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Best Practices - Billing
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Statement of Purpose

The Exhibit & Event Marketers Association (E2MA) is a not-for-profit organization, which is dedicated to enhance the expertise of exhibit and event planner professionals in exhibit and event marketing, and to raise the level of service excellence on the showfloor.    As part of its strategic mission, the E2MA endeavors to assist its EAC members maximize their servicing capabilities and minimize the associated risks by publishing best practices recommendations for the management and administration of an EAC’s business.

In reviewing the information contained herein, all members are reminded that this document contains a recommendation of best practices, and not an edict or membership requirement. Individual members must ultimately use their own best judgment in how to implement this recommendation

 

Billing & Collections Background Information

Generally speaking, the trade show industry operates today on a pay-as-you-go basis.

Show organizers typically pay facility rental fees in full prior to move-in.   Exhibitors are required to pay show organizers for their exhibit space in full prior to move-in.  They must also pay general contractors in full for services rendered prior to the completion of move-out. And, everyone that travels to organize, service, exhibit or attend a trade show pays for their air travel at time of ticketing and their hotel room at time of check-out.

Contrary to these industry practices are those of the typical EAC.

EACs, particularly those that are in the I&D labor business, must meet payroll for union personnel weekly, and must meet union benefits contributions monthly.  In addition, EACs must carry workers compensation and general liability policies in order to provide these services which adds to the overhead burden.  The fact that many EACs must assume the full burden of the cost of its services within a week of the service provision, places a tremendous imperative on that EAC to bill and collect for its services in a closely managed, and timely fashion.

Yet, given all these considerations, most EACs (74.1% according to recent EACA Survey) generally extend credit, and bill for their services on a Net 30 day basis. Credit for services is extended on a handshake basis, and rarely is a service agreement between an EAC and its customer, initiated, or executed.

For the reasons previously mentioned, and others that will be outlined in this document, the E2MA believes that it is time for its members to closely examine their billing and collections procedures. Upon this examination, if you find that any part of your billing and collections practices is unsatisfactory, you may want to consider the following recommendations.


Billing & Collections Recommendations

Billing and collections practices are crucial elements of an EAC’s ability to effectively manage its business cash flow. Additionally, EACs, like all other segments of the trade show industry, are under constant pressure to deliver better products and services at highly competitive prices, while maintaining the lowest possible costs. As such, the E2MA provides its members with the following "best practices” recommendations for the administration of your billing and collection policies.


A. Pay As You Go is the Ultimate Goal

Whether it may be immediately practical or not, all EACs should begin the process of exploring the systems necessary to keep pace with the rest of trade show industry service providers who demand, and receive, payment for services as soon as they are delivered.

The rationale for establishing a pay-as-you-go system is one that not only benefits the EAC, but it ultimately can and will benefit the end customer, the exhibitor, as well. Pay-as-you-go billing and collections policies will drastically reduce bad debt expense, as well as the overhead associated with collecting on past due invoices. By requiring payment upon completion of the work assignment, EACs will be taking an aggressive step toward reducing internal costs, which can and do ultimately get passed along to your customers, the exhibitors. Yet, the strongest reason for looking long and hard at a pay-as-you-go policy was stated earlier – it is already a widely accepted practice by the rest of the trade show industry.

To enable a pay-as-you-go billing and collection process, EACs may have to put in place one or more of the following:

1. The capability to communicate internally to all staff, and externally by way of the sales process, that payment is required at the completion of the show.

2. The capability to generate invoices on the showfloor upon the completion of providing your service, or delivering your product.

3. The capability to accept payment on the showfloor via check, money order, credit card, or wire transfer.

If pay-as-you-go is desired but the internal resources that may be necessary to invoice and/or collect payment on the showfloor are unavailable, then you may want to consider establishing a practice of requiring pre-payments whenever possible.


B. Extending Credit and Direct Billing

If a pay-as-you-go billing and collection system will not be available to you in the foreseeable future, and requiring pre-payments is not feasible for your business, then you find yourself in the position to extend credit and bill for your services.

If you have decided to extend credit and billing for your services it is highly recommended to embrace the following protocol:

1. Obtain written authorization for service from the end user customer.

a. In the case of set-up services, be sure to obtain signed time tickets for each day of service.

b. In the case of transportation services, be sure to have a signed bill of lading, or contract / P.O. authorization.

c. In the case of AV, floral or furnishings services be sure to have a signed service agreement, or contract / P.O. authorization.

2. If you are servicing a customer for the first time, and they have yet to establish a credit history with you, it is highly advisable to:

a. Obtain a completed credit application prior to servicing the first job.

b. Establish an upper limit of credit that you are willing to extend for each customer on a case-by-case basis.

c. Understanding that you may choose to extend unsecured credit to existing customers on the basis of a long-standing relationship, it is highly advisable to secure any credit you extend with one or more of the following standard practices:

i. Credit Card – you can obtain an advance approval of charges "off-line” by contacting the credit card company directly. Once approved, the approval code you receive is good for 30 days. The charges to your customer can be processed in any increments that you agree to with your client, as long as you stay within the 30-day period.

ii. Letter of Credit – the letter of credit is extended by the customer’s bank against a line of credit they have. The letter of credit essentially ties up funds in your customer’s credit line and earmarks them for payment to you.

iii. Deposit up to 100% - if neither of these previous methods is acceptable or workable with your client, and then it is advisable to get a significant deposit on services to be rendered.

iv. None of the above – If none of these measures to secure credit is acceptable to your client, then you may have to make a serious business decision as to whether the opportunity to do this piece of business is worth the risk to grant large amounts of unsecured risk.

3. Once credit and payment terms are agreed to, be sure to create a goal for your accounting department to send the final invoice within one week (7 days) of the close of the show where service was provided.

Amending internal systems to expedite the process of generating invoices may be the single most important factor toward improving your company’s collections success. This is particularly important since this is the primary component of the billing and collections process that is entirely in your control.


C. When Third Party Billing is Required

EACs are often referred work by display builders and brokers who, as part of their service to the end user customer, require that the EAC send the bill to them as a third party. The convenience to the end user customer in these situations is that they receive one bill at the end of the show for all their exhibit services, without assuming the responsibility of managing each of the individual EAC service providers.

While this approach to servicing exhibitors in this manner is fairly commonplace in the trade show industry, the EACs must recognize that third party billing will definitely add time to the collections cycle and can add cost and risk as well. Even if your company is disciplined enough to get your invoices out to the third party in seven( 7) days, the average billing cycle for third parties that consolidate invoices to the exhibitor is 30 to 45 days. So, if you are not going to get paid until the third party receives payment from its customer, you will be looking at a minimum of a 60 to 75 day pay cycle. Factoring in the cost of money, the interest you may be paying on your line of credit as well as the interest-free credit that you are extending, this scenario can potentially have significant impact on your bottom line.

The E2MA recognizes that many of its members have existing relationships with third party customers that are mutually rewarding and satisfactory on all levels.

If this were the case with all your third party relations, we would not recommend that you instigate any new processes that may adversely impact those relationships.

However, if you are initiating a new relationship with a third party customer, or if you have an existing third party customer relationship that does not fit your needs from a billing and collections perspective, it is highly recommended to embrace the following procedures:

1. Obtain written authorization for service from the end user customer.

a. In the case of set-up services, be sure to obtain signed time tickets for each day of service.

b. In the case of transportation services, be sure to have a signed bill of lading, or contract / P.O. authorization.

c. In the case of AV, floral or furnishings services be sure to have a signed service agreement, or contract / P.O. authorization.

d. Ask the third party (display builder or services broker) if they have communicated to its client their intention to mark up your bill for your services, if that is their practice, in exchange for the value they add to the process.

e. Be sure to include your payment terms in this written authorization/agreement, as well as any necessary language about resolving invoice, or service performance, disputes.

2. Obtain a completed credit application (see attached EAC Credit Application).

a. As in the case of direct billing accounts, determine the upper limit of credit that you are willing to extend.

b. Determine whether the credit you are extending will be unsecured credit, or secured credit.

3. It is highly recommended to secure any credit you are extending when your anticipated invoice will exceed your average ticket price.

4. If you determine that you will need to secure credit, it is recommended that you employ one or more of the following standard practices:

a. Credit Card – The minimal amount of security that you should require in this scenario is to obtain a credit card number from your third party customer. Additional credit card security can is available by obtaining an advance approval of charges "off-line” by contacting the credit card company directly. Once the credit card company grants approval, the approval code you receive is good for 30 days. The charges to your customer can be processed in any increments that you agree to with your client, as long as you stay within the 30-day period.

b.Letter of Credit – If you, or your client, are not satisfied with providing a credit card number, it is advisable to obtain a letter of credit. The letter of credit is extended by the customer’s bank against a line of credit they have. The letter of credit essentially ties up funds in your customer’s credit line and earmarks them for payment to you.

c. Third Party Authorization – If you, or your client, are not satisfied with either the credit card or the letter of credit options then it is recommended that you obtain an executed Third Party Authorization Form (see attached 3rd Party Authorization) from the third party’s end user customer.

Third Party Authorizations are routinely used by general contractors in trade show service kits, and are routinely filled out by Third Party Clients. The Third Party Authorization notifies the Third Party, and the end user customer, that you reserve the right to bill the end user customer if the Third Party does not make payment within an acceptable timeframe.

d. Personal Guarantee – If none of the previous instruments of securing credit are satisfactory to you, or your client, and you prefer the maximum amount of security that you can obtain when your estimated invoice will exceed your average ticket price, then obtain a personal guarantee from the Third Party business owner. The personal guarantee will allow you to proceed with collection activity and attach the business owner’s personal assets in the event of non-payment.

e. Deposit up to 100% - if neither of these previous methods is acceptable or workable with your client, then it is advisable to get a significant deposit on services to be rendered.

fNone of the above – If none of these measures to secure credit is acceptable to your client, then you may have to make a serious business decision as to whether the opportunity to do this piece of business is worth the risk to grant large amounts of unsecured risk.

5. When third party billing is coupled with a requested rebate program, the EAC should specify up front that rebates will only be paid to the third party when they pay their invoices within the guidelines of previously established payment terms. Should the third party’s payment practice fall outside agreed upon payment terms, then it should be understood that any rebates are then forfeited.


D. Not-to-Exceed Bids

In recent years it has become more commonplace for exhibitors, and Third Parties, to ask EACs for not-to-exceed bids for their services. If a not-to-exceed bid is a mandatory component of winning an opportunity to service a client, the E2MA recommends the following to its members that engage in this process:

1. If you don’t already have one, obtain a completed credit authorization.

a. Determine an upper credit limit for the client, and follow the prescribed recommendations for securing this credit as described in the section on Extending Credit.

2. Utilize as much detail as possible. Not only describe in detail as to what your bid includes, be sure to provide detail about what the bid does not include, i.e. on site changes to client requests, damage repairs, etc.

3. Obtain signed time tickets, or other appropriate written confirmation, for all services performed.

4. All on site requests for service that are outside the scope of the original bid must be committed to writing and signed by an authorized party of the client.

5. Obtain a minimum of a 50% advanced deposit for services to be rendered.


E. Credit Insurance

As a final precaution to protect your company from non-payment, particularly in the case of Third Party Billing, there is credit insurance that is available for your good receivables.

Credit insurance is:

1. Available for all your "good” receivables..

2. Dollar amount of exposure is also specified.

3. Contains a flexible deductible.

It is recommended that all E2MA members investigate whether receivable insurance is a suitable option for your needs.


F. International Customers

There are a couple of special considerations when dealing with international customers when it comes to billing and collections. They are:

1. Specify in advance that you will only accept payment in US Dollars

2. Letters of credit is a widely practiced and accepted method for securing credit with international customers.

3. If a letter of credit cannot be obtained, it is highly advised to secure a significant deposit (up to 100%) in advance.

4. Wire transfers are also a widely accepted practice for receiving payment from international customers. Although some banks may charge hefty fees ($35-$50) for processing wire transfers, it is highly recommended to request your bank to waive this fee. The cost to the bank for processing a wire transfer is normally less than $1.


Summary

In the trade show industry, exhibitors, display producers, and brokers greatly prefer EACs because the quality of service is high, and the cost of those services is highly competitive. While the presence of EACs is a great asset to service excellence on the trade show floor, it also places a great burden on the EAC to obtain prompt payment in order to maintain business viability.

The E2MA highly recommends that each of its members make good use of these billing and collection recommendations in order to maximize cash flow, and profits, and to facilitate continued excellence in exhibit servicing. And, in the interest of fairness and equity, the E2MA recommends that its members follow these recommendations when functioning as a third party billing agent for one of its clients.

Finally, our intention is to make this document a dynamic one. The E2MA will continue to monitor new developments in trade show billing and collections practices, and will update this recommendation as necessary.

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