Opinion: How Advertisers’ Long Payment Schedules Are Hurting The Creative Process
Advertisers’ long payment schedules are hurting creatives who work for small agencies that are forced to seek expensive alternative financing to pay multiple production vendors they work with on various jobs.
Creatives have for long complained about the long wait for payment after they have completed their project and submitted their invoice.
But that memo does not seem to have reached big advertisers like Anheuser-Busch InBev who wanted to increase their vendor payment schedule to 90 days from the currently popular 45 days – which already does not sit well with small agencies that pay out their contracts within 10 to 14 days.
Chrysler succeeded in pushing its payment window to 180 days last fall while another big brand started asking for payment terms of a full year, according to Digiday.
Small agency or production vendors, under these suggested payment terms, could easily be forced to finance more than $1 million in advance costs for as much as 120 days on behalf of a client.
Some advertisers have even offered to connect vendors to financing companies to address the very issues their own payment policies are creating, according to T. Alex Blum of Blum Consulting Partners.
Brands have suggested that agencies use supply chain financing through banks to get some revenue before the brands’ payments are due. Those early payments come with hefty fees.
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In other cases, advertisers give long-term retainers to vendor agencies so that at least they can build in the cost of financing for the first three or four months of the engagement. But many procurement policies do not allow for this.
An agency or vendor that steps up to advertisers, even when it’s the advertiser’s fault, risks not getting assigned any more work.