We’ve been in business 10 years and 2015 was both a high and a low year. High because we won some amazing brands including Toyota, Lexus and Dropbox, and because we were celebrating being 10. Low because it was our worst year ever for bad debt. For some reason clients seem to be getting slower at paying on time (and in some cases, never). There’s no commonality – big and small, UK and international, many companies are still not respecting payment terms, despite the PRCA’s laudable#30Days campaign launched last year to address the issue.
This has a knock on effect on so many areas of PR business. If as an agency owner you don’t know when you’re going to get paid, you cannot make decisions around when you can hire new people, or whether you can confidently enter a new geographic market (try clawing back money from France, for example).
If agencies have to be overly cautious about their cost base because they can’t trust clients to pay, they cannot be confident that they can afford to hire new people, who could be great for a client’s business. Inappropriate resource can put pressure on the existing team, which if not eased quickly can affect staff morale and cause people to leave, ultimately affecting the client who will not be happy to learn their amazingly competent AM is off their account.
The PR Network is in a slightly different position thanks to our business model, because we do not have an office but use freelance consultants based all over the world to deliver projects for clients. This means our cost base is lower than other agencies our size; that said, cash is still king because we pay our suppliers on time. It’s about respect, and we ALWAYS pay within 30 days, as our freelance associates will testify.
Given our year of spectacularly bad debtors, we’ve decided to get tough. We are adopting the approach of our own lawyers; money upfront placed on account for all new clients, 50% payment upfront for projects for brand new clients, and money in the bank before we’ll start work. Obviously this will deter some prospects, but we want to work with companies who fully intend to pay and respect our terms. This also means we can continue to expand into new markets and confidently engage large teams of associates in the safe knowledge we are going to be paid for a job well done.
It’s almost exactly one year since the PRCA campaign. Specifically, this called on government to make the Prompt Payment Code a legal obligation on companies, and on brands to sign up to the Code to signify their intent while the government debates the practicalities of such a change. The Code stipulates that 60 days must be the maximum payment term limit, working towards 30 days becoming the norm. One year on, the Code has not been written into law, and there remains much to be done to change brands’ mindsets to ensure that 30 days does not become 45, then 60, then 90…
Following on from the PRCA’s original campaign, we would like to issue a call to action on two fronts:
Firstly, to our peers in the PR agency world: Let’s know our worth and be confident to say ‘no’ to clients not prepared to sign up to tougher payment terms, and to pause work until payment has been received. We wouldn’t let a customer walk out of our shop without paying for goods, so why do we let clients get away with using our services indefinitely? We need to stop being so shy.
Secondly, we call on brands to sign up to the Prompt Payment Code, to respect the work of their agencies and stop cash flow bottlenecks along the supply chain. Let’s make 2016 the year 30 day terms become the norm, not the Holy Grail.
*The PR Network would like to thank its many clients who do pay on time.