Categories: B2B Payments

Modernizing Media Sellers’ Invoice-To-Cash Cycles

Media and advertising have endured a digital revolution over the last decade or so, but B2B payment practices remain stuck in the past.

From faxing credit card information to media sellers, to buyers delaying payments by 100 days or longer, the B2B relationship within above-the-line advertising — comprising of broadcast cable, television and radio platforms — can easily be strained.

For media sellers like broadcasters, accounts receivable (AR) management can be a minefield of friction points. While introducing AR automation technologies can be helpful, Paul Jaffe, senior director product, WO Payments Suite at WideOrbit, told PYMNTS in a recent interview that breaking down AR barriers to not only connect with broadcasting clients, but those clients’ own customers, is critical to improving payment practices and supporting healthier cash flows.

B2B Payments Notoriety

“The media space is exceptionally bad” for issues like delayed and late B2B payments, explained Jaffe. “DSOs [days sales outstanding] are quite large — in the 90s and 100s, easily, and especially for larger accounts. There are a lot of discrepancies and disputes around the invoicing itself, and there is a lot of scrutiny that tends to slow down the larger agency buyers from paying on time.”

While smaller buyers tend to delay payment for the sake of holding onto capital for as long as possible, for larger buyers, invoice discrepancies that delay payment are reflective of the challenging nuances of the advertising space, an arena enduring significant disruption amid broadcaster consolidation and heightened pressure to expand their online presence.

As these trends disrupt advertising strategies, they’re adding even greater complexity to a market in which it can be particularly difficult to establish pricing on advertising spots based on a slew of factors, including audience, reach and lead and sales generation.

While media sellers struggle to manage invoice disputes and accelerate invoice-to-cash cycles, Jaffe noted they’re also struggling to manage outdated, expensive payment habits from their buyers.

Fax Machines and Credit Cards

Jaffe pointed to on example that reflects just how challenging media sellers’ collections processes can be. It’s not unheard of, he said, for buyers to send over credit card data via fax, adding to the risk of fraud, data entry errors, and elevated manual workload requirements for these businesses.

“Many of them are doing it out of repetition,” he said of buyers’ payment habits. “But as soon as they find out there are better ways, and there is more scrutiny from their auditors, they dissect their business practices.”

Even as media sellers encourage their customers to nix legacy tools in favor of electronic payments via online portals, they can still struggle to navigate the pain of delayed payments.

Commercial credit cards, for example, are often touted as a beneficial B2B payment solution that can accelerate payments to suppliers while still providing buyers the capital float they need. Yet according to Jaffe, in practice, this doesn’t always happen for media sellers that decide to accept cards.

“Media sellers are fine, in general, taking credit cards, as long as they’re accelerating the payment cycle,” he said. “Buyers will do that for a month or two, and then come around and flip back to 100-day payment terms. Broadcasters end up back with the same DSO aging levels, and still eating the credit card fee. That’s where the broadcasters are frustrated.”

Servicing The Customer’s Customer

Like in other industries, AR technologies for the media sector increasingly view an opportunity in not only servicing their media seller customers, like broadcasters, but also in expanding their presence with their customers’ customers.

“The uniqueness and challenge of this industry is that there are really multiple tiers,” said Jaffe of this ecosystem of media sellers, advertising agencies and advertisers. “That’s where a lot of complexity is solved through software flexibility.”

He pointed to WideOrbit‘s ability to not only support a range of payment methods but establish custom controls on those methods as one example of how the technology that sits between media buyers and sellers can help guide improved B2B payment practices. For example, technology can support credit card payments, but only up until a point. If an invoice goes beyond 60 days past due, for example, technology can automatically enable a seller to stop accepting cards and only accept ACH payments.

Supporting self-service terminals through which buyers can manage their own payment processes like scheduling and onboarding can further support stronger buyer-supplier ties in this market. Further, noted Jaffe, adoption of automation technology can arm sellers with the data analytics they need to assess buyer risk and make more strategic decisions about their business partners and payment agreements.

Cash flow is king, and to improve suppliers’ order-to-cash cycles, AR technologies cannot be a one-sided offering.

“Sellers are really looking to help their cash flows and automate workflows,” said Jaffe. “One of the main focal points is around automating AR and collections — and focusing on our customers’ customer.”

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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