Bad debt in general circulation non-daily newspapers typically runs .50% to 2.5% of gross revenue. At the higher end are newspapers in competitive urban and suburban markets.
The accounts aging report reveals much about the quality of management, and can color a prospective buyer’s enthusiasm. Buyers tend to consider accounts more than 90 days out uncollectible; translating into corresponding reductions in gross revenues and operating margins. This scenario lowers the newspaper’s market value.
Positive control of accounts receivable generally demonstrates management’s credibility with good attention to detail where cash flow is king. It also indicates indirectly the newspaper’s acceptance in the marketplace.
Publishers with lax collections typically have “dirty” or disregarded rate cards. Often in this situation the rate schedules are too infrequently raised.
Buyers are not anxious to step into a market with a history of sloppy management of accounts receivable. It imposes a smaller cash flow projection which speaks directly to market value. Slow pay is a red flag for buyers accustomed to regular rate increases.
It’s a hollow recommendation for a selling publisher to say to his prospective buyer, “I recommend you raise rates, particularly since they haven’t been increased for three years.” A current rate card (annual increases) coupled with active management of receivables polishes the apple. Enhance your value with strong management of receivables and an “honest” rate card!