• by David L. Smith , February 11, 2002

It is great to talk about what the business should be in the future, but some days the stark reality of the present jumps up and bites you. And sometimes, no matter how much we try to move on from what has already happened, the present looms again. I found this ever so true again last week via interacting with collection agency correspondence. Now, it stands to reason that you should say “pay your bills on time, Dave, and this will not be an issue.” But, no matter how hard we try, this is not possible. Why? Because the Web media (yes, even the biggies) are not equipped to handle the business of selling advertising on the Web from an operational standpoint.

They say that they have accepted sequential liability but have not executed a system to process orders accordingly. They don’t have good internal systems for tracking ad orders from agencies placing business for multiple clients. They don’t have good follow-up systems to collect. And they still don’t have systems in place for discrepancy resolution.

While not the sexiest of issues, this is one of those areas that make handling Interactive media incredibly expensive for an agency vs. doing traditional media. For example:

Sequential Liability

Sequential liability has been followed by a number of agencies for years. Version 1.0 of Interactive Insertion Order Terms and Conditions is the first time that the industry has endorsed this procedure on a broad-scale basis. This means that the sites are willing to accept that the client, not the agency has financial responsibility for media payment. And I’m sure that when sales executives sign off on an agency’s Ts & Cs, they mean to keep their part of the agreement. But we have not gotten agreement from the finance and operations people at the sites and networks. The result, for most vendors, is that our agency has a combined account for all clients, even though the clients are responsible for payment. So, when one is late for payment, all are penalized.

Statements

Even with all clients on a single account, some simple practices could be implemented to ease an agency’s pain. The biggest of which is sending out statements. Now, to me, it seems amazing that companies who have spent 10’s of millions of dollars on targeting and ad serving technology (you know who you are) cannot spend $50-200,000 on a billing program, but this is apparently out of the question. Even QuickBooks can send out billing statements. Why do we need monthly statements after bills are sent out? It will get a site paid more quickly. Lots of things on the agency side can happen to cause a bill to be late. The agency could have forwarded the invoice to the client for payment and not know the status. The agency could have had turnover and the invoice not “logged in” properly. And it is possible that the mail never got there in the first place. These are certainly not a site’s fault, but a simple statement would help each of the last situations get escalated for payment consideration in most agencies.

Internal Systems

The sites are not the only ones to blame here. Few sites or agencies have internal order tracking systems. The result, when we do have a discrepancy where the invoice does not agree with the original order, most sites cannot resolve it, as they don’t have a system for tracking the agency’s original insertion order. Many site systems were built assuming that agencies would sign the site IO. Which now most everyone admits was a mistake, but this problem remains. On the agency side, the biggest housekeeping system, Donovan, has yet to develop an Interactive module for its agencies. As Donovan is the system used to track the majority of agency media business, the agencies are without financial controls too. Few have built their own internal systems and many are still using Word or Excel spreadsheets to mimic the IO process, but with no tie-in to financial controls systems.

Additionally, each side needs operations people dedicated to post-order issues. Someone between finance, sales and technology (tracking) that has all of the information and can resolve discrepancies readily. True, the agencies really don’t need this kind of system in place for print, but there is something similar in place for most agency broadcast situations. Few sites have the right operational infrastructure to support advertising after it is sold. The result is that when an invoice is discrepant, whether it is for surface issues such as correct liability recognition or whether it is for more substantial issues such as different dollars or impressions vs. the order, there need to be better systems in place on both sides. Couldn’t this be a business if Donovan does not want to get into it? Not as much sizzle as a new targeting engine but something that everyone in the industry needs.

Also, the lack of internal systems often causes sites to issue credits to the wrong client of an agency, which then makes resolution even more difficult.

The most galling aspect of this problem…

Is when a site without good internal controls goes out of business. It was bad enough that we had to go through the last 18 months. Now we have to go back and revisit transactions that we thought were resolved long ago.

It happened this week again and seems to be an all-too-often an occurrence of late. We get a collection notice via mail, fax, email or threatening phone call (these are generally guys you would NEVER talk to in your life. A cold call stockbroker touting their services or a stock is a nice guy compared to these guys). The notice, in whatever form, seldom has enough information. Just, the books were audited, it was found you owe money and it was put immediately into collection. Now, there are about fourteen things wrong with this process. Some include:

- It is no wonder the site went out of business if it waited months and months before pursuing the invoice.

- Many of these notices do not break out any information about client, flight dates or other information that would help you discern what the invoice was for.

- For resolution with the collection agency, with which you do not and do not want to have a relationship, you must not communicate in any other form than “fill out the form on the back if you disagree with the invoices in question”.

- The auditor who hired the collection agency usually did little seeming due diligence relative to what had been paid and what not. It then becomes the agency responsibility to communicate with the unknown force at the collection agency about the unknown auditor’s mistake in not catching the payments as well as the invoices. (I’m not making this up). Another reason to have all the auditors ……….(insert action here).

- And more, but you get the picture.

The hangover gets worse when this is all over a client who has gone out of business and the invoices are over a year old (sometimes two years+) but nobody ever bothered us until now. Whether money is owed or not, major work is involved in determining the resolution.

Next week I hope to get back to something a little more stirring. Just had to get this off my chest. I think my headache is going away.

- David L. Smith is President of Mediasmith, Inc., the Integrated Solutions Media Agency based in San Francisco and New York.