How Accounts Receivable Slid Into Influencers’ DMs

Mention social media influencers, and you’re more than likely to get a few scuffs. But the content creation economy is a multibillion-dollar industry, and influencers, YouTubers and other digital creators have become valuable marketing partners for brands across industries.

As this economy expands, however, many creators are struggling to figure out how to turn what might have once been a hobby or a casual side-hustle into a full-blown money-making business. As entrepreneurs, these creators need technology and solutions to help run their business, with billing and payments often one of their biggest pain points.

Tony Tran, CEO of Lumanu, says that pricing negotiations and accounts receivable (AR) communications are still occurring via direct messages (DMs) on social media platforms, and payments are often made via paper check or a promise for an eventual PayPal transfer. In a recent conversation with PYMNTS, Tran discussed how influencers and other content creators can drive the legitimacy of their business forward by embracing automated accounts receivable technology that supports both their cash flow and brand relationships.

Formalizing Accounts Receivable

As a relatively new business model, social media influencing and content creation are still working out some kinks along its journey towards monetization. There is no doubt that this economy can be lucrative for content creators, but understanding how to price services and establish monetary value for followers counts and product exposure is not always straightforward.

Some influencers may be figuring it out as they go — the industry as a whole tends to operate without technology built specifically to the content creation ecosystem.

That creates especially large pain points when it comes to getting paid, according to Tran.

“When we first started, we asked creators, ‘Who owes you money right this moment?’ That question was surprisingly hard to answer,” he said, noting that content creators tend to pull up their email and social media accounts to identify who owes them money while mom and pop shops can bring up QuickBooks to see their accounts receivables. Often, there is no formal contract, but rather a discussion via Instagram messages and an agreement for compensation. “That was basically the paper trail: a DM,” Tran added.

Failure to streamline accounts receivable can mean missed and forgotten payments and a severe lack of visibility into capital inflows. Exacerbating this challenge is the fact that influencers and creators can lack awareness or education surrounding proper AR strategies, including how to invoice and collect payment. The result, Tran said, is often creators depositing paper checks into personal bank accounts.

Legitimizing The Business

There are plenty of factors that add friction in the B2B payment process between brand and content creator, with many of those challenges often existing on the brand’s accounts payable (AP) side of the equation.

In some instances, Tran said there can be a “psychographic element” to paying an influencer. When that creator is using Gmail or Instagram to communicate with a brand, it can be difficult to ensure a level of seriousness necessary to get creators paid on time.

“Gmail email address and DMs just don’t have the same level of severity as if I’m emailing someone at BMW,” he said.

This challenge is waning somewhat as more brands eagerly adopt — and legitimize — this marketing strategy. Yet B2B payment pain points remain, often as a result of brands’ own AP infrastructure: AP solutions were not built to facilitate payment to dozens or even hundreds of creators who are operating essentially as independent vendors.

“When I talk to payers, they tell me one of their biggest pain points is having to hold the hands of creators as they go to Bill.com or Tipalti or collecting W-9s,” he said.

A Complex Ecosystem Evolves

Lumanu, which is now operating in Beta mode, offers a business management platform for the content creator ecosystem, allowing creators to collaborate not only with brands but also with the managers and agencies that are also diving into the industry.

With more parties involved and money exchanging more hands, B2B payment delays can grow even greater. In addition to supporting eInvoicing and payments, the Lumanu platform has also introduced EarlyPay, connecting influencers to the money they’re owed more quickly, for a discount.

A strong AR foundation will be vital to the content creation industry as it evolves and continues to promote its legitimacy. While in the early days of this business model it might have been acceptable for a brand to dictate compensation and pricing terms or delayed payment, creators are becoming more educated and business savvy about how to operate.

Tran noted that creators are a tight-knit community and, as a result, are promoting awareness of issues such as the “influencer pay gap,” where creators of color are often paid less. Filling that gap will require diligent and educated billing and collections strategies, but it will also need the help of industry-specific FinTech.

While having 150,000 followers on Instagram may not convince a traditional bank to provide a loan, the proprietary underwriting strategy of Lumanu, which takes into account industry-specific data to facilitate its EarlyPay offering, can support the financial health of these solopreneurs — and gradually create an enticing market for banks to service. It’s a win-win for the creators as well as the brands that employ their services.

“If your creative partners aren’t stressed out about paying rent, they’re going spend more time thinking of crazy great ideas for your marketing campaign, producing awesome output,” Tran said.