Chris Zukin, Cimmie Schultz and Rachel Anderson of Meadow Outdoor gave an outstanding talk on out of home credit and collections at the IBO conference today we’ll run Cimmie Schultz’s comments on vetting clients.  In a followup column we’ll feature Meadow Outdoor’s Chris Zukin and Rachel Anderson on collections.

Cimmie Schultz on credit applications

We require a credit application for every new customer, with the only exception being if the client chooses to prepay the entire contract upfront. I’ve been asked whether we receive pushback on this policy — and yes, occasionally we do. However, in my 16 years with Meadow, I’ve only seen a handful of clients walk away. Most either complete the credit application or opt to pay in full upfront.

Call references

We ask customers to provide three references, and I personally call each one to verify the client’s payment history. Honestly, it’s my favorite part of the process. What I’m really listening for is that infamous pause — the one that signals something bad is about to be said.  It doesn’t happen often, but when it does, I always appreciate the honesty.

I ask each vendor three key questions:

1. How long have you been doing business with the client?
2. Do they pay on time, or are they occasionally slow?
3. What’s their average monthly billing?

The answers help us get a clearer picture of what we can expect from the client moving forward.

The personal guarantee

Whoever signs this section is personally responsible for the bill if the company stops paying. This is clearly stated in both our credit application and our contract. It’s a continuing guarantee— meaning the person who signs is personally liable for each future contract, even if they don’t sign another guarantee.

This clause has proven to be a powerful tool, both for collecting payment and in litigation. For example, just a few months ago, we had an issue with a medical company based in another state. While the most recent contracts were signed and guaranteed by their office manager, the original credit application — signed eight years ago — was completed by the company’s president.

When they stopped paying and went silent, I reviewed the file and found the president’s signed guarantee. I sent demand letters to the office manager, the president, and the company itself. Within 48 hours, the CFO called me and paid the outstanding balance.

Funny how that works — all thanks to the continuing guarantee.

Don’t permit sequential liability

Our Terms of Sale sets the expectations of what our payment terms are and the consequences of not paying on time.  One important note: we do not include sequential liability in our contracts.

Sequential liability is when an agency or third-party states that if we don’t get paid, you don’t get paid and we have no recourse to the ultimate advertiser. If an agency wants to do business with us, they are required to complete our credit application and agree to our terms and conditions.

Never say no, say prepay

We never say no in credit. We say prepay. We will often ask for three months prepay, six months prepay, and sometimes we want the entire contract up front. They can say no and walk away but we never say no.

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