There are several different payment options you can use to pay your ever-growing paid search bills. Each method has its own risk and reward, so it’s best to consider your options against your business model. Please note, Microsoft adCenter is similar to Yahoo in billing, but they also have many options, and it’s worth speaking to your rep about their options.

Before we can talk payment though, we must talk financial risk.

What Level Of Payment Risk Taker Are You?

There are three major ways of dealing with media fees for clients.

1) The entire spend goes on your card (or invoice, more on this later) and you bill the client on a regular basis for the media fees. The advantages of this method are:

  • You control the entire relationship with the engine
  • If you use a rewards card, the rewards can be quite extensive

The disadvantage is obvious – if you don’t get paid (or the payment goes into collections), you may have to eat the fees for a while. For larger companies, this isn’t usually an issue. If you deal with a lot of small companies, this can be quite the headache.

2) The second method is to have your client billed by the search engines. This can either be the client being invoiced or using the client’s card, within the account interface. If you use this method, usually the client will have access to their account (a business decision – do you give your clients access to their PPC accounts?). This removes your financial risk, but it gives the client more to do as well. If they stop paying the engines, you usually stop getting paid as well.

3) The third method is prepayment by the client. The client can either pay the engines in advance directly, or they can pay you directly. If you have a static spend per month, this can be useful. Many clients have spends that vary dramatically by month depending on search volume and other off-line promotions. In those instances, you may have to collect funds more than once per month which can start to be a paperwork nightmare.

Once you determine how your business is going to operate from a financial perspective above, then we can start to examine the payment methods.

Payment By Credit Card

The first option is prepay. This allows you to pay first, and then have your funds deducted as you spend them. The major advantage of this payment method is that if you have a fixed budget, you can pay in advance and then when the funds are gone - you’re done advertising. This is useful if you have many campaigns and have to set many daily budgets, yet you have a fixed monthly budget. Prepay is usually done via credit card on AdWords or credit card or paypal on Yahoo.

The most common payment method on AdWords is postpay. You input a credit card into AdWords and, as your account hits certain limits, your card is billed. You can have a backup card in AdWords in case you hit your card limits.

Advantages and disadvantages

The disadvantage of using a credit card is that the credit card charges look the same on your card statements. It can be difficult to reconcile the credit card charges with what account was billed, if you are managing multiple PPC accounts. You can find the billing information within the various interfaces, but the combination can become cumbersome. The other huge disadvantage is that if your credit card is declined your client accounts will stop running.

I’ve seen some pretty fun rewards (think about spending a million a month; that’s serious rewards points); however, if AMEX has an issue – this will stop all your clients spends as their account tries to withdraw funds. So even if you go with your own credit cards – make sure you keep paying that AMEX bill. It’s not one account that will go down – it’s all your clients – and that’s a client relation nightmare.

If you are using clients’ cards, you need to make sure that you have a method for finding when a card was declined. If the AdWords login is their email address and not yours, you need a detailed procedure. If you are using your email login, then it’s easier to see these notifications.

The advantage is either rewards points, or having clients use their own cards for risk purposes.

Invoicing

Both Google and Yahoo have invoicing options. There are two types of invoicing: 

One invoice per account

With one invoice per account, you will write a check for every single invoice. This can be useful if some clients are paying the engines directly. However, as your operations scale, it can become very time consuming to write several thousand checks a month.

If your clients are billed directly by the engines, you may end up in the middle between a client not paying and your company running the conversations between the client and the engine.

With Google, this is pretty straightforward. You pay at the end of each month for the clicks you were charged. However, you are responsible for setting all of the daily budgets and making sure your spend is in line with your target. For more, see Google’s invoice FAQ page.

Yahoo still uses insertion orders (IOs). You will first sign a document about invoicing and receive credit terms from Yahoo’s financing department. Then each month, you will send them how much you want to spend over the course of a time period (usually it’s the next 30 days with 90 day options).

One invoice per all accounts

For larger agencies, this is the way to go. Have one invoice sent to you per month for all your accounts and then write a single check.

Google calls this consolidated invoicing. This also enables you to set some account budget information at the MCC level (how much to spend, time frames, etc).

For Yahoo, you still need to send an IO. This means each month, you will have a huge spreadsheet of all your accounts, how much they are authorized to spend, etc. It can be a bit burdensome, but much better than trying to write hundreds of IOs or reconciling many credit cards.

Big invoicing advantage

Invoicing doesn’t carry the risk that suddenly all your accounts are down because Google hit your credit card 500 times in a single day and AMEX flagged it as a fraud risk. Since you pay at the end of the month, as long as you pay that bill, your clients’ accounts will be active.

The biggest question with invoicing is do you pay the bill or the client?

Finally…

As you scale your operations, always consider the financial risk. Are you taking on any client? Do you run credit checks on your clients? Do your clients trust you to put their cards into the search engines, but not allow them to log in to their accounts? Are you willing to take the additional billing calls when the client gets billed and calls you, not the engine?

Don’t be afraid to call the engines and ask for their suggestions. They can walk you through the invoicing paths, operations, and help you determine what’s best. You will want to call an agency rep (if you have hundreds of clients) or your account rep if you are a single advertiser.

Questions to ask yourself:

  • How much financial risk do I want? (lowest is having your clients pay the engines)
     
  • How much customer service risk do I want? (lowest is invoicing)
     
  • How much interaction do I want my customers to have with the engines? (lowest is you paying or paying on their behalf)
     
  • How many checks to I want to write? (lowest is consolidated invoicing)
     
  • Do I want rewards points to give my employees/clients bonuses? (higher risk, extra bonus)

Choosing the correct payment methods and knowing when and how to change them can have a large impact on your successful agency operations. Know your risk threshold, your finances, your customer service, and the next step in your agency evolution. Answer those questions for yourself and you should understand which billing options if best for you.

Brad Geddes is the Founder of bgTheory, a regular blogger, presenter for AdWords Seminars, and a frequent conference speaker. The Paid Search column appears Tuesdays at Search Engine Land.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | How To: PPC | Paid Search Column | Search Ads: General

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About The Author: is the Founder of Certified Knowledge, a company dedicated to PPC education & training; fficial Google AdWords Seminar Leader, and author of Advanced Google AdWords.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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