According to Experian, trends are pointing toward 2023 being a busy year for debt collectors. The S&P/Experian Consumer Credit Default Composite shows defaults have steadily increased since late 2021. Not to mention, relatively high-interest rates, volatile market conditions, and recession worries among consumers. Many publishers and various advertising outlets are putting their collection strategy at the forefront of their planning to reduce outstanding liabilities. Others have already mastered the art of collections by implementing strategies that work best for their company and community.
The collections industry is quickly evolving, and staying up-to-date with trends can help you build a strategy that benefits both you and your customers. A deep dive with three industry-leading partners has proven that collections, while a necessary evil, can be efficient, personalized, painless, and friendly.
Keep it Personal and Transparent
With more than 25 years’ experience in the publishing industry, Ross Furukawa understands the challenges of debt collection. As co-founder and president of Santa Monica Daily Press, Furukawa stresses the number one collection strategy should be to keep it personal. “You cannot just send a [generic] form that people are used to seeing every month. They are going to ignore that,” he said. “But if the communication is coming from a [known] person and has information specific to that customer, they are more likely to take notice.”
He also mentioned including a tear sheet of the specific ad that ran will help to catch the client’s attention. “It’s really effective to put a link to the PDF to show where it’s live in the magazine, online, etc.,” says Furukawa. “You can also provide them with some analytics so they can see how well their ad is doing. They can see you have delivered on your end of the deal and it is time for them to deliver on the invoice. Give them all the information up front, so there is no back-and-forth, eliminating extra questions and being very clear and transparent with your communication.”
Publisher of Southlake Style Mike Tesoriero can speak well to the importance of transparency. If you have ever lived in a small community, you understand that word can travel fast. This works both to Tesoriero’s advantage as well as keeps him in check when providing pricing to clients. “We’ve been publishing for 17 years and really have not had a serious issue with collections,” he said. “I liken that to the size of [our] community as word travels fast. Our community is about 30,000 people. Everybody knows everybody and we have a long-standing customer base. When there is a hyper-local setting, people tend to be on their best behavior.”
On the flip side, Tesoriero says they are 100% rate card and always have been. This further promotes the importance of transparency to their clients creating a culture of trust. “I tell [clients] they are getting the same price as everyone else. And it is that simple,” he said. “If we gave people various discounts, we would be shooting ourselves in the foot, and I have watched other publications do just that. So we are proud of that. If you give a deal to one person, you must give it to everyone.”
Automation Increases Efficiency
During the last decade, digital outreach via automations has become one of the biggest and most significant forces behind effective credit collection. It provides several touchpoints, such as email, texts, app notifications, and more that can be deployed efficiently, saving time and money. This increased speed and efficiency can help publishers collect debts more quickly, improve cash flow, and reduce the risk of bad debt.
Automation can also help businesses reduce their labor costs by eliminating the need for manual data entry (aka: spreadsheets) and reducing the need for a large team of debt collectors. It can also run with minimal supervision, freeing staff to focus on other tasks. The cost savings can be substantial, allowing businesses to allocate these resources to other areas of the business.
Debtors are often more responsive to automated reminders and communications, as they come with greater consistency. A system is in place to give debtors thorough information about their debt, payment options, and the outcomes of not paying. This helps them comprehend their responsibilities and make informed choices about their obligations.
Automation can be extremely helpful when implementing payment plans, if done correctly. If you are considering instituting payment plans (or looking for ways to simplify your existing payment plans) you must ensure your accounting software is in sync with your ad sales CRM software. Depending on how your sales team’s software interacts with your accounting team’s software, invoicing and payment plan processes can become complicated. You will want to ensure your timeline of payments is properly synced with your reporting so you can see accurate sales results by product (or per month, quarter, issue, etc.).
Tesoriero says they have greatly benefitted from automating their collections and received 90% of their collections on the first of the month. “[Automations] have really streamlined our interactions,” said Tesoriero. “We start our collections two weeks in advance and then usually by mid-month everyone has paid. And it is that easy. There are a few customers who require some special accommodations in order to get the invoice paid and we will work with them to set up a payment plan.”
Make It Easy to Pay
Within any business that sells advertising, the accounts receivable team has a demanding job on their hands — especially when advertisers do not pay on time. Sound familiar? Not to fear. One step can help reduce the number of calls, emails, and letters to track down payment, and it is easy to implement: advertiser autopay.
Autopay saves your A/R team time. It saves your advertisers’ accounts payable team time, too. And, with a little help from the right ad sales software, it is a snap to set up and get rolling.
If your advertisers have paid invoice-to-invoice for years, they may be reluctant to switch to autopay. This is where messaging matters. Autopay is a mutually beneficial courtesy for both parties involved. Your advertisers are still able to scrutinize invoices and communicate with your team about their charges before a payment is scheduled, just as they would with print invoices.
However, with autopay, payments are applied without printing checks, stuffing envelopes, or paying postage. Not only are your advertisers’ saving dollars, they are saving time — and let us not forget about the trees!
Whether you manage an issue-based magazine or you are selling programmatic digital ads, your A/R team is the link between your sales and the dollars your business is owed. By automating repetitive tasks, such as invoice creation, and reducing the need for time-consuming follow-ups on late payments, your A/R team can focus on:
- better, more accurate record keeping.
- faster resolution of billing discrepancies.
- personalized customer service.
Software automation cannot replace an all-star accounting staff. But it can provide them the time they need to focus on tasks that move the needle for your business.
In addition to autopay, many publishers and their advertisers benefit greatly from payment plans. Sometimes businesses hit a rough patch, but working with them to clear up their debt will earn big points with your customers. “If an advertiser is having trouble paying, we get their rep involved,” said Logan Aguirre, publisher of 417 Magazine. “We work with them to change their contract to a more manageable amount or let them move insertions further out to help them catch their breath. We are incredibly flexible and accommodating because we would rather they stay with us and work with us than cancel and leave us high and dry. I do not remember the last time we had to write off bad debt.”
Just like other publications, Aguirre says they do require advertisers to keep a card on file and implement other strategies to ensure new customers start out on the right foot. “We require a credit card on file and every new advertiser has to pay their first ad upfront two weeks before we send it to the printer,” said Aguirre. “Depending on when they sign their contract, if there is enough time, we let them break that first payment into a few payments so that it is not a deterrent for starting with us. We do a lot of “flat bills” for clients where we take their contract total and even it out over the 12 months to help them manage their cash flow.”
Experience Share Q&A: Ross Furukawa, Santa Monica Daily Press
Q: Do you have any tips for eliminating unnecessary communications?
A: The back and forth is what kills you in collections. My advice? Just get everything upfront and be very clear about expectations. Eliminate blockers and additional questions. And it must be friendly.
Q: Do you have an example of a time when additional actions were needed in order to collect a debt? How did you handle it?
A: Marijuana is legal in California and there are several dispensaries you can visit if you are 21 years of age or older. There was a dispensary that owed us a very large sum of money and they went dark. They just stopped taking phone calls, texts, or any communication. We followed all the normal steps of collections but six months went by and they had not paid. So I am thinking, okay, what levers do I need to pull and what buttons do I need to push to get this paid. It turns out, the customer also opened another dispensary with a well-known actor. A friend of mine just finished a movie with this actor and had his cell phone number. I did not call it, but I sent a final email to a customer that owed me and let him know I would have to reach out to his new business partner if I did not hear from him soon. Thirty minutes later, I had a response and cash in hand by that Friday.
Experience Share Q&A: Logan Aguirre, 417 Magazine
Q: Do you provide discounts?
A:We do not do them. We tell clients that it is too small of a town for us to cut deals for one person that we could not cut for someone else. Rate card integrity is huge for us. We reward frequency packages with an ad size upgrade for one of their insertions.
Q: Do you require credit checks?
A: We do not do credit checks. We are net 15. We have so many people paying upfront that we have our collections days at negative one, if you can believe that. Our finance manager is diligent in following up at 30 and 60 days.
Q: Do you ever send customers to a collection agency?
A: Most clients have us run their card each month or send checks. It is incredibly rare for us to send someone to collections because we rarely have people stretch up past 90 days (except for agencies but that is typical.)
Q: Do you have an example of a time when a customer needed extra accommodations in order to pay their debt?
A: We do have a client right now who is past 12 months due because he is battling cancer. He slowly but surely is paying down the balance and because of this we have not sent him to collections or taken commission back from the sales rep. We are a small business too and try to approach each situation from a place of grace and caring.
Experience Share Q&A: Mike Tesoriero, Southlake Style
Q: Describe your collections process.
A: So for instance, on May 15 (for June’s publication) we will send out an invoice and that will start the cycle for people that pay via check. Then, June 1 (or first business day of the month), we run credit cards. And that usually takes care of most of our customers. We start our collections process two weeks in advance. And then usually mid-month everyone has paid. And yeah, it’s that simple for us. Being in a small community, we have a loyal customer base.
Q: You have mentioned that you stick to rate card; however, do you offer any discounts across the board?
A: We do offer volume-based discounts and we run special sections that have special discounts. And, even those things are so annual that we usually build those into their contracts.
Q: Have you ever lost customers to other publications because they offer more hefty discounts?
A: We have stuck to our guns and sometimes that means we have customers or prospects that will not advertise with us because they get a better deal elsewhere. And those are typically the ones who are looking for a deal and are tough to collect from. Sometimes it is just best for both parties to move on.