What collection steps are typical when an agency closes its doors for $ reasons?

[Learning2Program]

An agency in the next state over from us (i.e., not local) closed its doors in the last six weeks, apparently due to financial strife. Can a station go to the advertiser for payment? The amount is more than the small claims court limit in the state in question, but not a lot more. Should we file for Small Claims court in the agency's county and then show up for the hearing in order to get a judgment and take our proper place in line to be paid?

Thanks for any insight.

 

[amfmsw]

I'd go directly to the Marketing Director and Accounts Payable person of the client first. Hey, the advertisor is YOUR client too, right? You gave the service and can prove it, right?

IF they didn't already pay the bill to the agency, you have great odds of having them pay it directly to you, and you may collect the GROSS amount due, not the agency net.

IF they DID pay the bill to the agency, you're probably screwed, and will have to sue the agency and get pennies. Call right away, don't delay a minute.

 

[jdweaver]

Indeed. If the client has paid the agency, you're wasting your time. The agency is long gone and assets in the agency business consist of a coffee maker and two cell phones these days.

We're to see more of these happening in 2009 - time to carefully look at aging and $$ up front for new shops.

 

[SonoSational18]

Well if you waited six weeks, you probably waited too long. Having said that, you shoud immediately contact the client and discuss the situation with them. Check with your own attorneys, but my understanding is that courts have generally held that advertisers are liable if they have not yet paid the agency or if they paid the agency knowing that the agency was not paying its bills in a timely fashion (which is difficult to prove). Give the clients copies of all outstandining invoices and ask them to document whatever they've already paid to the agency and that they remit any that they have not yet paid directly to you, less any applicable commissions. You CAN sue the client for any amounts not paid to the agency (but might not want to do this if you want to continue to do business with them)

As far as collecting from an out-of-business agency you're probably SOL unless you know that the agency was a sole proprietorship and the owner has some assets. This is unlikely, as it's a pretty sure bet that the agency is a corporation or LLC. If they've gone bankrupt, you can file a claim with the courts and maybe get a penny or two on the dollar, but I wouldn't wast too much time. With the exception of a few pens and pencils they probably rent or lease everything so they have no assets. It is quite possible that they have so few assets that they might not even bother to go bankrupt and figure the creditors will reposess whatever they can (unfortunately airtime can't be repo'ed) and just fold the corporation or let it lie dormant.

I agree with the previous poster... stay on top of your agings. Never let anyone get outside of 90 days (unless there are extenuating circumstances) and with any new client, train them to pay you sooner rather than later by being the squeaky wheel and asking for the check. You'd be surprised how many clients and agencies just set on the check until someone asks.