A Reader's Question: How to Collect Advertising Money That's Owed?
Posted on Thursday, July 01, 2010 at 3:00 PM
Q. Right now, my biggest concern is getting paid by advertisers
that owe us money. We are a monthly trade magazine with a circulation of
100,000. Throughout the recessionary period, we tried to work with
advertisers who couldn't pay net 30. For some longtime advertisers we've
been especially lenient. After all, we have relationships with them that
go way back. But now we're getting to the end of our rope, and frankly,
I'm concerned about how much credit we've extended. Worse yet, the
advertisers don't seem so sympathetic to us when we call them requesting
that they pay up. What can we do to get out of this spot?
A.
The economic conditions have put a number of publishers in precarious
positions such as yours. We've seen how advertisers have fallen behind
for a number of very different reasons. I'll identify the three main
categories, and then suggest ways to deal best with each.
The
first category is the advertiser who has a good and established product
line that serves a real need. He's continued to advertise as before.
But, the reason he can't pay now is because the recession has weakened
his sales. Actually, it's good that he's maintained his advertising.
Research has shown that those advertisers who maintain their advertising
presence are able to emerge from a recession far stronger than those who
pulled back their ads. It could be, however, that this advertiser's
particular ad strategies and offers have not been adapted appropriately
to the current economic circumstances.
So, my advice is to work
with the advertiser in three ways:
a. Have your sales staff help
him to hone his advertising message. Come up with offers and copy that
will appeal to prospective buyers based on where they're at in the
recession. (If your sales staff is ill-equipped to do this, give me a
call and I'll explain how to get them up to speed quickly).
b. If
the advertiser is making non-productive ad decisions, help guide him
toward more efficacious ad decisions. For instance, if he's spending
money on position, it would be better to steer him toward greater
frequency, greater size, or more color. Research has shown that position
doesn't impact results very much, contrary to popular beliefs.
c.
If the advertiser needs sales, be sure that his ads are actually focused
on asking for orders. This may not be the right time for image ads or
institutional pitches. Counsel him to run ads that will elicit orders,
not just ones that make the company look good.
Approach all this
cautiously. Put this advertiser on a payment plan to work off the
arrearage. And, ask for a partial payment (at least enough to cover your
costs) with each new insertion order. Also, get a D&B on the company to
assess the risk of an impending bankruptcy. Set clear limits for the
credit that you've extended and will extend.
The next category is
the advertiser who has many of the good qualities of the advertiser
described above. In this case, however, since she has been unable to pay
for ads that have already run, she's voluntarily stopped advertising.
That in itself may put collection of her debt in greater jeopardy. See
if you can get her to resume advertising, albeit with a requirement that
some cash start flowing in your direction at the same time, as suggested
above. It may sound counterintuitive to solicit more ads from a company
that hasn't paid for past advertising. However, if this is a viable
company with a product that meets a market demand, the surest route to
getting your money may be by helping to stimulate that company's sales.
The
last category includes those companies that never were doing very well
in the first place. Perhaps their products are mismatched for the
marketplace, or they lack customer loyalty as a result of poor customer
service, or they've simply been a slip-shod operation. With these guys,
you should do whatever is necessary to establish your legal claim for
what's owed and press for collection. In the meantime, allow them to
advertise only on a cash-with-order basis.
It would have been
good if you had instituted these practices earlier. But, the sooner you
put them in place, the better will be your chances of collecting what
you're owed.