However, despite the success that marketing agencies bring to their clients, agencies often find themselves struggling to collect payment for their services. Because it is an ever occurring situation for marketing and advertising agencies, we’re focusing on a few reasons why this can happen:
Longer Payment Terms and Timelines In a study conducted by leading online revenue exchange company for digital advertising buyers, Oarex, it was found that the mean average payment terms for invoices purchased (factored) between January and May of 2020 was 59 days, which was up from 49 days in 2019, 47 days in 2018, and 40 days in Q4 of 2017. This means that companies are taking longer and longer to pay their marketing agencies, and typically waiting until the last day prior to the favorable 60-day payment terms stated on the agency’s invoice. Within this same research, Oarex predicted seeing payment terms from organizations to agencies exceed 100 days in the near future, with the current financial status of said companies.
How do late payments affect an agency’s business? Just like any other type of business, marketing agencies have employees, overhead expenses, and their own invoices to pay to vendors, technology stacks, and more. Additionally, the marketing agency has already fronted the costs for the client to run advertisements. For example, if a marketing agency’s client ran a television ad in June, and was invoiced at the beginning of July, the marketing agency (at this rate) would not receive payment until the beginning of September.
Return on Investment is Hard to Prove There are many channels and avenues that fall under the “marketing umbrella.” There are traditional marketing channels (such as radio/digital streaming, highway billboards, magazines and newspapers, direct mail, etc.) as well as digital marketing and advertising channels (these would be websites, social media, email marketing, paid advertising, and the like). Because of the vast amount of channels and tactics underneath this “umbrella”, it is sometimes difficult to prove return on investment of a particular marketing campaign and channel. Take a highway billboard for instance - you might know how many people drive past it daily, but will you ever fully know the impact of the investment put towards the billboard on the busiest highway in the city? It can be challenging to track the return on investment (ROI) for marketing tactics such as this, as an agency can not directly tie direct numbers back to a particular marketing campaign or tactic, as well as that billboard’s impact may not see any action for a few months or periods of the year. However, it still does promote the client’s business and name to potential customers who might consider reaching out to them when they need to, as they might remember seeing the billboard on that busy highway. Despite this, it brings challenges to the advertising agency when providing reports and success to the client who may expect an immediate and measurable ROI.
What Should Marketing and Advertising Agencies Do? What happens when a media agency can’t collect on their client’s invoices? They typically turn to a third-party or outsourced debt collections and accounts receivable company to recover the funds from their current and past clients. This in itself can cause some friction between the client and the agency. Outsourced accounts receivable management companies like Oxygen are able to provide customized collection and accounts receivable services to marketing and advertising agencies using our in-house technology and professionally trained staff.
Oxygen’s First Party (FP) service helps marketing and advertising agencies stay ahead of their past due invoices by taking over the accounts receivable process and ensuring agencies get paid before they’re due. Our FP team works as an embedded AR team within your company, working on an as needed basis, ultimately acting as a cost-saving. XL
Additionally, our Oxygen XL team members are trained to complete professional and non-harassing settlement calls with marketing agency clients should an invoice go beyond the due date and need to be collected on. We know that reaching out to customers and clients is always tough and the need to maintain a marketing agency’s brand reputation (especially with current clients) is crucial.
If you’re in the marketing and advertising industry and find your agency struggling to collect on invoices from your clients, contact Oxygen XL to discuss your collection and accounts receivable needs. We understand your challenges and be a breath of fresh air to your company.