Electronic data interchange systems have streamlined advertising transactions, saving buyers and sellers money. But they are not hassle free. E-files can become lost or corrupt. In addition, legal and accounting personnel need to work with their IT department on such matters as determining which files to store, how long they need to be kept, who has access to them (password protection), how often the database is reviewed and what files can be deleted.
Electronic data interchange systems (EDIs) can improve advertiser relationships, accelerate credit application approvals and bolster the effectiveness of collections programs. While EDIs have been at work in various aspects of business operations for 20 or more years, harnessing their potential to benefit credit and collections has presented a number of unique challenges.
In the September-October issue of MFM’s The Financial Manager (TFM) magazine, Editor Janet Stilson asked Anthony Besaw, an accounting manager at ESPN, to give us an update on the status of EDIs being used by the industry’s credit and collections professionals.
Besaw’s understanding of how credit and collections departments have changed as a result of such EDI developments as electronic invoicing, data storage and signatures dates back to the beginning of his industry career, as credit manager for WTNH Hartford-New Haven, Conn., in the 1990s.
Besaw entered the industry at a time when “people envisioned the day when agencies were no longer going to have to spend hours manually inputting thousands and thousands of spots.”
In addition, “electronic invoicing would drastically reduce input errors and improve how quickly agencies would be able to pay media companies,” notes Stilson, who has followed digital media’s emergence as a journalist and editor for media and advertising trade publications, including TVNewsCheck.
Today, the benefits of those digital media systems “are certainly standard operating procedure for credit and collections personnel,” Stilson reports. But Besaw finds that while EDI has created greater efficiencies, it has also brought its own set of new challenges.
“Certain legal issues have surfaced, and some media professionals haven’t altered their credit and collection business practices, leaving their companies vulnerable to potential problems,” he says.
The pros and cons of e-filing
Seizing on the benefits of EDI processes, many media companies’ credit and collections departments are now largely paperless, with records stored in databases that may be accessed online. This shift has been fundamental to the shared services model that allows station groups to centralize media credit management and standardize processes.
“Overall,” Besaw says, “e-filing is a good change for the industry. It is more cost efficient and easier to store data online. There also is an ability to easily share files and have a level of security with password protection.”
However, companies need to minimize the risk that their e-files become corrupt or lost. “It is important to put procedures in place to guard against those situations, such as backing up data that is segregated from archived data.” In addition, legal and accounting personnel need to work with their IT department on such matters as determining which files to store, how long they need to be kept, who has access to them (password protection), how often the database is reviewed and what files can be deleted.
Advances in EDI: EMCAPP
Besaw also describes the opportunities he sees with one of the industry’s newest EDI initiatives: the Electronic Media Credit Application [EMCAPP]. Developed by BCCA in collaboration with advertisers, agencies and industry associations, EMCAPP allows agencies and advertisers to each fill out one standard credit application for all media. Today, advertisers looking to do a major ad buy across multiple TV stations and other local media can be required to complete credit applications for each business.
This pool of online applications also benefits media companies, providing them access to credit applications from agencies and advertisers who have been historically reluctant to complete the paperwork. As an ad agency executive once remarked during a BCCA educational panel, advertisers and agencies simply don’t have the resources to complete unique credit applications for multiple media outlets. For a national advertiser that could mean hundreds of different documents.
One of the major accomplishments of EMCAPP is that it also finds a middle ground between the ad community, which has advocated for sequential liability, and BCCA members, who endorse joint and several liability as a way of ensuring payment from advertiser in the event the agency fails to pay. EMCAPP’s terms include a form of sequential liability, which asserts that the agency is liable for payment of media invoices once it has been paid by the advertiser.
But EMCAPP’s terms and conditions add a new layer of protection by granting the media provider the right to perform an audit of the agencies’ records to determine when or if they were paid for the media provider’s portion of the buy. Coupling this with the requirement that advertisers also furnish an agency of record letter, we describe EMCAPP’s liability position as “sequential liability with teeth,”
EMCAPP also provides transparency at a time when the procurement departments at major advertisers are looking for greater accountability from their agencies. This should go a long way toward repairing the trust between media providers, advertisers and their agencies.One former ad agency official recently told me that agencies are aware that they are being accused of holding funds that rightfully belong to media providers and believe the accusations to be unjust.
Besaw comments that EMCAPP’s statement that “payment is due 30 days from invoice date” may be different than what is published by some media providers established by some media providers now. But, as he says, net 30 “is deemed to be the industry standard.” He also points out that EMCAPP has been reviewed by several legal experts, who have found it complies with Sarbanes Oxley and antitrust laws.
EDIs and Credit Searches
An added benefit of EMCAPP for media providers is its affiliation with BCCA, which provides industry-specific credit research. As Besaw notes, by the time a media provider pulls an EMCAPP, BCCA’s credit investigators will have already done the credit research meaning that the credit references and bank information media providers need to make informed credit decisions will be available on a BCCA credit report.
EMCAPP will be in beta testing at the end of this month. We expect to roll it out at no charge to all BCCA members who accept the terms and conditions of the database in November. Ultimately it will be the media providers who pay the costs to maintain the EMCAPP database; those charges will not kick in until November 2013 at the earliest.
Legal Issues Surrounding EDI’s
One question that continues to be asked is about the legal issues surrounding electronic documents and electronic signatures. Besaw provides his understanding of these near the end of the Stilson interview.
The full interview can be found in the September-October issue of TFM that will be available on the MFM website through the end of this month.
Besaw’s comments echo and complement tips from Robin Szabo, president of media collection firm Szabo Associates Inc., which I shared in a Front Office column earlier this year.
BCCA Media Credit Seminar
EDI processes such as EMCAPP and IAB’s work on digital advertising invoices will also be addressed at the upcoming BCCA Media Credit Seminar, which will be held Tues., Nov. 6 at the McGraw-Hill Building in New York. Co-chaired by Besaw and Michael Denson, VP of network credit and collections for Katz Media, the seminar will focus on high-level credit related issues for the media industry including print, television, radio, cable, interactive and digital. More information may be found on BCCA’s website.
Harnessing Digital’s Potential to Improve Customer Relations
While disruptive, technology has helped to transform many aspects of the media industry, to the benefit of our customers. That was true when television was first broadcast, when black and white TV gave way to color, when consumers added VCRs and then DVRs, when the Internet became commonly available, and when EDIs were first adopted.
We are looking forward to having EMCAPP join that list of game-changing technologies that help media continue to evolve and prosper. I am imagining a world in which media credit managers can spend their time making decisions that help grow the company’s profitability rather than tracking down missing paperwork or digging for contact information.
If you would like to learn more about EMCAPP and its potential for improving advertiser relationships, accelerating credit application approvals, and bolstering the effectiveness of your company’s collection programs, I encourage you to take a look at the EMCAPP
You may also contact me. It will be my pleasure to talk to you about this next great step in electronic data interchange and/or your experiences with electronic filing, electronic order exchanges and digital systems in general. I look forward to hearing your comments and suggestions.
Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.