that are both timely and optimal.

Mary M. Collins is president and CEO of the Media Financial Management Association and itsBCCA subsidiary, the media industry’s credit association. She can be reached at[email protected] and via the association’s LinkedIn, Twitter, or Facebook