The ANA is out with a new study that shows the length of payment terms for a range of marketing services rose sharply between 2013 and 2019. The longest terms are for research and agency fees.
Last year, agency clients on average had nearly two months (58.1 days) to pay their bills, up 27% from the average 45.7 days recorded in 2013, when the ANA did a similar payment terms study.
Research payment terms are the longest, averaging about 60 days, versus 44 days in 2013, an increase of 36%.
Production clients last year had an average 45 days to pay bills, an increase of 18% from six years prior.
The extended terms have been driven primarily by finance and procurement teams at clients, the study found.
The basis for the study is a survey fielded in January of 109 client-side marketers.
Nearly thirty percent of those surveyed indicated that they were somewhat or very likely to change payment terms for advertising and marketing services within the next year.
The ANA stressed that it does not recommend specific payment terms practices but did conclude that pushing for extended terms “can have negative consequences, notably strained relationships with vendors, reduction in flexibility and high prices.”
Extended terms has been a sore spot for agencies. A few years back Coty made headlines for reportedly seeking 150-day payment terms in a review. Unilever and Proctor & Gamble have also faced complaints in the past about extended terms.
The new ANA report urged marketers to “proceed with caution” when pursuing extended terms. “The business models and livelihoods of smaller players in the marketing supply chain can be threatened by extended terms,” the report concluded. “Such companies are not banks.”
The report quoted 4As CEO Marla Kaplowitz: “Experience reflects that extended payment terms will result in elevated supplier pricing and reduced supplier choice. A recent analysis of the extensive Aprais database of over 20,000 cases reveals that a client-agency relationship where parties ‘win’ financially, achieves the best results.” Aprais is a London-based agency evaluator and relationship management company.
The full report can be accessed here.