Vandana Sethhi, Founder and Director – Water Communications, Mumbai based 360 degree communications agency recently participating in a panel discussion organized by a reputed college in Mumbai shared her views on one of the biggest challenges faced by the advertising industry ‘ Recovery of Dues – An Agency Perspective’.
During the discussion, she highlighted how this problem adversely affects the advertising agencies, particularly the small and medium level agencies. She said, “Since the onset of civilization money has played an important role in aiding development and progress of mankind over the ages. The sheer importance of money and financial power can’t be undermined. Kingfisher once the pride of the Indian skies whose bad debts now hangs like an albatross around the neck of the banks who lend them loans without battling an eyelid. All this only goes to prove that in modern times, money is closest to buying happiness and peace of mind, the absence of which can cause untold grief and suffering.
Coming down to a micro level of an advertising industry vis-à-vis the financial angle of recoveries of dues it is indeed a dangerous and tricky situation which is witnessed by most small and medium level agencies across cities with dues ever mounting. Indeed the situation becomes so bad at times that agencies shut down because of the bad debts and outstandings. There thus, needs an urgent intervention by the concerned bodies and associations to minimise these dues. What is needed is firm and unrelenting actions by the affected agencies and supported by all concerned. It is because of the current loose arrangements that errant clients often get away scot free. The sheer importance of finance at the right time for an agency can be gauged by the fact that out of 100% only 15% is due to an agency whereas 85% is to be paid to the publications. Thus, agencies risk the entire 100% billing.
Agencies often fall for short term gains to increase billings or to gain a new client and don’t pay enough importance to the financial terms often with dangerous consequences. Especially for a new client it is all the more risky as there is no background or history to track his payment schedule. Thus, the first stakeholder in this cycle – the agency themselves must properly assess the risk vs. gains of going in for a new account. Do they want volumes or debts? The proverb ‘angels fear to tread where fools rush in’ perfectly describes the scene. The damage done by a fraud client takes months and even years to clear off by which time agencies have lost their standing in the market. Financial fraud by even a single client can destroy an agency. When that happens even the employees stand to lose their jobs besides all related parties like production, creative people, etc. who are freelancers.
Further, there has to be clear cut guidelines on how to treat a blacklisted client so that he does not repeat this fraudulent behaviour. If repeated warnings do not work then he should be boycotted at large by the related bodies.
One of the short term measures to minimise debts is to ask for some sort of advance from the start which will help improve financial discipline. If banks and other sectors can ask and work with advances so do can ad agencies. It requires somebody to bell the cat (clients) and to stop treating clients like God. Agencies at the same time must check the background of the clients before signing them on’, she added.
It was an interactive session with views being exchanged both, for and against the topic of debate. It also saw participation from students with Ms Sethhi answering their questions on the tough times faced by agencies due to such challenges faced by them.