Why is late payment endemic in the PR business?


Our old chum the World’s Leading blogger has posted on how a certain PR agency has treated a freelancer regarding late paying of invoices.

The comments thread is worth a read – aside from the specifics of this particular case, it does raise the general question as to why PR agencies are rubbish at paying and getting paid.

With regard to the above example, one strongly suspects that the reason the agency has set its payment terms at 60 days is because they themselves are hopeless at getting paid by their own clients.

That said, I realise that bigger organisations tend to demand longer payment terms from their suppliers – 90 days is not unheard of. But this should be a point of negotiation before work even starts – if the client wants 90 days credit then what other aspect of the contract might they relax on eg termination period. Once again, it seems most agencies just roll over because they are scared.

On a related subject, I’ve always been amazed by the "cult of billing" that exists in most agencies. The directors and account directors that get the biggest praise are those that have invoiced the most – but I would wager that in many cases, if you examined the recovery rates of these big billers, you’ll probably find they have the clients that take the longest to pay.  Issuing an invoice is easy – getting paid on time is a different beast entirely. A director crowing about how much he has invoiced is also probably the one who is costing the company dearly in bank interest because his clients pay on 120 days or more.

In the end, there are two very simple reasons (usually) why clients don’t pay – because they are unhappy or they are in financial difficulties.  Or we can add a third where it is an unwritten company policy to find "issues" with an invoice to delay payment. PR expenses bills are the usual victims – if you’ve got a number of line items, the classic client trick is to query one small line item that holds up the whole bill. Best way to solve this is simply remove the item and re-issue – because you’ve now removed the apparent disputed item – it also helps to see who is doing this for genuine reasons and those that are simply doing it to use the agency as an unofficial bank.

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