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ANA Conclusions from “Payment Terms” White Paper

December 5, 2013

By Bill Duggan, Group EVP, ANA

The just-released ANA white paper, “Payment Terms – Current Practices for Marketing Services,” finds that many marketers have extended payment terms or are considering doing so in the near future for a list of marketing services covering agency fees, research, media, production, and talent payments. ANA’s key conclusions from the white paper follow.

Client-side marketers who are considering extended terms should proceed with caution, and are encouraged to evaluate the downstream implications of such payment term extensions. There can be serious tradeoffs resulting from payment term extensions that can have both immediate and longer-term negative consequences. Noted in this survey are strained relationships with vendors, reduction in flexibility, and higher prices.

Furthermore, the very livelihoods of some of the smaller players in the marketing supply chain are threatened. This includes smaller agencies, production companies, editorial houses, and media outlets. Such companies require a predictable cash flow, often don’t have access to large lines of credit, and have pricing models that do not currently reflect the costs to their business resulting from extended terms.

Client-side marketers need to consider what is fair and how they would want to be treated. If the payment terms they are suggesting to their suppliers would not be acceptable to them as suppliers, a re-think might be in order.

With 42 percent of survey respondents stating that there is a likelihood of changing payment terms for advertising/marketing services within the next year, it would make good business sense to review the pros and cons of such a change, as well as both near- and longer-term implications. Companies are encouraged to open honest dialogues with suppliers to assess the consequences.

The full ANA report can be accessed here.

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