Out Of Home Today is the leading source for news and information on the out of home industry.

- Advertisement -

Fixing the Broken Payment System in OOH

How to Create a Healthier Cash Dynamic Between National Buyer and OOH Provider

6 827

 

OOH…Here’s One Thing

by Jim Johnsen,
Managing Director, Johnsen, Fretty & Company

My friend Bill Board, was kind enough to invite me to write a periodic #OOH column.  Since I am a man of few words, I promise to keep my riffs short and focused on one thing.

 

Okay, here’s one more thing

Turn the Other Cheek?

For decades now I have heard from outdoor advertising vendors throughout the country (and in Latin America) how hard it is to get paid.  “We never received your proof of performance.”  “We lost your proof of performance, can you resend it?”  “The client has not paid us yet.”  “We don’t send checks and you never gave us your ACH instructions.”  “You need to send us your forms so that we can get you approved as a vendor.”  “We lost your approved vendor forms.”  “I am waiting for London to approve payment.”  “We sent you a cancellation notice last month”.  And of course the granddaddy of them all…”the check was sent last week, you didn’t get it?!”

For decades now I have heard from outdoor advertising vendors throughout the country (and in Latin America) how hard it is to get paid. 

There is nothing more frustrating and less productive than having to work twice for the money. Why then has slow pay been so endemic in the industry for so long? Parenthetically, I have a hunch that once you start “borrowing” from the supplier to pay overdue bills, it becomes a never-ending cycle of using current money to pay-down old obligations.  But perhaps the more relevant question is…why do we as an industry put up with it?  The emperor has no clothes on and has been parading around for years, but we all seem too frightened to say anything!

why do we as an industry put up with it?  The emperor has no clothes on and has been parading around for years, but we all seem too frightened to say anything!

Before you say, “well that’s not true, the 800 hundred pound guerrillas get paid on time.  It’s just us lowly independents that are constantly getting squeezed”, contemplate the following:  Using some very crude math on 2017 year-end results (since 2018 is not out yet), I calculate OUT carrying national receivables for roughly 80 days, LAMR carrying national dollars for about 84 days and CCO for 123 days.  (Send me an email if you would like to see how I got to these figures).  What I conclude from the above, is that perhaps the big guys get some preferential treatment, but they are also in the soup here.

there can and should be a much healthier cash dynamic between buyer and vendor.

Okay, so its endemic and its been going on a very long time.  Do we just continue to smile and shut up?  Certainly don’t want to piss off the guys that control our destiny do we?  They always eventually pay us, right?  Maybe I have been spending too much time in that recently legalized state of California, but I do believe there can and should be a much healthier cash dynamic between buyer and vendor.  Can you imagine all the stress that would go out of the system if people didn’t have to spend their time designing excuses..or alternatively placing that 4th irate call.  Can you imagine how good it would feel if you had an online dash-board where you could see how far away your payment was and whether there was anything holding it up?  Maybe it wouldn’t get there on day 30…but if you knew come hell or high-water, you were being paid on day 70…my guess is, that would be a huge improvement over the current game of cat and mouse.

With all the time and money we are spending to get at these programmatic dollars…perhaps we should be investing a few on a solution that fixes the broken payment system.  In concert with an semi-automated payment system, we can give the agencies a bit of a lifeline and then begin to reel it in slowly. What are your thoughts?  Are your receivables an issue? 

Jim Johnsen

 

jfco.com
Securities transacted through StillPoint Capital Member firm FINRA/SiPC

 

 

 

 

- Advertisement -

- Advertisement -

Leave A Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

6 Comments
  1. Gino Sesto says

    While I appreciate this article and agree with its premise. I think you are going to find the same issues in any “industry”. OOH is not special in clients paying slow. By the way I’ve heard all these excuses too. Its just part of running a business.

  2. Bill Board says

    Thank you Gino for sharing your experience. We too agree with Johnsen’s premise, though we would add the delinquencies are further out many more days than his estimates.

  3. Chris Zukin says

    Jim
    I could not have put it better. Why do we as an industry put up with 120 and even 180 day old invoices?
    What other industry allows its customers to take so long to pay?
    We avoid agency business for this reason.
    Chris

  4. Bill Board says

    Chris Zukin, thank you for your comments. Avoiding agency business is unfortunately an action more common, particularly with small #OOH providers, than what people realize. To a great extent it is not realized by those same agencies who hold payment. What is told to their clients is not remotely near the reality of slow pay. Often it is excused as a lack of coverage or a flaw in the OOH Owner provider’s response. Other media share the same issue. The winner, if there is one, are the larger companies who can withstand the delay in payment.

  5. Tracy Y says

    This is a issue in all media but even more so in OOH. I think if we as an industry moved to billing in a broadcast calendar instead of by periods (which is still in 4 week increments) we would make it a lot easier on the agencies to process our invoices. Plus, you have several big OOH “specialized” agencies who are controlling a large share of the billable OOH dollars third party, which is just delaying the process even further from client approvals.

  6. Bill Board says

    Thank you Tracy Y for your comments. Changing #OOH billing similar to ‘broadcast calendar’ is one I thought we did over 10 years ago as an Industry. This is a new idea to us, one we have not heard.
    We’ll check it out and welcome more detail from you or others who may shed light on that billing process. Regarding our second point: Are you suggesting the client is holding the money for an extended period of time as well before releasing to the agency or specialized OOH agency? The scenario is: 1. Advertiser/Brand X- holds back payment 60 to 90 days 2. Agency withholds payment 60 to 90 3. OOH Provider is paid 120 to 180 days ?