With advertising harder to sell these days, it’s more important than ever to make sure you get paid for each and every spot. Here are some tips for making sure that you do, starting with sound credit and collections policies. If you do all you can and still don’t get a check, it may be time for collection agencies and lawyers.
As mentioned in my last column, I was in Grand Rapids, Mich., to do a presentation for the Great Lakes Broadcasting Conference & Expo organized by the Michigan Association of Broadcasters and credit and collections was a big part of it. Few regions in the country face the challenges that our colleagues in Michigan do. This means that it’s even more important that they are paid for every ad they sell.
And since none of us can really afford to let collections slide, I thought I’d pass along some of the tips I shared. Many of them were gathered from the credit and collections experts who also serve in leadership posts at MFM and our BCCA subsidiary.
These experts include MFM Board members Robin Szabo, president of Szabo Associates; Michael Denson, vice president, network credit & collections, at Katz Media Group; former board member Bob Rollins, who just provided another insightful article for our member magazine, The Financial Manager; and Turner Broadcasting System’s director, corporate credit services, John Sloan, who was featured in our February Distance Learning Seminar on this subject.
Review and Update Your Credit Policies Regularly
One of the first steps that our experts recommend is to review and update credit policies regularly. Companies that maintain liberal credit policies need to balance them by following conservative rules for collections. Keeping “both doors open” by having both liberal credit and collections policies is asking for trouble.
Check Credit Worthiness
Using discretion and checking credit worthiness before extending credit to new customers is more important than ever. Look at their credit history to confirm that they haven’t created collections problems for other companies that sold advertising to them. MFM’s BCCA subsidiary has a database of over 30,000 credit reports, including industry-specific data that continues to grow as we research new advertisers and agencies for our members.
Believe it or not, asking for cash in advance or refusing the business can save in the long run. Any business may seem like good business when sales are slow, but if a client goes under owing you a lot of money, that can drag you down too. And don’t be afraid to use pricing to protect yourself from those who exploit you; one strategy is to raise prices for slow payers.
When you have new customers that meet your credit requirements, welcome them with personalized letters. In addition to thanking them for their business, give them the names and contact information for their account representatives and others in the organization who will be assisting them in developing, placing and tracking their ads. This not only lets them know that you appreciate their business, it can also helps you set expectations for the relationship. It’s much easier to train a new client than to retrain one with bad payment habits.
Foster Teamwork Between Your Sales and Business Departments
Teamwork between sales and the business office is imperative. There are a number of ways to encourage a partnership between sales and collections departments, beginning with opportunities like job shadowing. Business office personnel should accompany account reps on a meeting with a sales prospect and sales reps should listen in on collections calls. There are few ways more effective than having someone walk a mile in your shoes to get that person to see things from your perspective.
The business office should also make sure that the sales department understands the importance of accurate and complete information for approving a new customer’s credit. However, this should never include sharing credit information with sales employees. This data is confidential, and the loss of control could have unpleasant consequences. The business office should also ensure that sales reps understand the importance of early intervention to an effective collections program and DSO — day sales outstanding. After all, sales and collections are on the same team when it comes to supporting a profitable enterprise.
Condition Payment Behavior
Collections experts also encourage beginning to work past due accounts at 45 days or when they are 15 days past due. A representative from the business office should contact the clients’ accounts payable or accounting department and verify that the invoice was received, that there aren’t any problems and that it’s understandable.
The first follow-up call is also a good time to offer a signed W9 in return for receiving payment. The call should end with some type of commitment, such as the client’s agreement to send in the payment by a certain date or an agency’s promise to review the invoice with the customer and receive approval to pay by a specified date.
As part of the teamwork between sales and the business office, the account rep for the past-due client makes a customer service call to the person at the client company or agency who placed the order at about the same time. The stated purpose for the call includes making sure that invoice was received and confirming that that customer or media buyer doesn’t have any questions about the bill.
The account rep should also ask if the customer was happy with the ads. If the customer is already on record as being happy with the service, it will be much harder for him or her to dispute a problem later.
The account rep should also “innocently” ask when the customer expects that the check will be mailed. This helps to set payment expectations. As I mentioned above, it’s much easier to train new customers on keeping their accounts current than to retrain old ones who were allowed to go past due before they were cajoled.
You probably can’t contact every past due customer on the 45th day. So, it’s important to prioritize calls based upon the amount of the invoice and the newness of the client. Avoid the trap of scheduling calls alphabetically because that’s the way the list prints. However, it’s important to schedule call for all past due accounts. The earlier you begin your collections activities the sooner you can detect where problems like billing discrepancies are going to occur.
Communication is essential for effective teamwork. Sales and business office personnel need to keep one another in the loop on any communication with the account.
The Customer is King
It’s also important that our collections activities don’t irritate good customers. Reminder notices, which should precede any follow-up calls, should not go out before invoices are due. An axiom in the collections world is “keep them current and you will keep them buying.”
The opposite of that axiom is also true. Customers who continually pay late eventually will stop buying altogether. They may choose to go to your competition (another reason for credit research to include industry data). When employees have invested a lot of their time and effort into the relationship, it’s hard not to take it personally when customers skip out on paying.
However, this is not about you. You have delivered a valuable service and can expect to be paid for it. There is going to be a point after which your time will be put to better use by focusing on more current accounts. When it’s time, turn the account over to a collections firm; they make their money when they collect on the debt.
Finally, don’t rule out legal recourse if you are no longer interested in doing business with a particular client. Legal counsel is also especially valuable in the case of clients that have filed for bankruptcy protection.
These are just a few of the tips from our experts that can be particularly helpful at a time when businesses see postponing paying for services rendered as a means of cash conservation.
Our BCCA subsidiary is developing a full track of sessions focusing on credit and collections for the 2009 annual conference for members of MFM, its BCCA subsidiary and in conjunction with Interactive & Newsmedia Financial Executives (INFE).
Session topics include “The Legal Implications of Bankruptcies, Liability Changes and Challenges,” “A Business Manager’s Guide to Credit & Collection in the Current Economy,” and “How to Turn Panic into Productivity and Centralization & Localization of the Credit Process.” You can see the full agenda here.
Last summer, when we selected “Responding to Change” as the theme for this year’s conference, few of us knew just how much change we were in for. But I am also comforted by the reminder that this will be our 49th consecutive annual conference. As near-daily references to the current economic downturn point out, our industry and our economy have weathered a number of challenges since 1960.
The media industry certainly looks a lot different than it did back then. But the companies that are still a part of it today succeeded as a result of their unending commitment to seek out innovative strategies for seizing new opportunities in a dynamic marketplace. Rather than focusing on just surviving another quarter, they identified and embraced the solutions that allowed them to adapt and thrive in an ever-changing ecosystem.
It’s always important, even in the best of times, to question the value of each expense. That’s why we continually focus on providing a great ROI on our conference and all of the educational programs we offer.
When it comes to learning how to respond to the challenges we face today, it’s not a matter of affording the cost of a conference. It’s more about choosing the forums that provide the knowledge you can’t afford to miss.
I promise you that when you join us in Atlanta next month, you will come away with at least one piece of information that is worth more than the price of your registration. And, if that’s not the case, I want you to call me on it.
Mary Collins is the president and CEO of the Media Financial Management Association, a professional society addressing the diverse needs of the industry’s financial and business professionals. Her column appears here every other Friday.