TO AVOID COLLECTION HASSLES, INSIST ON CREDIT REFERENCES
Almost unique among small businesses, some local-market radio stations are still hesitant about asking new accounts for credit references. I understand the reasoning: business is harder than ever to come by and stations would rather take a chance than annoy new customers about their credit. That approach may have worked for decades. Now, it’s asking for collection problems. That’s because, in the present economy, the old “If they won’t pay you in 60 days they won’t in 90” has been supplanted by a new universal truth:
Net 30 Has Become Net Whenever.
I was discussing this with a station owner recently. He said, “It’s fine for some stations to do credit checks but that would be suicide in this market”. (That’s what everyone says about every market, by the way, but let us continue.) “The local business people pretty much know each other. We know who’s a deadbeat and who isn’t.”
Really? Do you
- Read your customers’ balance sheets and have access to their bank accounts?
- Know all their professional and personal financial details?
- Have an accurate update on their personal credit scores?
Of course not. But while personal ethics may say that none of that is any of your business, if you’re going to sell them radio advertising, it definitely is.
We’ve all spent years patiently explaining to the unknowing that no, we aren’t selling “air”. We may be ON the air but what we’re selling is advertising—the wisest business investment ever and the only thing that will absolutely bring customers to them, if it’s done right. Selling “air” is worthless unless one is in the oxygen tank business.
But if you don’t value your product enough to insist on the proper business relationship of “product ordered” and “product paid for”, you’re automatically devaluing the time on your station(s) to nothing but the price of air. Which is free.
Look at it another way: If you walk into an appliance dealer and ask him to let you have a washing machine based on your word that you’ll pay his bill in thirty days, do you think he’ll go for it? Of course not. No matter how well he knows you that washer won’t clean a fiber of your clothing until you’ve crossed his palm with cash, a check, a credit card or a credit application—which will be checked and approved before the machine is delivered.
This is how business is done in even the smallest towns. The dealer knows that. You know that. No one questions it for a moment.
Yet when stations sell advertising based only on a contract (or, even worse, a verbal order) they’re saying “My inventory isn’t worth as much as yours so I don’t have to worry about being paid for it.”
Today more than ever, successful radio stations operate as solid business organizations, even if they’re operated by only one person. There are several ways to get paid for your advertising, all of them standard business practices. In order of preference:
- Cash or check up front—with a discount, if you like
- Credit card—the business’s or the owner’s, whatever
- A completed and approved credit application
- A signed statement right on the advertising contract that the client personally guarantees payment
If you use a credit app in a smaller market, you need basic info from three creditors: Business name, accounts receivable person’s name and phone number. Then, before one second of a commercial appears on your air, someone needs to call each of those references and politely ask: “We’ve been given your name by _________ as a credit reference. Can you tell me about your experiences with them? ”
Businesses share this information all the time. It’s routine. Most of the time the answer will be positive. Once in awhile, though, a red flag will be raised. When that happens, you have to go back to the customer and say, “We’re going to need payment up front for now, just to get you started. That’s our policy.”
And it is your policy, if you want to get paid in the current fragile economic environment. The cold fact is that any business owner who bristles at the concept of applying for credit or paying up front is absolutely going to be a problem down the road—and it will probably be a pretty short road.
