Proactive plans can ease overdue invoice problems

Pursuing overdue invoices is a fact of PR agency life. Some clients are chronically late, others are downright deceptive in their delinquency. Sometimes, an invoice really may be buried in a drawer or stuck in a spam filter.

Pursuing overdue invoices is a fact of PR agency life. Some clients are chronically late, others are downright deceptive in their delinquency. Sometimes, an invoice really may be buried in a drawer or stuck in a spam filter.

Regardless of the reasons for compensation delays, one thing is certain: Collecting on overdue invoices is not getting any easier.

"In the wake of Sarbanes-Oxley, Enron, and the push for more corporate transparency, we see more layers of approval slowing down payment," says Paul Maccabee, president of Minneapolis-based Maccabee Group PR. "We've seen CFOs at major Fortune 500 companies required to sign off on an invoice from a PR agency. You never saw that years ago."

To expedite the process, Maccabee prescribes reaching out to the client's finance department within 48 hours of inking a deal, to ensure the agency's information is correctly entered into the client's payment-processing system.

"Also, find out what the client's payment peccadilloes are," he says. "If they pay all vendors on a particular day and your invoice arrives the following day, don't be surprised when you have to wait another 30 days."

When delinquencies do occur - and e-mails and letters have not worked - it's time to get personal.

"I'm dealing with just such an issue today, where I have to personally call the CEO of a client and inform him that, because payment is 60 days past due, we will stop work," says Ken Eudy, CEO at Raleigh, NC-based Capstrat.

"The CEO is so embarrassed, it gets resolved quickly," Eudy explains. "You don't need to convince someone that they should pay an invoice they clearly owe."

When the client is having genuine financial difficulties, such direct confrontation can also help the agency position itself to be among the first paid, he notes.

To steer clear of billing issues from the beginning, Eudy advises reviewing the initial invoice with the client's finance manager, to ensure that there are no preventable misunderstandings down the road. If non-payments do become a reality, though, a decision has to be made regarding how far the agency will go to pursue them.

"We operate in California, the 'sue-me state,' and there are colleagues here very quick to sue for payment," says Pat Tobin, president and CEO of LA-based Tobin & Associates. "My feeling is that when you do that, word gets around. You want to be known
for your ability to make peace and solve problems, not that you run to your attorney when you have a problem."

Instead, Tobin stresses the importance of consistency in billing practices and of having a dedicated accounts-receivable manager, no matter the size of the PR firm. She also encourages agencies to take advantage of innovations in invoicing and document-management technology.

Above all, Tobin advises, never become abusive with a client.

"I have one client I know is in the Bahamas, who owes me several thousand dollars from over a year ago," she says. Another, a "music industry client, who was just involved in a major movie premiere," still owes the firm a similar amount.

"I never give up, no matter how many years I have to wait - and I can wait," Tobin says matter-of-factly. "Clients are the lifeblood of our business, so if they are not paying, we are bleeding."

Key points:

Agencies should have actionable plans for pursuing delinquent invoices

Establishing a relationship with a client's finance manager can help prevent delayed payments and miscommunication

Firms should maintain consistency in their own billing practices

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