Pay For Your TV As You Go
For small business & professional TV advertisers, it's the way to go!
Why apply for credit? There are only two reasons that I know of why you, the TV advertiser, would want to apply for credit with a television station and pay on billing, rather than just pay up front, a few weeks at a time. One reason is good, the other bad.
1. Good Reason to Use Credit: You are a very big company that makes all payments to vendors through an Accounts Payable Department. We really don't expect Ford or IBM to pay for their television advertising any differently than they pay for anything else -- through their corporate system, on billing.
2. Bad Reason to Use Credit: You intend to pay for your advertising with the money you make from the advertising. This reason is bad because you never know, in advance, how well your advertising will work. The advertising may be wildly successful but you still don't know how long it will take new customers to pay you. And you never know what unexpected budget demands will arise for you at the same time your TV bill is due.
There are several good reasons to pay as you go:
1. TV stations will sometimes run spots you didn't order. I have had stations run twice as many spots as I actually ordered for one of my clients -- and then bill for them! But my client got all those extra spots for free, without argument, because we pay as we go.
If I point out to a station that they have gotten an order wrong, I can say, "When I paid for the order, if the amount I paid didn't match what you booked then you had an opportunity to clear up the problem at that time."
Here's what can happen: The station bills you for more spots than you ordered. But the salesman, covering his you-know-what, swears up and down that you did order all those spots. The station takes you to small claims court and gets a judgment against you. I have seen it happen.
But if you had paid cash-in-advance, it could not have happened because you would not have had a credit application on file and without a credit application, the station has no weapon to use against you. So by paying cash in advance you protect yourself against this problem.
2. Paying up-front puts you in a position of strength with salespeople. Most TV salespeople are paid on the basis of orders, rather than collections. So some of them will use every trick in the book to try to get you to order as much airtime as possible, long before you even know what works and what doesn't. When you are planning to pay for your advertising way out in the distant future you are much more vulnerable to sales pitches than you are when you are paying as you go.
3. You take no chances on ruining your credit. TV station credit managers get together with each other and trade information. If something happens and you get behind with one station, that station will tell everyone who will listen.
4. Most TV credit applications make you personally responsible. If something terrible goes wrong with your business before you pay them, even if your ad agent runs off to Mexico with your payment, they can go after you personally for the money.
5. Your ad agency -- if you use one -- is not a bank. An ad agent who files a credit application with a TV station, then puts his client on the air and bills the client is, in effect, loaning the client money, like a bank. If, for any reason, the client can't pay, the station sues the agency and the agency can be quickly driven into bankruptcy. Then the TV station goes after the client personally for the money.
Huge agencies with huge clients can take those risks. In my opinion, small agencies that "loan" money to their clients only do so because they they are afraid to ask for money up front. That's just foolish. Look for an agent with more courage.
Although it's rare, yes, there are occasions when an ad agency will take a client's money and then not pay the TV stations. If you are suspicious for any reason, you can make sure that your ad agency is passing along your money by simply calling up the TV stations around the time your schedule starts running and making sure they've been paid. You could even ask them to inform you any time your money doesn't get passed along in a timely manner.
So -- pay on credit or pay as you go? Really, what's the downside to paying up front? When you pay on 30-day billing, after a month or so you are paying every month -- the same as when you pay as you go. It just starts a month later. (That is, assuming you are planning on paying the bill!)