Advertising agencies rank fourth in new B2B payment risk study

Advertising agencies scored 71 out of 100 in a new national risk index, placing them fourth among 23 industries for business-to-business payment risk. The study says the sector’s elevated ranking reflects the highest historical SBA loan charge-off rate in the analysis, not a prediction of missed invoices or defaults.

Why it matters: - Businesses that extend credit to advertising agencies may face more financial risk than broad industry labels suggest. - The study ranks advertising agencies above several other professional-services categories, including management consulting, marketing consulting and software publishing. - The findings matter for vendors, lenders and others that rely on timely B2B payments to manage cash flow.

What happened: - Commercial debt collection firm The Kaplan Group released a new analysis of federal data on 23 industries. - Advertising agencies ranked fourth overall with a risk score of 71 out of 100. - The ranking puts advertising agencies behind freight transportation arrangement, transportation equipment wholesalers and long-distance truckload freight. - The company said the study combines historical SBA loan losses with current business-condition data.

The details: - Advertising agencies posted the highest SBA loan charge-off frequency in the study at 11.6%. - Advertising agencies also recorded the highest dollar-loss rate at 5.4%. - The 71.0 score for advertising agencies was higher than general freight trucking at 69.2, management consulting at 65.5, marketing consulting at 65.4 and software publishing at 61.2. - Management consulting ranked eighth, marketing consulting ranked ninth and custom computer programming ranked 22nd. - Four of the seven highest-ranked industries were freight-related businesses, showing broad pressure across transportation. - The study’s top 10 also included other durable goods wholesalers at 70.0, long-distance LTL freight at 68.5 and software publishers at 61.2. - The analysis used seasoned loans approved between fiscal years 2010 and 2018. - The index weighted charge-off frequency at 45%, dollar-loss rate at 20% and current business-condition stress at 35%. - Current business-condition measures included revenue, demand, pricing pressure and expected performance.

Between the lines: - Advertising agencies’ high score appears driven mainly by historical loan losses, while transportation industries were lifted by both losses and current cost pressure. - The study does not say advertising agencies are more likely to pay invoices late. - The results suggest that broad industry categories can hide meaningful differences inside professional services. - Advertising and consulting firms can be exposed to cash-flow strain when client payments lag behind payroll, contractor costs and software bills. - Dean Kaplan, president of The Kaplan Group, said agencies can generate strong revenue and still run into cash-flow problems when payments arrive late.

What's next: - The Kaplan Group says businesses should look beyond industry labels and review customer payment behavior and financial history more closely. - Vendors and lenders are likely to use the index as one more screening tool, not a stand-alone decision maker. - The study frames the scores as relative risk signals, not predictions of bankruptcy, loan default or late invoice payments.

The bottom line: - Advertising agencies emerged as the riskiest professional-services industry in the study, driven by a poor historical credit record rather than a direct forecast of payment failure.