Adland seeks Govt action on late payment

Agencies are claiming that the extension of payment terms by clients is threatening economic recovery and are demanding that the Government intervenes.

Cadbury: owner Mondelez has announced that it will increase its payment terms to 120 days
Cadbury: owner Mondelez has announced that it will increase its payment terms to 120 days

Last week, Mondelez International said that it would increase its payment terms to 120 days from 1 July in the US. It has 60 day terms across Europe. This followed Procter & Gamble’s announcement that it plans to extend the average amount of time it takes to pay its suppliers from 45 to 75 days.

Small agencies, in particular, have complained that the increasing trend for large clients to extend terms is adversely affecting their business, even though small and medium enterprises have been identified by the Government as key players in restoring economic growth.

Jonathan Trimble, the chief executive of 18 Feet & Rising, said: "Agencies providing favourable credit terms is one thing – being a provider of working capital is another. We are in professional services, not banking."

Neil Hughston, a founding partner at Johnny Fearless, added: "Cashflow is king, whether you are a global multinational or a Soho-based independent. It just so happens global multinationals have more cash to flow about."

Privately, a number of agency chiefs have called on the Government to take action on their behalf.

ISBA claimed its members want to work with agencies to address the issue. Debbie Morrison, the director of consultancy and best practice, said: "Almost every client we speak with is looking closely at this issue and working with their finance teams to find ways of providing the latitude that their agencies require. It is in their interests, after all, that their agencies are solvent and able to do their job."

Read Campaign editor Danny Rogers' leader on crippling payment terms.

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