It came as no surprise to this blogger that Mars Inc., recently joined the ranks of Procter & Gamble, Johnson & Johnson and Anheuser-Busch InBev by announcing they’d “seek” longer payment terms from suppliers.
I placed the word seek in quotes because the longer payment terms aren’t a request, they’re an ultimatum (as in: “Do you want to keep representing us? Then, you’ll wait to be paid. Period.”).
I’m not surprised that 120-days is now becoming the standard payment cycle among giant consumer brands. And, let’s be honest, it won’t be long before two things happen:
- Every brand follows suit.
- The payment cycle is extended by another 30 days.
Why? Because clients can do whatever they please. That’s why. And, rare indeed is the agency that will walk away from a million-dollar- plus client relationship.
But, as chilling as the parsimonious big brand decision is, it pales in contrast to what some smaller, lesser known clients will do to their agency partners.
We, for example, find ourselves in the midst of attempting to collect some $40,000 from a small client. They’ve agreed to comply with a payment plan that will see us receiving what’s owed us in $5,000 increments. Since our payments depend upon the client being paid by their derelict customers, we could be looking at the year 2020 before we’re made whole.
But, what options do we have? It would cost more in legal expenses to take the non-paying client to court. And such an action is a major distraction to our finance staff. So, we’re stuck.
We were also placed in a helpless position when our largest client of seven years decided that Peppercomm would front the out-of-pocket deposit costs for every one of their PR-related projects in advance. Nice, no? And, a la Mars, this household name would finally get around to reimbursing us about 180 days AFTER the event occurred. So, in effect, we became the client’s bank for about six months. I joked at the time that we should change our firm’s name to The Ed & Steve Savings & Loan Company.
So, despite everything the PR trades groups and industry media would have you believe, we agency types are still seen as vendors in the eyes of client purchasing managers. Sure, some chief communications officers offer us a seat at the oh-so-coveted C-suite table, but their boss cares far more about her profitability and stock price than she does the counsel of an external PR firm (Note: the exception to the previous statement occurs when the client organization finds itself in the midst of a high-profile crisis. Then, and only, then, will our bills be paid promptly, and with a ‘Thanks for being there for us’ cover note attached to the check).
That’s life in the agency world, people. It’s not pretty. And, judging by what I see and read, it’s not getting any better.
Decisions such as the one by Mars will do more than just hurt every roster agency’s cash flow, it might put more than one out of business.
But, hey, as some purchasing manager said long ago, ‘All’s fair in love, war and payment cycles.
This post is dedicated to the long-suffering, recent dad, Peppercommer Adam Giambattista.