Essential Business Practices For Sequential Liability Agencies - Part 3

If your agency adopts or operates under sequential liability, it’s essential to follow certain business practices to keep your agency on the right side of sequential liability.

Timely Billing & Collections

Just because the agency isn’t liable for payment to the vendor until payment clears from client to agency doesn’t mean the agency can take a back seat!

Agencies must act in good faith under sequential liability which means timely invoicing of clients and making reasonable efforts to collect payments.

When possible, pre-bill (aka advance bill, bill on estimate) clients to improve the likelihood of receiving payments and having funds in hand in advance of receiving vendor bills or hitting payment due dates.

Be proactive and follow up with clients on time-sensitive and past due invoices while escalating accordingly.

Communicate With Vendors

Giving vendors the silent treatment when it comes to past due bills will only infuriate them and could potentially cost the agency the relationship.

Respond timely to vendor inquiries on past due bills letting them know the agency is awaiting payment and is actively following up with the client.

Be sure the agency is actively following up with the client and taking appropriate action to escalate the matter accordingly.

Keep in mind vendors will grow impatient and may want to reach out directly to clients for past due amounts in accordance with sequential liability … a key reason why getting all parties onboard with sequential liability at the onset is crucial.

Agencies can only act as gatekeepers for so long.

If clients don’t act in good faith when it comes to timely payments, agencies may be left with little choice but to defer collections to vendors.