Late, Slow Pay Clients

[Mark Suszko]

Slam it shut, and direct all further correspondence to the company ceo/owner, certified mail, with signature.

When the phone starts ringing, stay dead calm. Respond to nothing they say, except to say: “we’re glad to work out a paymanet plan for you to get your outstanding bills paid, but until we’ve cleared this huge debt, we can’t do any more work, and we can’t release any materials. Its just business. In fact, we’re needing to erase some drives to make space for a paying customer. We’ll take a certified bank check for x amount to settle the immediate past-due balance.”

Any/All new work for them is done on a cash in advance/cash on delivery basis. The checks must clear FIRST.

Archive all project files and source materials and box them up for storage.

Surrender no tapes or dubs unless they are watermarked “approval copies” with a time code window burn across the middle or upper third. Get a receipt for each one handed over.

Notify fedex you no longer accept charges from this client, insist on all future shipping being prepaid by them. Refuse to accept deliveries billed to you.

Assume the money is gone. Assume this client is burned and will never come back. Assume a small claims fight for the tapes at least. Assume you are not the only one they have been doing this to, and that you will not be first in line to collect anything if they go broke.

Now you are free. Free of guilt or remorse. Free to do whatever must be done. Be firm, never falter; grinders prey on weakness, guilt, and second chances. All the leverage you have is in that footage. If they really need it to make their money, they will find a way to pay you. If too much time goes by, the footage becomes worthless to everyone. You just have to wait them out now.

[Bob Zelin]

Hi Chris –
boy, I am almost never on this forum. It’s good to talk with you.
Ron Lindeboom wrote a CLASSIC article on Grinders, that I think about all the time. Its a MUST READ. I am in the land of infomercials, and your experience is commonplace here in Florida – the land of “buying some swampland cheap !”. Do you really need to hear “gee, don’t work for them anymore, and collect your money”.
You know what to do, and you have received the proper advice from so many of the replies. There are plenty of people out there in every industry that seek out “suckers” that will work for free, based on a promise. No one is able to avoid this type of client, at least once in their career.

Bob Zelin

[Chris Blair]

Bob,

These guys are a little different in that we have been paid almost $400,000 in the last 9 months on projects, with most of that being paid on-time. It’s only in the last 3-5 months that the payments have gotten slow. But it’s certainly no coincidence they’re struggling financially in this economy. It will all be resolved one way or the other very soon.

My hope is they pay it and we continue doing work…even though they are classic “grinders.” If they pay on-time, it’s constant work, they never budget or discuss fees, and they make SO many changes to spots, the billing can be phenomenal.

I did read the “grinders” article a while back and had to chuckle because it’s so true. Luckily, in 12 years most of our clients have been excellent. This is only the second one we’ve had like this and funny enough, they’re both VERY large, nationally known companies! Even the director of advertising was the same at these two companies, although he’s not the common link between their poor management. It’s the owner/CEO. They’re both classic egomaniacs that got lucky with a concept and still run the companies like they’re the local corner gas station. We have local retail clients that run their marketing and advertising in a more sophisticated and intelligent manner.

I’ll give you an example. We’ll spend a month shooting, editing, revising, then revising some more a series of spots for a promotion. They’ll pay a celebrity doctor to go on camera and endorse the product or service. Then, they’ll place the spot, and if after ONE day the call volume isn’t higher than the previous weekday or previous month or previous year, the owner will quite literally pull the entire campaign! No…stop laughing…I’m serious. The owner pulls all the strings and makes all the decisions.

Another example: they’ll introduce a new “revolutionary” product. In one case, it was actually a VERY good product developed by the USDA that they licensed. They did the same thing, spent a ton of money producing spots, ran them for 3 days, then dumped the campaign because call volume was down over the previous like periods. And keep in mind they spent a small fortune on packaging and inventory for this stuff.

With this particular promotion, when we asked about the product’s status (we produced spots that never aired) they told us they were discontinuing it. Then last week…they ordered up a NEW TV spot promoting this product again. We said, “I thought it was discontinued?” Their ad director said, “I thought it was too!”

So that should give you some idea of what we’re dealing with. If I wrote a book detailing the stuff that goes on, nobody would believe it. It would be like the silly workplace sitcoms on second tier cable TV networks. Except now I don’t think those sitcoms are so silly after all!

Anyway…I’ll update this thread in a week or two as things shake out.

Thanks for all the comments.

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com

[Chris Blair]

Wanted to update this thread. It’s been a month and in that time we eventually had to threaten to suspend work and withhold uploads of the client’s spots. Within a day we had a check for $50,000, and a week later a second check for $50,000. The Dir. of Advertising has promised to stay on top of this and get us paid weekly. The client is now current with billing although they have another $100,000 in billing coming to 30 days early next week.

We’re still doing work and incredibly, the last month was the highest billing month we’ve ever had with them despite this economy and their recent troubles.

Their business appears to have stabilized with no reports in the last 3 weeks of any additional store closings and no reports on franchise websites or blogs of any additional future closings.

Unfortunately, this has strained our relationship with their Dir. of Advertising, who is undoubtedly under tremendous pressure of her own without the added stress of our billing issues.

It has also damaged the enthusiasm people in our office have for the work they’re doing for the client. We still want to do good work, but we used to do ANYTHING to get this client’s work out the door and ensure it was well-done. That attitude has naturally cooled some after all this.

We’ve also recently gotten LOTS of questioning about piddly line items in our bills…like scriptwriting charges, which are typically 2-3% of total billing. Very odd indeed considering each spot goes through about 8-12 revisions (which include re-writes).

So we’ll “ride the pony” as long as it’s still kicking and see where it takes us. We’ve discussed internally dumping the client after the first of the year, but in this economy, we’re not sure this would be a good move. We’re seeing cutbacks in several of our other big clients so coupled with that, dropping our largest client might not be such a good idea, even if it did mean more sanity and joy in our lives!

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com

[Chris Blair]

I updated this thread exactly two weeks ago with seemingly good news. Unfortunately, I was premature! Today we learned that the client in question is shutting down the franchise corporation and all corporate stores. All but a handful of 70 or so corporate employees were unceremoniously let go today, including the VP of Advertising, who we worked with.

None of our contacts knew what was going to happen to the remaining franchise stores, but it’s unlikely they could continue without the support of the Franchise Corporation, which supplies them products, marketing materials and placed their media.

While we’ve received significant payments each of the last three weeks, we still have a sizable sum in current billing. Our corporate contacts told us, quote” “not to expect payment for those invocies.”

So while we collected on all overdue invoices, we still had current billing from the end of September totaling quite a large sum.

One of our contacts at corporate said they were told the recent financial meltdown, along with the stock market nose-dive, prompted the sole owner and CEO of the company to “cut his losses” and shut down. As an aside, their CEO is a well-known financial figure in the Northeast who owned a prominent NBA sports franchise from 1982 to 1986. He’s worth an estimated $50-100 million. So while he could easily afford to shut down this corporation and do it in an ethical and financially responible way. He’s chosen not to.

Makes me feel all warm and fuzzy inside!

The good part of this story is we were able to collect roughly 85% or all the money owed for work we did over the last 10 months, and it was a sizable sum that overall made it worthwhile to take on the account.

We’ve also been through the loss of a large client before…back in 2004 when we lost a large retailer who, at the time accounted for about half our revenue. So we know how to survive the loss of a high-dollar client. Unfortunately, that always means reducing staff and possibly selling equipment. But you do what you have to do to survive.

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com