Payment terms?

[J Arnold]

I have my first job selling advertising space. Now do I ask for full payment in advance or do I offer 30 days after the job is done?.

If a client decides to not pay once the job is done, they have got themselves free advertising and there is nothing I can do about it.

Its going to really hit my cash flow to start with as all staff will be paid out of my own pocket first.

Do news papers and magazines require full payment in advance?

I was thinking of having an "all invoices must be paid in full 5 days before advertising starts".

 

[arnydnxluk]

There's always the option of 50% upfront, 50% on completion, giving you both some form of protection. It's difficult to say what's reasonable without knowing the industry, the costs involved, etc. I think most people here will advise you to take full payment upfront. In my opinion, you should at least be taking some kind of deposit and I don't see why any legitimate client would have a problem with this.

 

[Trader82]

Hello there,

I've always had to pay upfront for advertising, my personal opinion would be to ask for the payment upfront.

Advertising is an allowable business expense, so most people will claim for it when the time comes anyway.

 

[Jayser100]

I worked for many years in consumer publishing, and I used to sell advertising. I can tell you that very few companies are prepared to pay on a pro forma basis. The industry standard is that you book the space and then send an invoice once the publication has been printed (along with a copy of the magazine). You then give them 30 days to pay from date of invoice. A word of warning - in my experience, it is quite common for advertisers to be very slow at paying. Many will 'pay on statement', which basically means you are unlikely to receive their payment until you are forced to send them a statement for what they owe, one month after the initial invoice.

Magazine advertising space has got harder and harder to sell over the years, for various reasons. Firstly, less people read print magazines; secondly, internet advertising and general marketing (e.g. SEO) are way cheaper and so most companies put their marketing budgets into the web these days. The smaller consumer magazine market has been decimated in the last 10 years or so simply because publishing companies cannot get enough ads to make their titles viable. It's difficult enough to sell any advertising space in a printed publication, but if you try and force pro forma on them you are going to make it even harder (much harder). What you need to remember is, none of your experienced rivals will be asking for pro forma, so where are they going to spend their money?

Make sure you have a really good debt collection agency lined up because I'm afraid you will need one. When companies work through their piles of bills, they put them in order of importance and guess which ones come at the bottom of the pile? Yup, you guessed it. Staff wages come top, followed by essentials like rent, electric, insurance etc. and then right at the bottom is that invoice for an ad they placed in a magazine. If they don't have piles of cash to spend, your invoices will always be the last to get settled.

If you are selling advertising as a third-party agent for a publisher, make 100% sure you have clear and written terms regarding what happens if the advertiser does not pay their bill, i.e. are you responsible for recovering the debt, or are they?

I am sorry that's all a bit negative but if you're starting your own freelance advertising placement agency you really need to know what you're getting into.

 

[J Arnold]

My advertising is more direct than magazines, its on the back of bikes, vans etc so most if not all my clients will be local to my area.
I'm going with deposit of 25% then the remainder paid before the campaign starts. All I can do is try and see what the feedback is!.

 

[Jayser100]

Oh, okay. In your original message you said "Do news papers and magazines require full payment in advance?" and so I presumed that is what you were doing.

 

[ethical PR]

Yes your post did imply newspapers/magazines.

Have you done your research to find out if it's normal practice for people to pay a deposit and then the full balance before the ad appears?

I think you might find businesses would be reluctant particularly for a start up with no track record.

Do make sure you credit check and have proper terms and conditions/contracts drawn up which you have had professional legal help with.

 

[Ra5ax]

please see some of my posts in particular http://www.ukbusinessforums.co.uk/threads/passing-on-finance-costs.352580/#post-2612828

we work on large ish contracts 30-50 thousands pounds we have to work 30days on most but do whatever you can to get payment upfront, at worst case cover all your costs with upfront payments, we do also sometimes have to put in a retainer in our industry this is fairly normal but a nominal amount say 5% retained by the client for 30days can give them that little peace of mind.

Be careful we worked on 30days and it has been very detrimental due to 1 poor paying client.

the only advice i can give is repeated by the majority of business owners and it is so true cash flow is king do what you can to keep your cash flow high.

 

[Jayser100]

If you are selling marketing packages to companies that include a mix of print advertising and vans etc, then it may be more reasonable to ask for something up front. If you're the one handing over the cash for the print adverts, you can also be the one who doesn't pay for at least 30 days, giving you a better chance with your cashflow. You need not feel guilty about doing it, it's standard and most publishers expect it.

 

[J Arnold]

Thanks for the responses.
Yeah sorry, I was just wondering how other forms of advertising worked their payments. I would offer credit in the long run after a client has used me a few times paying up front.

Back when we played weddings we would take a deposit and the rest had to be paid 10 days before the gig. Also when we used to sell embroidered garments to companies who didn't have an account with us we asked for full payment up front. Twice we had people order clothing then never turn up to pay so then we always took payment first. The garments were useless to us once embroidered. No one has ever complained about paying in advance so its worth trying at least for my new venture.

 

[Ian J]

Make sure you have a really good debt collection agency lined up because I'm afraid you will need one.

From experience the most often used excuse for non payment is "I didn't order that advert" so make sure you have that angle fully covered, preferably with a signed order

 

[Jayser100]

Indeed Ian. A quick story - a few years ago, my cricket club celebrated their 150th anniversary. I volunteered to put together a celebratory book, the idea being that we would sell adverts in it to cover the cost of production (and maybe even make a bit of a profit for club funds). At the time, we had a member who worked for a sports equipment company - he had just finished putting together their latest catalogue, and had himself placed ads for a number of sports companies they were dealing with. He told me he reckoned he could persuade some of them to advertise in our book, so I left him to it; within a couple of days, he told me some of them had agreed to the ads, and he sent over their copy. I was delighted as we ended up on paper at least, with enough cash to cover the printing cost. Next thing you know, I have the boss of my mate's company on the phone saying that in actual fact, four of the companies who had ads in the book never agreed to them, and were refusing to pay. As you say Ian, there should always be a piece of paperwork. I would never have let that happen when I worked in publishing, but I suppose because it was just a cricket club book, and my mate seemed confident in what he was doing, I didn't think to ask for written confirmation. That was certainly a lesson learnt for me!

 

[J Arnold]

Looking at leaflet distribution companies in my area they all require payment up front. I think of myself as the middle ground between them and magazine/news paper ads. So I'll require payment up front.
One client not paying, especially as I'm just starting will really damage my cash flow so id rather be safe than sorry!

 

[AllUpHere]

I don't think you will have a problem getting paid up front. If someone resists, they aren't the right client for your business model. If anything, being paid upfront gives you a marketing advantage, so I would just crack on if I were you.

 

[Jayser100]

AllUpHere that's a fine principle but if he finds nobody is prepared to pay up front then he might end up with no business. I think he is taking the sensible approach by asking for a deposit. Most companies are going to want to see the results of an agency's efforts before paying the full load - I certainly would.

 

[ethical PR]

Have you done research with your direct competitors i.e. other bike advertising companies to see what their payment terms are? That will give you the best indication of what's standard in your industry.

 

[Jayser100]

Ethical PR is right. Why don't you call some of the other companies pretending to be a potential client to find out what their terms and rates are.

 

[ldjames]

Taking payment upfront might be easier than a discussion later on around unhelpful advertising campaigns.

 

[J Arnold]

Ethical PR is right. Why don't you call some of the other companies pretending to be a potential client to find out what their terms and rates are.

They have 30 day terms. But leaflet distribution companies want the money as soon as the invoiced is raised before they go out for delivery.
As I'm scaling this up while still in my current job I could offer 30 days and keep a tight reign on my cash flow. Its going to be a balancing act though. One non payment (at this stage) will rock the boat.

 

[Michaeljonescsuk]

Hi there,

having read your post, something that I might be able to help with. I speak to a lot of companies on a daily basis that are nervous about their cashflow and getting money back.

payment upfront can be okay, but then if you deal with a client who wants credit, then lets be fair in this modern day you are not going to turn business away.

There is a way where you can see how well a person is paying their clients before doing business with them, so you know that if you do go into business with them what sort of time they are going to be paying you and if they do pay other customers terrible, then the decision as to whether to take payment upfront. it may even be a case where you build a good relationship with someone so you can eventually put them on credit.

give me a little call if you do have a customer that you want to take a look at or if you want any advice,

Michael (02920 855175)

 

[Chris Ashdown]

I assume this will be quite a small business at least on start-up

If you take payment up front you have no problems its sold and finished

If you take 25% as a deposit you have to spend hours chasing up the remained before you send the riders out and if they don't pay you have to make up your mind on if to still send out the riders and hope for payment to follow or quickly find another advert to fill the space at short notice and then get payment from then

All very messy and a lot of time chasing up money

Far better to take payment with confirmed order and be done with it you could also if they use business cards like many do nowadays use pre-authorisation where the card payment is basically logged but not taken until you authorise it the day the advert starts which gives a small bit of assurance to the customer that you are not a fly by night

 

[ethical PR]

I understand your point Chris but it absolutely depends on what is common practice in the industry the OP is in.

I buy a lot of advertising and wouldn't look at paying in full up front, particularly for an unknown start up.

What guarantee would I have that the ad would run?

That's why I suggested the OP does some research in the sector he has chosen to start up in to see what payment terms his competitors offer.

There's no point him asking for money up front if everyone else is offering a deposit and then payment within a certain number of days, or offering credit.

The OP can run a credit check on potential advertisers and I've already suggested he has properly drawn up terms and conditions which include terms around payment.

 

[J Arnold]

My plan is to offer my service at cost to 5 local companies in turn for testimonials. Hopefully this would ease some clients concerns?.

I'm the only company in my area offering this so at the moment its either accept my terms or don't use me. I'm the only choice.

Everyone seems 50/50 on the payment terms, I can see the points on both sides. Its a tough one?.

 

[ethical PR]

Well you're not the only choice your potential advertiser could use another advertising method that's available in your local area.

When I do media buying I am looking at what offers my clients the best return. So the advertising channel needs to let me know about audience reach, demographics, costs, process, terms etc

I take all of these factors into account when making a buying decision.

You also need to think about how you are going to help your clients evaluate the success of their advertising campaign.

 

[J Arnold]

You also need to think about how you are going to help your clients evaluate the success of their advertising campaign.

One way is to create an offer only using my trailers. We will also be handing out flyers if the customer needs to as well.
One potential client is an indoor climbing company that's new to the area. We are in talks to advertise for them during Feb half term. We can directly hand flyers to parents with kids in that age bracket as well as teenagers etc. This will be an offer only shown on our trailers and the flyers we hand out. This will then let us know how well the campaign went.

 

[Chris Ashdown]

Thats good, just keep thinking outside the box.

Would I be right in that you tow a small billboard around on a trailer if so think maybe illuminated adverts for the night time