Payment Terms – Current Practices for Marketing ServicesDecember 2, 2013
By Bill Duggan, Group EVP, ANA
ANA has just released the new survey research report, “Payment Terms – Current Practices for Marketing Services.” This work was initiated due to member interest resulting from reports in the advertising/marketing trade press and mainstream business press regarding changes in payment terms being implemented by a handful of companies to some suppliers. Our purpose was to determine if such changes were isolated examples or reflective of a broader trend. Key findings follow.
Payment Terms Are Either Being Extended or Kept the Same
In the past year, 43 percent of respondents report extending payment terms and 17 percent report shortening terms for a list of marketing services covering agency fees, research, media, production, and talent payments. Meanwhile, 90 percent report keeping at least payment terms the same.
Reasons for Extending Payment Terms/Finance and CFO Main Drivers
The majority of respondents who have extended their payment terms have done so in order to derive better cash flow. Next in importance is upper management’s focus on accounts payable, which is tied directly to cash flow. By far, the finance department and/or the CFO have the most impact in driving payment term changes. The procurement/purchasing area also plays a role.
Negative Consequences of Extended Payment Terms
Extended payment terms can have negative consequences, notably:
- Strained relationship with vendors
- Higher prices
- Strained management process
More Than 40 Percent Likely to Change Payment Terms Within the Next Year
Forty-two percent of respondents say they are “very/somewhat” likely to change their payment terms for advertising/marketing services within the next year, including 29 percent who are “very likely.” Those respondents who are likely to change their payment terms cite three primary reasons for doing so:
- Improving cash flow
- CFO/internal management pressure
- External forces/keeping up with competitors
The full ANA report can be accessed here.
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