Late payments drain the lifeblood of industry growth

It is time to call time on late payments and unethical payment terms that damage the whole industry.

How do you feel when someone pays you late?

How does it make you feel about that organisation or individual, their respect for you, and the way that they do business? My guess is that you’d think it’s a pretty negative look for anyone. And that’s not what we’re all about in the PR industry is it?

The PRCA believes this so strongly that we have launched a campaign to call on all clients to pay their PR agencies within 30 days.

As part of that campaign, 51 agencies from across the ind­ustry have agreed to be signatories to a letter calling time on the practice of unethical payment terms.

The level of support I’ve received over this issue has been overwhelming, which should give some indication of how serious a problem this is for our industry. Why so? It is draining the lifeblood of business growth.

According to the RSA, more than half (55 per cent) of SMEs don’t survive beyond five years. The CBI says that small and medium-sized businesses account for 99.9 per cent of private sector companies. Therefore there are huge implications in them succeeding or failing. One of the main factors in their survival is cash flow.

It is unfair that larger organisations take advantage of their suppliers when these suppliers are often smaller companies that cannot survive with an irregular cash flow. Why should smaller companies provide interest-free loans to much larger
organisations?

There is no reason why any company needs any longer than 30 days to pay for the services with which they have been provided. It is a highly unethical way to treat a commercial relationship, and it has to end.

Of course, we’re not the first to focus on this issue. The Government has made admirable steps in the right direction by launching the Prompt Payment Code. As part of our campaign we want the whole industry – both clients and agencies – to sign up to that code, as the PRCA has signed up to it.

But more can be done, and how the new Government will take on this issue remains to be seen. As part of March’s Budget announcement, the last Government promised to clamp down on late payments by extending the Prompt Payment Code. Matthew Hancock, the previous business minister, announced plans in February to make 30-day payment terms the standard, with 60 days the new maximum limit.

Let us hope that his successor, Anna Soubry, will make that commitment a reality. We call on the Government to make prompt payment a legal requirement, not merely a voluntary measure.

So, I urge you: join us in signing up to the Prompt Payment Code, and let me know if you would like to add your
voice to our campaign.

Whether you are an agency or an in-house team - pay your suppliers on time and make sure you are not the one being chased for late payment.

Francis Ingham is PRCA director-general and ICCO executive director

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