collective wisdom® SZABO ASSOCIATES, INC. VOLUME 11, ISSUE 4, DECEMBER 31, 1996 Dear Friends: Media Credit Managers “What do you think will be your greatest challenges and opportu- nities in the coming year?” That Speak Out on Issues was the question we posed to several media credit managers for Part I—Liability, Reengineering, Technology, this issue’s feature article. Their answers covered a num- Bad Checks, and Bankruptcy ber of topics—so many that we decided to expand the article into What’s on the mind of media an agency or service indicates a a two-part series, to be concluded industry credit managers? Szabo position of sequential liability, we in March. We think you’ll find Associates interviewed managers in inform them of ours,” says Best, their comments interesting, and different areas of the media indus- who admits his company’s joint we invite you to send us your own try—television, radio, cable, news- and several liability position has responses to the question as well. paper, magazine, and entertain- not yet been tested in court. We want to hear from you! ment—and asked them what chal- Brenda Smith, Business There is much discussion in this lenges they anticipated in the com- Manager of WOAI-AM, KTKR-AM, issue about technology. Szabo ing year. The answers were varied, KQXT-FM, KAJA-FM, KSJL-FM Associates is also working to maxi- with some concerns specific to a mize the opportunities that tech- Radio in San Antonio, Texas, feels nology offers. We are now trans- particular medium, some shared by that the liability issue is further ferring thousands of pages in our all media, and a few shared most complicated by a disturbing library to PC, and later this year certainly with credit managers in trend—advertising agencies taking we will be able to send any infor- any industry. In the first part of our longer to pay, and large agencies mation in our library resource to two-part series, managers discuss going out of business. our customers via e-mail. liability, reengineering, technology, “We deal with the problem by Our business continues to grow, bad checks, and bankruptcy. first sending a copy of the con- including internationally. Some of tract directly to the advertiser so our employees are rising at 2:00 Liability Issues the advertiser is aware of what the and 3:00 in the morning to call Continue to Plague agency or buying service is other time zones. Maybe I should “Who is responsible for payment?” doing,” says Smith. “Then we have given them alarm clocks for is a nagging question that continues Christmas! require that the person responsi- And speaking of Christmas . . . to cause headaches for many credit ble for payment—the advertiser the 1996 Szabo Christmas party managers. —sign the contract and cut the was a smashing success. We thank “There is an increasing number of check.” all our friends who helped us buys being placed involving several Another problematic trend celebrate our Silver (25th) parties—advertisers, ad agencies, regarding liability has been Anniversary and another great and buying services,” says Neil Best, observed by Jeanne Puttre, year for Szabo Associates. Corporate Credit Manager at Collections Supervisor at USA Best wishes for a happy and Meredith Broadcasting Corporation Cable Networks. “In the past year prosperous 1997, in New York City. “Orders that sta- or two, more and more agencies tions receive do not always clarify are signing contracts ‘in care of’ who is responsible for payment.” advertisers,” she says. The joint and several liability posi- “Additionally, since agencies book Pete Szabo, President tion is contained in Meredith’s cred- in advance, sometimes we are not Szabo Associates, Inc. it application as a condition. “When —continued on page 2

1 others utilize electronic invoicing, in-advance payments, and elimi- Credit Managers which will definitely become more nate delay tactics,” she says. “As common.” EDI becomes universal, a claim Speak Out Gallo attributes the current trend that ‘the invoice was lost’ or ‘the of agencies stretching out payment check’s in the mail’ will be a —continued from page 1 terms in part to the “growing thing of the past.” aware at the outset that the pains” that accompany technologi- Technology will also speed the agency is placing advertising ‘in cal change. “Agencies are them- upfront credit approval process. care of’ its client.” selves undergoing reengineering, “I believe that in the future we’ll Regarding ways to address the creating additional strains on our spend much less time gathering problem, Puttre says, “It is now credit departments to get the credit information,” says Kathy becoming increasingly important money in on time,” he says. Clark, Credit Manager at Disney. to get as much information as Mike Singer, Director of Credit “We’ll have immediate access to possible on the advertiser as well and Collections for The Hearst that information via technological as the agency before extending Corporation Service Center, con- delivery systems. While we still credit.” curs. “Agencies have definitely been pay for information services, Pamela Sharp-Brown, Business tightening up,” he says, “but I hon- we’re finding that we can obtain Manager of WODT-AM, WQUE- estly don’t believe they’ve made a similar information through the FM, WYLD-AM/FM in New conscientious decision to withhold internet, and we’re now working Orleans, La., also runs checks on payment. It’s because their payables on strategies to accumulate more advertisers represented by agen- departments have been downsized.” data that way.” cies, even if the agencies are reli- Singer believes that the trend The immediacy and accuracy able. “Agencies often will not take among agencies to send out one facilitated by technology can, the responsibility for payment if payment per month rather than however, cause discrepancy the advertiser doesn’t pay them,” weekly is a function of fewer peo- issues relatively unheard of prior she says. “With a loss of 10 cents ple doing the job. “Of course, we to computerization, according to on the dollar at 90 days, we need bill throughout the month, and our Neil Best of Meredith to do what we can to insure terms are net 30 days, so we often Corporation. “Ten years ago, it someone pays us.” do not receive payment within 30 was understood that if a spot ran days,” he says. within a couple of minutes of Reengineering, Technology Singer states that his toughest time purchased, it was accept- Impact Credit and problem lately involves his “good” able,” he says. “Now, if a spot Collections Processes accounts. “In the last six months, doesn’t match almost exactly to Pete Gallo, Credit Manager of I’ve seen payments slowly slipping,” the time purchased, it gets USA Today, calls 1997 a “time of he says. “While payments are not so ‘kicked out’ by the computer, and change,” as technological slow that they’re something to get there’s a problem. Additionally, advances, reengineering and alarmed about, the trend is a fairly with the amount of information “reallocation of resources” create steady one, and it’s making our DSO available to the advertiser, particu- both challenge and opportunity go up.” Singer’s department is look- larly demographics, advertisers are for credit departments. He feels ing at various ways to reverse the more savvy and watchful about how the transition period will take trend. “We have all payments sent to their agencies are buying time.” several years as companies get up one central lock box to minimize to speed with technological delays and are working toward faster Bad Checks and advances. “Many companies are resolution of billing discrepancies,” Bankruptcies Increase changing their organizational he says. “I also believe that as more “Our challenge is constant vigi- structures and consolidating func- agencies improve their technological lance,” says Bill Wallace, Credit tions into one centralized capabilities, we will get payments in Manager of theDaily Oklahoman. source,” he says. “For example, faster with electronic invoicing and “We’ve had accounts on our books collections might be separated direct deposits.” for years, then suddenly they from credit, and credit might Jeanne Puttre of USA Networks slow up with payments, getting become part of customer service. believes also that electronic data later and later each month,” he Of course, many companies are interchange will be a boon to the says. “That’s when you realize further along the technological credit and collections process. “EDI you’ve got a Chapter 11 waiting curve than others. Some newspa- can minimize miscommunication, to happen. We have to take a pers do not even use PCs, while facilitate money transfers for cash- renewed interest in these 2 accounts, get new D&B reports, among advertisers. “We deal with and make a recommendation to many small local businesses,” she CALENDAR OF EVENTS management on how to handle says. “I think many declare bank- January 13-16 the problem.” ruptcy as an easy way out. We also National Association of Television Pamela Sharp-Brown of WODT have problems with returned Program Executives cites an example of an advertiser checks, particularly among advertis- New Orleans, Louisiana that ran spots for five years with ers on our photo advertising chan- February 11-13 no payment problems. “Suddenly nel, where the cost for a 12-second Georgia Association of the payments stopped coming,” spot is only about $60-70 per week. Broadcasters, she says. “It turned out that the I believe they should always pay a Radio and TV Institute company had been bought out, month in advance,” she says. “This Athens, Georgia although the name, address, year we required political advertisers everything was the same. We lost to pay in advance, but we still ended February 19-21 Broadcast Cable Credit Association a lot of money.” up with returned checks later.” San Antonio, Texas Pete Gallo of USA Today speaks Brenda Smith of WOAI deals with of the risks inherent in the retail cash-in-advance local advertisers by industry. “There seems to an over- requiring the sales representative to increasing bankruptcies and hav- abundance of retail outlets com- bring in a cashier’s check prior to ing to consider marginal accounts, pared to the demand for goods,” running the spot. “For non-local our credit policy remains the he says, “and the risk filters down advertisers, the requirement is a same. We do more credit work to newspapers. There are a lot of check seven days before the sched- up front as opposed to collec- discrepancies coming in from ule starts, to provide time for the tions. It’s important for manage- retail, and we need to react quick- check to clear,” she says. “And for ment to be your ally and under- ly, putting more emphasis on cus- out-of-town entertainment enter- stand that the company loses tomer service.” prises, we require a wire transfer.” money when an account ages 90 Bea Giordano, Advertising Sales “I believe bankruptcies among or more days. This revenue is Coordinator for Time Warner our advertisers have quadrupled in their greatest liquid asset and Cable Advertising in Newburgh, the last year,” says Dee Vickers, needs to be protected,” she says. N.Y., has noticed an increase in Credit Manager of WDIV Television “In my opinion, it’s better to run bankruptcies and bad checks in Detroit, MI. “In the face of promotional spots for the station than to run an ad for someone with bad credit.” Pamela Sharp-Brown of WODT says this year her management instituted an effective way to keep national accounts from aging 90 days. “At the end of a month, if an account hits 90 days, the national rep’s commission is charged back, so the national rep gets an adjusted commission,” she says. “Then when the money comes in, the commission is added back. It’s a real incentive for them to get the money in on time.” In our March 1997 issue, man- agers discuss international busi- ness and management support. We would like to thank Neil Best, Brenda Smith, Jeanne Puttre, Pete Gallo, Mike Singer, Kathy Clark, Bill Wallace, Pamela Sharp- Brown, Bea Giordano, and Dee Vickers for their contributions to Part 1 of this article.¨ 3 Why We Work the Way We Do Bankruptcy Expertise That “B” word is about the • When can I safely issue credit ize in collection cases and have most unpleasant sound a credi- to a Chapter 11 debtor? in-depth knowledge of bank- tor can hear. Unfortunately, it’s Our people regularly work on ruptcy procedures. (You saw an sometimes all too real. The creditors’ committees and credi- example of that in an article on important question is how a tors’ plans, both in and out of Chapter 11 debtors in the last creditor can deal with it — bankruptcy court. Because of our issue of “Collective Wisdom.”) before, during and after various knowledge of debtor and creditor In addition, our Library kinds of bankruptcy. rights, we can usually negotiate Resource Center contains the Szabo clients know they can the best possible settlements for latest information on turn to our experts to help our clients. debtor/creditor rights and answer questions like: We have our own litigation pertinent court cases. department, made up of para- Even all this know-how can’t • How can I obtain payment legals who have specialized train- make the “B” word pleasant. prior to the debtor’s bank- ing in bankruptcy procedures. But the more help you get from ruptcy without risking losing We have a close working rela- your collection service, the a preferential transfer? tionship with our own network of easier it is to manage credit risks • How can I see that my rights attorneys located throughout the more profitably.¨ are protected? country. These attorneys special-

©Szabo Associates. Inc. 1996. All BULK RATE rights reserved. Materials may U.S. Postage SZABOSZABO ASSOCIATESASSOCIATES INCINC.. PAID not be reproduced or transmit- Atlanta, GA ted without written permission. Permit No 747 Collective Wisdom® is a publication of Szabo Associates, Inc., 3355 Lenox Rd., Suite 945, Atlanta, Georgia 30326, Tel: 404/266-2464, Fax: 404/266-2165

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