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A Reader's Question: How to Collect Advertising Money That's Owed?

Posted on Thursday, December 17, 2009 at 4:12 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.

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