Prompt payment is a sign of respect

One of the starker statistical claims by business schools is that 80 per cent of businesses that go bankrupt are fundamentally viable. What forces them into extinction is a problem with cash flow. Or to put it more brutally, the accumulated failure of a group of people with whom the liquidated company did business to pay that company on time for goods or services rendered.

Ian Monk
Ian Monk

It is a statistic on which hundreds of PR agencies and consultancies and the people who cherish their services should ponder in these straitened times.

Across our industry, as in other sectors, the flow of payments is slowing. Every agency is aware of the drift from 30 days payments to 60 days and beyond as clients seek to improve their own cash positions at the expense of others. Bigger companies seek to extract cash flow advantage from smaller businesses.

Since the majority of PR companies in PRWeek's Top 150, plus hundreds outside the list, are small to medium enterprises, the likelihood is that many will find themselves close to the end of the cash chain. This is exacerbated by a cynical client calculation that agencies may feel they are too dependent on goodwill to hustle for payment.

One substantial company with which my company deals recently responded to payment reminders by saying that it had just instituted a new payments policy. Payment was now effective 'from the date the invoice was received and not the invoice date'. Payment would then be made 35 days after the end of the month on which it was posted. You don't need to be an accountant to see the flaws in this system.

It is worth remembering that seriously late payment is a breach of the trust as well as a breach of contract. It implies that PR agencies are too timid about the value they provide to take action.

Agencies should be as robust as necessary in their demands for proper and prompt payment for their services. Respect and good relationships are a two-way street in PR as much as in any other part of the commercial world.

Ian Monk is founder of Ian Monk Associates and a former executive at the Daily Mail and The Sun.

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