Report: Clients Take Two Months (Or More) To Pay Their Digital Shops
A new agency compensation study—focusing on the digital sector—has found that on average it takes shops 66 days to get paid for outstanding invoices while 94% of all invoices are paid after 30 days.
That’s according to a study by FastPay, which analyzed more than 2,500 invoices covering the period from January 2010 to December 2012.
The results vary sharply from a study released by the Four As in August that concluded that most clients are still paying their bills within 30 days.
The compensation issue took on greater urgency earlier this year when Procter & Gamble said it was implementing a new policy that would extend the company’s payment cycle to 75 days from the time that it is billed. P&G said it would put the new terms into effect as contracts for agencies and other vendors come up for renewal.
Other big marketers also plan to extend the time they take paying their bills. Or already do. Advertising Age reported that both Johnson & Johnson and Anheuser-Busch InBev pay vendors 75 days out or longer. And Mondelez, spun off from Kraft last year, recently confirmed plans to start paying 120 days out.
FastPay, which provides asset-based loans to small and mid-sized digital media companies suggested that the differing results between the two surveys might have been due to the fact that the 4As’ study focused just on its member shops, which the lender described as an “elite” group focused on the largest brand advertisers.
FastPay said its survey results were more closely in line with a recent IAB study which found that invoices for digital shops were typically paid within a 60-to-90-day window after being issued.
FastPay concluded that longer terms are here to stay and are likely to spread beyond the digital sector as real-time bidding and other performance-measured ad products gain further traction in the marketplace.
“As lengthy payment terms become a standard industry practice, service providers will have to adapt, becoming more financially sophisticated in using flexible debt solutions to support their operating capital,” FastPay concluded.