When did Agencies and Vendors become banks for their Clients?

Increased pressure from brands on their agencies and vendors to extend payment windows is greater than ever

Big brands such as General Mills and Chrysler have been throwing their weight around, putting their accounts into review of which payment window terms have reached a new low – or should we say high?

Last month, General Mills’ new creative agency review reportedly demanded a payment window of 120 days. And according to a post on Digiday, “Chrysler succeeded in pushing its payment window to 180 days last fall…And around the same time…a big brand started asking for payment terms of a full year, according to the 4As, which received complaints from creative and media agencies about the terms.”

While the client in that latter situation asked agencies to “work out a deal where on paper it looked as if the agencies had agreed to payment terms of one year,” we can only assume they’re having the agencies prebill far in advance and reconcile later.

At least that’s what we work out with clients and agencies we work with, whether we’re handling a search or modernizing their agency contracts that have to include such burdensome corporate-wide payment windows that go beyond a 30-day period.

The Digiday article further reveals that some marketers requiring these abnormally long payment periods assume that agencies should get financing to cover the widening payment to expense gap. Of course the client doesn’t want to pay the financing fees. And some even use third-party invoice processing systems that charge agencies for every invoice that is submitted – non-reimbursable of course.

Thought agencies were in the business of driving brand revenue through their communications expertise, not money-lenders to clients.

We wonder if client-side staff would be okay with being paid for their services rendered 120 days out.

Definitely not.

Is this what client’s really meant by wanting agencies to be their partners?

This is just another strain in the client-agency relationship.

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Posted in Advertising Trends, Agency Management Best Practices, Agency Remuneration / Agency Compensation and tagged , .