I am an offshore marketing agency owner working with US companies. By increasing our client base, we see a trend of late invoice payments or some hustle getting the invoices paid on time.
Do you have any tips on how to do proper collection for offshore agencies?
Require payment up front, either in full or as a deposit. During your onboarding process, make it clear that your policy is to pause future work if the client becomes past-due. And then follow that policy if it becomes a problem—be polite but firm.
Concerned you don't have the reputation or track record to require payment up front? Look at the social proof you're using in your marketing. Mention U.S. brands you've worked with (if you have permission to do so). Share testimonials and case studies. The goal is to reduce risk to your prospective clients, so they're less likely to push back on pre-payment.
In the U.S., I see independent agencies doing primarily Net 30 as their payment terms. If you're doing that now, shorten terms for new clients to Net 15. (Don't do "Due on Receipt" since no one pays on receipt; you should have a real due that that's some point in the future.)
Here's more on preventing this long-term: http://sakasandcompany.com/clients-who-keep-paying-late/
Onshore agencies struggle with this, too, so you're not along in facing this problem. Good luck!
Background: I led business operations at 2 digital agencies, have worked in digital marketing since 1997, and advise agencies about operations, strategy, and leadership in (so far) 15 countries. If you have followup questions, request a call here on Clarity; I'm glad to help!
Change the billing terms. Instead of providing services and then asking to be paid -- ask for a retainer upfront that must be paid in advance. While many corporations like to play games with first classifying their agency as a "vendor" (instead of professional services), and then secondly requiring Net 60 or Net 90 terms -- this requires the agency to act as a bank to finance the client. If your standard terms are Net 30 and your clients are not paying on time -- simply explain to them that you are no longer extending credit terms due to their failure to remit timely payment. Change the terms to retainers (payable on the 1st day of each month or quarter). I had to do this with Dell and several others who were killing our cash flow by accumulating huge payable amounts and not paying on time due to overly complicated invoice approval processes and Accounts Payable delays. Remember -- credit terms are a privilege that must be earned. When the "trust is broken" you must change the billing terms.
Agree with getting paid upfront and for any payment that is not paid upfront, get a credit card on file that you can charge if it becomes late. Let the client know that you do this to keep the project moving forward. Also get to know the accounts payable person, so they pay you first. And lastly make sure your invoices are well documented so they don't have any questions.
All good and practical answers, but if you want a different legal perspective, here is a good talk with a memorable title from an agency that has worked with many clients over the years (warning, there is some foul language):
Mike Monteiro is the design director at Mule Design Studio. During a seminar at CreativeMornings, Mike gave a really insightful and thorough speech about how a creative professional can protect his or her work and payment in the event that something goes wrong with the client or job. This video is long but it should at least make you aware of issues you might face on your journey, including:
Have you ever had a client dismiss a project after you have already put in hours of work?
What are you supposed to do when a client brings in a second professional to also work on your project?
What can you do if a client says your work isn't really what they were looking for (and doesn't want to pay you) after you have already delivered the final project?
Mike's conclusions: Hire an experienced lawyer, get your contracts drafted right from the beginning, and use pressure to get what you are entitled to. Don't be a bottom.
All what was already said makes sense.
The first solution that came to my mind is:
- Ask people to pay: you personally, call the highest manager you came across and naively asked if they don't pay you because they don't like your work or in general respect the people working in your agency => the chance accountancy is messy vs. dishonest is very high, a top manager can fix this
- externalize this problem to a company whose job is to get invoices paid so you can focus on what you do best. To cover their fees, include in the payment terms that you wiull charge fees in case of late payment.
There is only one real solution. State Pay with 15 days on invoices. Give a tiered discount for pay within 15 days, 30 days, and 60 days. Charge a penalty for anything over 90 days and never count on getting paid sooner than 90 days. That is not to say that you will not be paid sooner than 90 days by some customers. Just to maintain your health and that of your business, don't count on it.
I am not trying to sell you on calling me. Really, I am pretty busy with my businesses and consulting. However, I need more info before I could have a greater impact in helping you.
Ask, Ask, Ask, then Ask again.
Here is $10,000 worth of information for free and in a nutshell.
Concentrate on the 3 M's. There are actually 7, but 3 will do for now. These are Market, Message, and Media. They come in that order.
Who is your target market (customer, clients, buyers, users, etc.)?
Tailor your laser focused message for this target market.
What is the best media mix to get your message to that market?
Here's what you do...first, make it an offer that is so incredible that they cannot resist. Secondly, do all the work for them. Make it so easy to make the purchase now that they can do it virtually without effort. Thirdly, give them an incentive to act right now. Fourthly, offer an almost unbelievable guarantee. Fifth, offer a bonus for acting now. There are many other incredible steps, but these steps should help the novice to the professional sell anything.
Whether you are selling B2B or B2C, you have to focus on selling to only one person. You can actually sell to one person at a time while selling to millions at a time. They are one and the same. Don't get off track, what we call digital marketing selling is just selling in print. And that has not changed since Cluade Hopkins wrote "Scientific Advertising." Really long before he wrote the book.
The secret to success: I have had the pleasure of knowing and working with some of the biggest names in business, celebrities, actors, entrepreneurs, business people, and companies from startup to billion dollar operations. The number one reason for their success is doing what they know and love while doing it in new, creative, and innovative ways.
Ask, Ask, Ask. Have thick skin and learn from each "mistake." In a short while, the market will tell you what you need to do and who and what you need to ask. But get started now even if that just means asking a contact on LinkedIn.
While you are thinking, think big and think of something at least 1% better, newer, or different. And being cheaper is not a winning strategy.
Make decisions quickly and change decisions slowly..unless you are actually going off a cliff.
Remember these two 11 letter words...persistence and consistency. They are two of the most important tools ever invented.
Treat everybody you talk to and everybody you meet (including yourself) like each is your number one million dollar customer.
Best of luck,
Take massive action and never give up.
Michael Irvin, MBA, RN