Too many clients bully their agencies and enforce crippling payment terms, according to a new global coalition of agencies demanding better treatment from clients.
VoxComm brings together agency trade bodies from around the world, including the IPA in the UK and the American Association of Advertising Agencies, to champion the value of agencies and fight against bad client behaviour .
The coalition accuses some clients of hypocrisy: although they talk about purpose and corporate social responsibility, they are abusing their agency suppliers and the coronavirus crisis is making the situation even more acute.
"We are hearing from our members all around the world that many of those same 'corporately responsible' companies are using the [Covid-19] crisis to delay paying their agencies," a VoxComm statement says. "Late payment is a pernicious habit that even cash-rich companies employ to falsely enhance their liquidity ratios. It is directly at odds with their avowed policy of CSR."
According to VoxComm, agencies are de facto being asked to act as banks for bigger client companies.
"These companies bully agencies into longer payment terms or just flagrantly flout contractual payment terms. The unintended consequences mean agencies in turn struggle to meet payroll – often 75% of their costs. Then have to delay paying their freelancers and subcontractors (who have been hired to work directly for these clients). These are often niche and diverse community-based media owners, as well as voiceover artists, photographers, illustrators etc. Their fees are their salaries. It’s what pays the rent and what puts food on the table."
Paul Bainsfair, director-general of the IPA, recently told Campaign: "Although some clients are struggling financially themselves, in many cases it’s not a case of ‘can’t pay’, it’s ‘won’t pay’."
Bainsfair said his members had experienced clients asking for fee deferments, trying to cancel projects altogether even though work had been undertaken and simply refusing to pay. "Some agencies will go to the wall if this continues," Bainsfair added.
VoxComm is now calling on its members’ clients to "seek agreement on payment terms that support a positive and mutually beneficial relationship. Together, we can support the sector and those that rely on our industry for their livelihood."
The group's manifesto is built upon "championing the value that agencies bring to their clients as turbo boosters for growth":
- We stand for the power of commercial creativity in all its forms – across strategy, ideas, content and media – as a proven lever for growth that businesses neglect at their peril.
- We stand for creativity at the heart of the application of data and new technologies, not as an afterthought – agencies and clients should be running towards creativity, not away from it.
- We stand for agencies as indispensable business partners, bringing outside perspective, cross-category insights, provocation and a breadth of specialist expertise to their clients.
- We stand for partnership, new agency models and creating an environment where agencies can flourish, and clients can benefit from the unique business value agencies can deliver.
- We stand for better ways to procure and compensate the kind of added value, talent-based services agencies offer and will work with agencies and clients to deliver these.
- We will promote good practice, but speak out where we see bad practice, value-destroying behaviours to the ultimate disbenefit of our clients, as well as agencies.
- And we will do this together, as a global partnership, sharing our resources and best ideas, because the challenges to the unique business value that agencies can deliver are the same everywhere, in every market and region, on local assignments and international ones.
The members of VoxComm are: Alianza por el Valor Estratégico de las Marcas (Mexico); Association of Accredited Advertising Agencies of Hong Kong; Association of Accredited Advertising Agents (Malaysia); American Association of Advertising Agencies; Brazilian Association of Advertising Agencies; Commercial Communications Council (New Zealand); The Communications Council (Australia); European Association of Communication Agencies; Institute of Communication Agencies (Canada); IPA (UK); and Unión Columbiana de Empresas Publicitarias (Colombia).