Collins | A Cure For The Slow-Payer Blues?
The U.S. media industry seems to be emerging from the COVID-19 pandemic in something of a pendulum swing. Television viewership of all types, print and online readership, and radio listenership have all soared, and may have peaked, during the past nearly 18 months. Consumer spending has escalated, the upfronts are all reporting huge numbers and video streaming networks have reached high water marks. Better yet, there are no signs of significant diminishing in sight. It would stand to reason that media companies should have even less of a problem collecting payments from advertising agencies. Not so.
MFM conducts a quarterly DSO (Days Sales Outstanding) survey for its television members. Companies opting to participate pay a nominal annual fee and share their quarterly DSO numbers. In return, they receive a report showing anonymized and sorted by market size, average days to collect from local and national clients. Between 2015 and 2020, the amount of time it took to collect from a national advertiser increased by 10 (or more) days.
The media company ecosystem continues to be fraught with challenges; one of the largest ones is the ability to collect timely payments. Fortunately, there’s also some great advice available to media companies trying to get ahead of the collections game. One of the roles of Media Financial Management Association’s subsidiary organization, BCCA, the media industry’s credit association, is to provide order-to-cash professionals education that enables them to efficiently manage credit risk and increase profitability.
Robin Szabo is president of Szabo Associates in Atlanta, and with 50 years of experience behind his media collections firm, he has amassed a treasure trove of knowledge on the topic. In the July/August issue of our member publication The Financial Manager currently available on the MFM website — Szabo shares his “Slow-Payer Remedies.”
There are myriad reasons why collecting from ad agencies can be so complicated and problematic. There may be issues within the agencies themselves. They may not have proper organizational support, no formal protocol for signing contracts, no consistency on liability positions, or undisclosed payment terms. It may be as simple as ad agencies refusing to pay media companies until they’re paid by their own clients.
Add to the pile last-minute schedule changes; slow discrepancy resolution; difficulties in finding out when and how much advertisers have paid agencies; outdated misconceptions about when agencies are paid and when to begin collection; and media company policies or improperly followed (or ignored) media company procedures, and you have the makings for a massive payments logjam.
To cut through this clutter, Szabo recommends a three-step approach to break cycles, revamp procedures and ultimately secure more timely payments.
First, examine internal processes. That means taking a close look at whether written credit and collection policies, the media company’s payment terms, its liability positions, and its procedures line up with how the company conducts business in general. Policy goals should be as realistic and as flexible as needed to accommodate business model adjustments and unforeseen economic events (like a pandemic).
As with so many critical business updates, organizations should enlist all key stakeholders from senior management, finance and sales, particularly when it comes to examining accountability, authority, and responsibilities regarding credit and collections. Their input in any revision is critical.
Of particular importance is ensuring that payment liability policies, as they affect ad agencies, are bulletproof. Businesses may want to deny credit to an agency that is not creditworthy, or may decide to impose a credit hold until past payments are made. In certain situations, the collection process may need to extend to contacting the agency’s client or clients.
Second, educate for compliance. This step entails communicating existing or new policies and procedures to all media company employees involved in the order-to-cash process. Policy education is best done in person, but can be relayed via video platform if necessary. Offer ample opportunity for questions and answers, and distribute hard and soft versions of information to current and new employees. Be sure to enforce the rules, and to enact consequences for employees who don’t follow them.
The third step is to execute the plan. This measure involves some very specific actions, which if taken, should lead to more successful collections. First, Szabo advises, put together a list of agencies and their advertisers that are the most serious offenders. Document the history of the media company-agency relationship and set objectives around each agency, recapping earlier efforts to remedy payment issues. Present these findings to key internal stakeholders, along with recommendations around how to proceed with the agency.
Once these actions are completed, it’s time for the company to select a representative to approach the appropriate counterpart at the agency. Whether via phone, video or in person, the conversation should take a businesslike tone, avoiding conflict, and with the aim of forging a better working relationship between both parties.
The ultimate goal is to forge a written agreement on how the two organizations can work together more effectively. The conversation — and the agreement — may include specific points and solutions around discrepancy resolution, advertiser payment disclosure, more timely payments and other outstanding issues.
With compromise and understanding on both sides, all organizations should feel better and more positive about the media company-agency relationship and can ideally move forward together to everyone’s benefit.
BCCA is an invaluable resource to the individuals and companies involved in media credit and collections. We truly appreciate Robin Szabo other stellar professionals whose contributions make the organization so remarkable.
Just last week at MFM’s annual Media Finance Focus 2021 conference, BCCA presented Mary McKenna, vice president and global head of customer finance operations of NBC Universal, with its highest honor. This award is given to a BCCA member who’s made a lasting contribution to the growth and expansion of BCCA by providing ongoing support and leadership, and McKenna is richly deserving. Despite being recently promoted, she continues to make time to share the broad and deep knowledge she’s built during her more than 25 years in the NBC family. Her many contributions to the BCCA community led us to select her for our 2021 BCCA Member Contributor Award.
There’s still time to tap into the remaining sessions scheduled as part of Media Finance Focus 2021, which runs through July 29. Among them are Digital Transformation & Trends in Finance & Accounting (July 27), Data Acquiescence to Data Activism: Why Legislation & Technology Must Work Together to Provide Data Protection and Monetization (July 27), and Why Understanding a Cyber Attack Is Important to You (July 29).
And don’t miss the closing lunch/brunch on July 29, in which MFM will present its annual Rainmaker Awards, honoring Neuhy Hubush of Gannett Co., Christine Pecher of Marketron and Darren Wilson of Deloitte. Special entertainment will be provided by BMI singer/songwriter Katie Pruitt. The complete conference agenda is available on our conference website.
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.