Who Owns A/R?

Getting the agency's bills paid is a thorny subject at most agencies and one that you could easily write a book about, but this is a blog so we're going to touch on the key points and dive into some solutions.

41751BD400000578-4609304-image-a-6_1497570393599The underlying issue here is that nobody in the agency wants to be the debt collector. That particular job is vilified in our culture which explains everyone's aversion to it. As such, people tend to have a strong opinion as to why the job of debt collection doesn't belong in their department or competency. The two that usually wind up on the hot seat are Finance and Client Services.

 

 

 

Finance thinks the job belongs to Client Services, because:

  1. They own the relationship with the client
  2. They're the ones who negotiate the costs of the projects and get the Statements of Work signed
  3. They have the greatest influence with and chance of convincing the client to pay the bill

 

Client Service thinks the job belongs to Finance because:

  1. Client Service needs to protect their relationship with the client if they're to continue to win additional business
  2. The clients they engage with are rarely the individuals writing the checks (that's usually the client's Accounting Dept)

 

What's the solution?

The solution rests in getting the account set up successfully from the beginning. Ask the right questions at the start of the relationship:

  •  
  • How does the SOW process work at their company?

  • Who's involved? (the more detail the better - you want names, introductions and contact details for everyone involved)
  • What are the payment terms?
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  • What does the escalation path look like?

meeting-1Get all the details in place and make introductions before any bills have been sent. It's even worth sending the Finance Director out to meet personally with the client's Accounting team to build that relationship directly and make sure everyone is 100% clear on the process. Doing so may be the single most effective tactic at getting your bills paid successfully.

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Automate as much of the process as possible.

If you don't have an agency management system that enables you to automate invoicing, A/R, billing notifications, etc. think about upgrading to one that does. Keep human involvement limited to escalation instead of first or follow-up contacts.

 

Always approach payment issues in good faith, assuming that everyone is on the same side and wants to get the (approved) invoices paid. Sometimes clients face unforeseen cash crunches that wind up hitting all their suppliers and it's embarrassing for the Accounting team to relay that, so instead they do the human thing of ghosting the agency and that's where the Finance Director's relationship comes into play, because the client's Accounting Dept. will ghost the client as well (which makes Client Service's efforts useless).

 

Adjust payment terms when bad behavior occurs. Clients who make a habit of screwing their partners learn to expect significant upfront payments to continue working with those partners. At a minimum, 50% of the total project cost should be due upon approval of the SOW with the remaining 50% due at the first creative review - but be sure to partner with your client in developing the terms so that nobody gets surprised when the invoice shows up.

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If the account is set up properly and the agency has a good agency management system, then the question of who owns A/R is perfectly clear. The system itself should bear most of the burden when it comes to notifying and reminding the client's Accounting team that the invoices are due, and the Finance Director's relationship with the client's Accounting team will take care of any bumps in the road. Nobody has to play Collections Agent if the lines of communication are kept open, the terms are followed and the escalation path is clear.

 

Unfortunately, if you're still using spreadsheets or an antiquated Accounting system to handle your A/R and other Accounting tasks, you're stuck in a bit of a nightmare. See what's possible by scheduling a free online demo of Advantage's agency management system. You'll discover how much easier life can be and how much more successful your agency can be in getting receivables paid on time with an automated solution.

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