MAA calls for better payment terms for agencies
Posted by
The Marketing Agencies Association is appealing to clients to stop grossly unfair payment terms, due to the profound effect that it has on integrated and small to medium agencies that frequently do project based work. According to the MAA, approximately 72 %* of agency income is project based, which has increased year on year as clients look for tighter financial control and fewer retained relationships.
With some payment terms increasing over the past few years from a ‘standard’ 30 days to an incredible 120 or 150 days, agencies are being pushed to the brink, according to the MAA. The increase is despite the consistently low interest rates of the last few years.
Scott Knox, managing director of the MAA said “We are increasingly hearing from agencies dismayed at clients’ payment terms, which have crept up from 30 days to 90 and then to 110 and 120, and even 150 in some cases. This is nothing short of unfair and greedy”.
“We are seeing the worst payment terms in history and it’s been allowed to go on unchecked. There’s a large percentage of the industry that, unlike the bigger retained agencies, can’t absorb such punitive financial punishment. With cash flow more precarious at smaller agencies, exceptions need to be made and a stop put to these inexcusable bad habits”.
The MAA believes that clients ‘hide behind’ policy and international directives, yet changes can and should be made.
Agencies are also reporting that on top of extended payment terms clients are still paying late and upon reaching the statutory 120 days, can remain unpaid for another month over the already overlong payment terms. The MAA says that although many client/agency contracts have a late payment clause, most agencies are reluctant to invoke their rights for fear of offending their non-paying clients.
Knox observes: “More agencies need to charge their clients for late payment or at very least put their intention to do so in writing, without worrying about negative consequences to their business”.
