Marketing is one of the critical drivers of success for any business. Whether it's through SEO, PPC, or another form of advertising, marketing has the potential to bring in new leads and customers that are vital to helping your business grow.
A recent article in the Harvard Business Review by Business school professors Thomas Steenburgh and Michael Ahearne summed it up best when they observed that:
"Senior leaders have great confidence in their ability to develop innovations but not in their ability to commercialize them."
Even the best idea in the world needs good marketing to reach the right customers and be sold effectively. This makes marketing agencies one of the most essential tools for any business.
Yet, despite the critical importance of marketing and its ability to drive success, many marketing agencies are facing colossal cash flow issues due to late payments.
Chaser's 2022 late payments report shows the full extent of the crisis marketing agencies face. According to the survey, respondents from the marketing and advertising industry reported that 60% of their invoices are paid 15 or more days late.
Even worse, if you're a marketing agency, you could spend as much as seven or more hours per week simply chasing the money you are owed. This is a massive distraction for many agencies, taking valuable time away from their core activities and impacting their business performance. And in many smaller agencies, these types of credit control tasks often fall to the owners or managing directors.
The impact on cash flow is even more severe, with SMEs in the UK creative industry alone spending 56.4 million hours a year on accounts receivables tasks related to late payments. Even worse, £40 billion a year is written off as 'bad debt’ in the UK’s creative industry,' putting thousands of businesses at risk.
Thankfully, there are steps you can take to make sure your invoices are paid on time and that your cash flow is healthy. In this article, we'll set out seven simple but effective strategies for reducing late payments at your marketing agency.
With these tips, you can protect your agency's finances and ensure you get paid on time!
Clear and consistent payment terms are an essential first step in ensuring timely payments. Ensure you define your payment terms and include them in all invoices, contracts, and other relevant documents. It is also worth detailing your payment terms in your credit control policy, so this can be referred back to and updated if necessary in the future. The clearer you are about when payments are due and what happens if they're late, the more likely customers will be to pay on time.
Your payment terms should specify the procedure for payments, including any discounts you offer for early payment and penalties for late payment.
While each digital agency's payment terms will be specific to their own business, standard payment terms cover:
If you don't have payment terms, they should be your priority. To help out, we've created a credit control and debt collection policy template for businesses that you can use as a basis for your policy.
This template will help you set the payment terms and conditions and how to handle late payments and debt collection.
The most effective invoicing process is one that is streamlined and efficient. This means issuing invoices promptly, with all the correct information, such as itemized descriptions, accurate costs, and due dates for payment.
Disputes over invoices can slow down the payment process and should be avoided as much as possible. If a dispute arises, it should be resolved promptly, ideally by both parties mutually agreeing to a resolution. Dispute resolution is far easier if each invoice is accurate and complete.
Invoices should also be issued to the right person. There's no point in giving an invoice to the wrong department or contact. One of the best steps you can take is to find out who handles payments at your customer's business when agreeing your contract, get their contact details, and also ask for a backup contact for when you are unable to reach them.
When it comes to creating an accurate invoice, there are a couple of steps you can take, including:
By taking this simple precaution, you can make sure your customer can settle their invoice quickly and easily, helping you get paid faster.
If you're running a PPC agency or SEO agency, you'll know how important it is to be proactive and adaptable to changing circumstances. The same is true when it comes to effective invoicing!
Ironically, the first step in following up on invoices is to send your customers a preemptive email informing them that you will soon be billing them. By doing this, you can help ensure your customer is prepared to pay their invoices promptly and that no unnecessary delays occur.
Letting your customer know about an upcoming bill can also help to avoid bill shock. Bill shock occurs when customers are surprised by the amount they have to pay, leading to unnecessary delays.
In a perfect world, your customer will be ready to pay the invoice soon after it's issued. However, sometimes that is not a realistic expectation. If necessary, be sure to follow up with your customer per your agreed-upon payment terms and deadlines.
Here is a suggested schedule for follow-up:
Most importantly, maintain a positive attitude throughout all interactions with your customer and emphasize that you are open to finding an acceptable solution for both parties.
Positive customer relationships are the bedrock of any successful business, so make sure to treat your customers with respect and understanding throughout the payment process.
Late payment of invoices is often an emotive subject, as it puts massive pressure on the customer and the supplier. However, polite professionalism and open communication can often help resolve payment issues where aggression and threats will only worsen the problems.
Early payment incentives can be a powerful tool in encouraging customers to pay on time. It is an excellent way to reward them for settling the invoice quickly while recouping your money promptly.
There are several ways you can implement an early payment incentive. You could offer a discount for invoices paid within a certain time frame or make specific offers to customers who have had issues with late payments in the past.
Depending on how early your customer pays, you could also offer different discount levels. For example, you could offer a 2% discount for invoices paid within seven days, with increasing discounts for payments made sooner.
You might also choose only to offer early payment discounts to customers with a good payment record. This will require you to segment your customers using their payment data. However, this is a good idea on its own, as it also helps identify which customers may have payment issues in the future and take preventive measures.
The flip side of using early payment discounts is late payment charges. Late payment charges are the stick compared to the carrot of discounts and can be an effective way to encourage prompt payments. Ensure you know any legal restrictions in your jurisdiction regarding late payment charges before implementing them.
Whether you choose to use discounts, late payment fees, or incentives for prompt payments, communicate your payment terms and policies. Put them in writing and ensure your customers understand how they can pay you promptly. Doing so will set the stage for a successful business relationship with each of your clients.
As mentioned, businesses in the UK creative industry alone spend 56.4 million hours a year on accounts receivables tasks related to late payments. This wasted time compounds the financial costs of late payments.
Automation is one way that you can improve the efficiency of your accounts receivable system.
Investing in an automated payment reminder system can save your business time and money by quickly sending out emails or SMS reminders to customers when their payments are overdue.
Instead of spending valuable staff hours chasing up late payments, automated payment reminders can do the job for you. You can also add personalized messages, tailor the payment reminder frequency, and set up automatic escalation rules to promptly remind customers of their due payments.
This frees up your staff to focus on tasks, such as ensuring customers receive the best service possible or creative marketing initiatives to bring in more business.
Automated payment reminder systems can also help reduce the risk of customer churn and bad debt, enabling you to maintain strong customer relationships and grow your bottom line.
Automated payment reminders are also remarkably effective in reducing the number of overdue payments. A combination of SMS and email reminders increases a business’s chance of getting paid within a week of the invoice due date by 56%.
When it comes to setting up automated payment reminders, there are a few best practices to keep in mind:
By following these steps, you can ensure that your customers are updated with their payment obligations and that you get paid promptly.
Many businesses are wary of using a collections agency because of the potential repercussions. However, debt collections agencies are available that can help you recover debts without damaging your customer relationships.
Since SMEs in the UK alone write off £40 billion a year in bad debt, it's essential to take all reasonable steps to collect overdue payments. With an effective collections agency, you can rest assured that payment will be collected efficiently with minimal effort on your part.
The benefits of using a collections agency include the following:
When it comes to maximizing the benefit of a collections agency, there are several factors to keep in mind when selecting one:
With careful research and due diligence, you can find a collection agency that will be the perfect fit for your business and help you collect the outstanding payments owed to you. While it may take some effort and time, the results will be well worth it. If your agency is seeking debt collections support, Chaser collections use a professional and friendly approach to recover debts whilst protecting your customer relationships.
Marketing agencies are core to the success of any business. Companies need them to provide effective campaigns and strategies that will help your brand reach its full potential.
However, despite their importance, marketing agencies worldwide find it increasingly difficult to operate due to cash flow issues caused by late payments. Thankfully, there are many solutions that marketing agencies can use to ensure their long-term viability.
Clear payment terms should be established from the outset and adhered to throughout. This means specifying payment terms for each project in the contract, discussing them with clients before work begins, and avoiding surprises later on.
Once a project is completed, invoicing should be done promptly and accurately, avoiding any ambiguity or mistakes which can cause payment delays. Once sent, invoices should be followed up proactively and consistently to collect payments quickly.
Automation can be invaluable in helping to streamline payment processes, freeing up skilled staff to focus on work that provides value. Incentives can also be used to encourage clients to pay on time, such as early payment discounts or late payment fees.
If all else fails, rather than writing off the debt, collections agencies can be pursued to recoup the money owed. A good collections agency can help to recover unpaid funds without jeopardizing the relationship with your customer.
By taking the proper steps, businesses can ensure that payments are collected on time and in full, mitigating any associated losses. Properly managing payment processes helps to ensure cash flow remains consistent and healthy. It also allows companies to focus their resources on areas where they can add value and grow their business.
Chaser’s market-leading credit control automation saves customers more than 15 hours each week, and reduces their Days Sales Outstanding (DSO) by 75%. Compatible with any accounting software or system, the features help businesses to automate their payment reminders, reduce the time spent chasing customers for payments, and gain comprehensive insights on their credit control operations.
Chaser also offers expert debt collection services. Chaser collection agents provide a personal touch and, by focusing on positive customer relationships, help users recover their lost debts without damaging relationships or reputations.
Chaser's credit control services can help agencies manage their customer accounts more effectively and efficiently, freeing up valuable time and resources that would otherwise be spent chasing payments.
To learn more about how Chaser can help your business improve its accounts receivables process, recover lost debts, and get paid faster, speak to an expert or start your 14-day free trial.