Mary Collins | The Brave New World (Of Credit And Collections)

In his Foundation Trilogy, author Isaac Asimov wrote: “It has been my philosophy of life that difficulties vanish when faced boldly.” This quotation may well apply to the best approach for media credit and collection teams working in today’s pandemic-influenced environmentCOVID-19 has rocked us into the reality that we’re living in a different world indeed, and collections departments, in particular, are dealing with a global crisis that has resulted in their skills being put to the test as never before.

The Media Financial Management Association (MFM) and its BCCA subsidiary, the media industry’s credit association, is indeed fortunate to have a credit and collections expert like C. Robin Szabo, president of Szabo Associates, as a longtime contributor to MFM’s member magazine, The Financial Manager. His thorough and clearly explained article, “A Period of Adjustment,” is a cornerstone of our Credit and Collections Special Report within the March/April edition. In the piece, he details a number of credit/collections situations and solutions befitting current business scenarios.

During the past year, myriad articles have appeared in publications targeted toward media professionals describing the domino effect the pandemic has had on the traditional media landscape of television, radio and print. Production delays in scripted television, for example, led to delays in the ad campaigns that surrounded networks’ fall TV lineups. An eMarketer study of August 2020 predicted significant declines in ad spending across traditional media in the U.S. in 2020, including TV (-15%), print (-24.7%) and radio (-23%).

And while stories in media-focused publications have pointed to a rebound in investment and spending in traditional markets, led by television beginning in the third quarter of 2020, the trough that was dug earlier in the year has left many businesses — particularly smaller ones — severely or even irreparably damaged. When those now-hamstrung or even dissolving organizations owe money, credit and collections managers are faced with the very challenging task of how to go about recouping it on behalf of their companies.

Szabo’s straightforward premise is that the credit and collection process is simply different than it was before the pandemic, and that collection teams must employ more research, additional planning and out-of-the-box approaches, complemented by understanding — and the human touch.

He begins with the collection team itself, advising that remote work situations may have unexpected effects on team cohesiveness. Ensuring that the team indeed feels like a team may involve more frequent meetings and check-ins, using video and messaging platforms to take the place of formal meetings and hallway conversations. By making sure the team stays in regular contact, its members will feel more like they did when they were heading to the same office each day.

Szabo recommends collection representatives do some digging to determine what may be at the heart of their customers’ problems, starting with their own sales teams. By building on their relationship with salespeople, most of whom are under more pressure than ever to perform in this unusual environment, collectors can likely learn what the customer is doing to rebuild its own business so it remains solvent — or if it’s making serious missteps that may point to its demise.

Collections professionals should also find out whether the companies from which they’re trying to collect have taken advantage of the range of coronavirus relief programs offered by the government, including the CARES Act, PPP (Paycheck Protection Program), tax credits and other relief packages for small businesses. Further, there are numerous relief programs provided through the U.S. Small Business Administration, including Economic Injury Disaster Loan grants. Recently passed regulations clarify that business expenses paid with these funds will be deductible.

Another thing to be aware of is the Small Business Reorganization Act, which created a new Subchapter V within Chapter 11 of the U.S. Bankruptcy Code. Placed into law in February 2020, it enables small businesses to survive bankruptcy and retain control of their operations while spreading debt “over three to five years, during which time they must devote their projected income to paying creditors.”

Even with these new small business protections, Szabo says he expects many small media customers to file for bankruptcy, followed by requests for returns of preferential payments. His article includes a number of very specific tactics credit and collection teams can employ to prepare their defense against such claims.

Beyond his very detailed and clearly explained tactics, however, I especially appreciate what Szabo lays out as four “pillars” of action that will help collections teams have the greatest chances of success with customers.

• The first is focus — and here he reminds credit professionals that 80% of their business comes from 20% of their customers. He advises them to stay in close contact with their biggest customers, as well as pay attention to new customers.
• The second pillar, flexibility, is the idea that collectors must work closely with customers to develop jointly agreed-upon plans to work through this temporary situation, which may mean temporarily extending terms or offering a payment plan — with the caution that collectors must still follow through and adhere to their companies’ policies.
• Empathy, the third pillar, is simply that: by reaching out in a human way and sharing with customers that collectors too are personally struggling through the pandemic and can relate to their challenges. Whether it’s Zoom fatigue, “COVID 20” weight gain or other lighthearted topics, relating to their pandemic-associated issues will make customers feel that they share common ground, and a common goal to move forward.
• Finally, the compare pillar is one in which collections teams must put in work to analyze their customers’ credit lines to determine if they’re in step with the customers’ purchase history. If their credit line consistently exceeds their purchasing, consider decreasing it as a means of reducing risk while still allowing customers to buy what they need, while forcing them to prioritize their payments in order to maintain their now-lower line of credit.

MFM’s Credit and Collections Special Report is just one reason to read the March/April 2021 edition of TFM from cover to cover. Members have been mailed their issues, and a digital copy will be posted on the MFM website.

Credit and collections are one part of a larger ecosystem of issues facing MFM’s members — and one for which we offer an ongoing slate of information and learning opportunities.

• Our CFO Summit, held March 11 and 12, provided new insights into challenges now facing media’s senior finance leaders; preliminary feedback has been quite positive.
• Our Media Tax Summit presented the first week of March, gave MFM members a chance to discuss both new tax issues and specific considerations including what they can do to aid their CFO and how to approach the numerous tax issues that may arise when their company begins to consider work-from-anywhere policies.
• Of course, our largest event, MFM’s Media Finance Focus 2021 annual conference, which begins May 11, offers members the opportunity to share knowledge about a variety of topics of interest to media business professionals; it will feature a full track of credit and collections content. This year’s theme, “Together Toward Tomorrow,” focuses on the optimistic approach for the industry into 2021 and beyond.

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