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How to Fix the Broken Payment System in OOH

Creating a Healthier Cash Dynamic Between National Buyer and OOH Provider

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OOH…Here’s One Thing

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

 

 

 

A republish of previous Jim Johnsen post 

Fixing the Broken Payment System in OOH

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

 

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

 

 

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6 Comments
  1. Thomas R Giesken says

    Personally i think we ought to join/collaborate/team up to agree as a “whole” to have in our agreements that we won’t take any contracts unless the agencies agree in writing/terms to pay some time between 30-60 days at the most. There is no reason for it other than they get rich on the interest they are making on our money!!!!

  2. Jonathan Gudai says

    Unless there is a seismic shift in the buying ecosystem, it’s hard to see things changing on the time-to-collect front.

    Agencies still need to wait to collect from their brands and then after they do, they process payments to the media owners in a timed cycle.

    Publishers like Google and Facebook enjoy shorter collection periods because they have been able to successfully implement a credit card based payment system. Yeah, it takes away 2-3% from the net proceeds, but would you rather pay that to get your money in 30 or less days?

    A hybrid system is probably the best. But any way you slice it, the payments system is still a complicated beast.

    Good, clean reporting and diligent billing and collections people and processes are clutch.

  3. Bill Board says

    Thanks Tom R. Giesken. Agencies already have the obligation in writing. No OOH companies enforce it. I don’t know many OOH Owners who will reject the business.

  4. Bill Board says

    Thank you Jonathan Guidai.
    Many OOH companies currently take credit cards for payment. Some agencies, yes some of the Big 5 will pay in a 30 to 60 period.
    You are correct, the issue lies with your final comment: “Good, clean reporting and diligent billing and collections people and processes are clutch.”
    That is the biggest tale of the tape for payment.

  5. Thomas R Giesken says

    Yes, they already do have it in their contracts but what i’m saying is for the industry to stand together to enforce and assess penalties for late payments or even dropping the advertiser down if the agency doesn’t pay in a certain amount of time! My point is strictly about standing together as a whole and enforcing. That’s the only way we can change the system. Otherwise, you are just wasting your breath.

  6. Bill Board says

    Yes, understood Mr. Giesken. Unfortunately, there will always be some OOH provider who will either not join those ranks or break the ranks. It is an Advertising industry wide issue.