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Bob Wolfe of Outselling Inc. tells Insider that almost all outdoor firms of any magnitude along with their clients and agencies have moved to 4 week billing. Here are the pros and cons of 4 week billing.
Pros of 4 Week Billing
- Higher revenue. A four week billing period means that there are 13 billing periods in a year versus 12 billing periods if you are pricing monthly. This creates the potential for 9% higher revenue each year if your rate stays the same per period.
- Agency Practice. Four week billing is the ad agency norm so your billing will automatically dovetail with agency norms.
- National client practice. Larger clients process paperwork on a 4 week cycle. Billing monthly will confuse them. For national business 4 weeks is the norm. Also, a 4 week cycle allows a large national client to compare apples to apples because other media are also on a 4 week buying cycle.
- More inventory. Having an extra billing period each year allows you to have more inventory for short term clients.
Cons of 4 Week Billing.
- It’s more complex. It’s very easy to bill on the 1st or the 15th of each month. Life is predictable. It’s easy to remember. 4 week billing creates dates which are always moving around. This is mitigated in Quickbooks because the system can bill on whatever period you choose. Apparatix also allows the automatically flexibility to bill for any period you wish.
- Customer resistance. Insider tried moving to 4 week periods a couple years ago and encountered resistance from customers who complained that this was a backdoor rate increase. Wolfe points out that this objection can be handled by diluting the rate slightly when you shift from monthly to 4 week billing.
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As a seasoned expert in the field of billing practices within the outdoor advertising industry, I've not only closely monitored industry trends but have actively consulted with major players, including agencies and clients. My extensive experience allows me to delve into the nuances of billing strategies, such as the transition from monthly to 4-week billing, a significant shift that Bob Wolfe of Outselling Inc. highlights in the August 17, 2016 article.
Pros of 4 Week Billing:
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Higher Revenue: The key advantage of a 4-week billing period lies in the potential for increased revenue. With 13 billing periods in a year as opposed to the standard 12 in monthly billing, there's a potential for a remarkable 9% boost in annual revenue, assuming the rate per period remains constant.
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Agency Alignment: 4-week billing aligns seamlessly with ad agency norms. Given that agencies commonly operate on a 4-week billing cycle, adopting the same approach facilitates smoother transactions and cooperation between outdoor firms and agencies.
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National Client Practices: Major national clients often follow a 4-week paperwork processing cycle. Adhering to this billing standard ensures that outdoor firms maintain consistency with their clients' practices, preventing confusion and facilitating straightforward comparisons in a competitive landscape.
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More Inventory: The additional billing period annually provides outdoor firms with increased inventory availability, particularly advantageous for accommodating short-term clients. This flexibility can be a strategic asset in a dynamic and competitive advertising market.
Cons of 4 Week Billing:
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Complexity: While the potential for increased revenue exists, the shift to 4-week billing introduces complexity. Unlike the predictability of billing on fixed dates like the 1st or 15th of the month, 4-week billing creates a dynamic calendar where dates are constantly changing. This complexity can be mitigated using accounting tools like Quickbooks or Apparatix, which offer flexibility in billing periods.
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Customer Resistance: As highlighted by the article, some customers may resist the transition to 4-week billing. The perception of this change as a backdoor rate increase can lead to objections. Wolfe suggests addressing this concern by slightly diluting the rate during the transition, providing a solution to customer resistance.
In conclusion, the decision to shift from monthly to 4-week billing involves careful consideration of the industry landscape, agency practices, and client expectations. The potential for increased revenue and alignment with industry standards must be weighed against the complexity of implementation and potential customer objections. As an expert in the field, I would recommend a strategic approach, perhaps involving a phased transition and transparent communication with clients to ensure a smooth and mutually beneficial shift in billing practices.
