Campaign reported U.K. advertising agencies are whining about clients instituting extended payment terms—yet a measly 5 percent have refused to accept the new deals. It’s a safe bet the rejecters were not AORs for major clients such as Glaxo¬SmithKline and Mondelez International. Similar to their U.S. peers, U.K. ad shops don’t have the guts to earnestly protest pay arrangements. Plus, the advertising Brits are probably just as guilty as the advertising Yanks of already extending payments to vendors and freelancers—as well as dragging their feet on issues like diversity. Imagine if clients were to send payments based on the agency’s diversity record. For example, agencies (not even confident the plural form of the word is appropriate here) displaying deliberate and proactive inclusivity would receive restitution for services within two weeks, while the shops showing systematic exclusivity would have to wait much longer to collect on invoices. Would that type of arrangement lead to change?
Agency unrest at payment terms
By Maisie McCabe
Almost two-thirds of agency executives say they are unhappy with clients’ requests for extended payment terms — but only 5 per cent have refused to accept them, according to a new study.
Kingston Smith W1, the marketing services and media accountants, asked more than 100 managing directors and financial directors about their experience of advertisers wanting to extend the length of time they take to pay their agencies. Of the agency executives surveyed, 91 per cent said they had been asked by a client to extend their payment terms and 65 per cent said they were unhappy with payment-term extensions and associated supplier finance schemes.
Although the majority (64 per cent) had tried to negotiate with clients who had asked them to extend their payment terms, just over a fifth (22 per cent) accepted the new terms.
Over the past two years, conglomerates such as Glaxo¬SmithKline and Mondelez International have extended the length of time they take to pay suppliers. GSK increased its payment terms to 90 days, while Mondelez moved to 120 days.
Paul Bainsfair, the director-general of the IPA, said: “In all agencies, cash flow is critical. If their clients don’t pay on time, then the agencies often have no alternative but to hold off paying their suppliers. These are often the highly talented people who, in our case, help make UK advertising among the best in the world.
“These small suppliers need their money like most people need their monthly salary. When they don’t get paid, the human cost can be devastating.”
The UK government is planning to consult on the issue of payment terms later this year.