“Eye watering” payment terms of up to 150 days are increasingly creeping into client demands in Australia.
The demands tend to come from international clients, and while it is still rare, it is happening – and putting agencies under huge cashflow pressure.
One source, who didn’t want to be named, said that while it’s not new for clients to demand extended terms of 120 days, some are now calling for up to 150 days and treating agencies like banks to carry the cost of campaigns.
Peter Horgan, CEO of OMD, said: “Payment terms are just another way to squeeze a supplier, but treating your agency partners like credit lines is not sustainable.
“It’s another short-term win for procurement-led clients. It is still rare, and holding companies here have been resolute in holding firm [against it], but it’s damaging for agencies already operating on slim margins. If you’re going to dry up cashflow it all unravels.”
Standard business payment terms are 30 days, which was then extended to 45 days in advertising, and later commonly stretched to 90 days.
UM CEO Mat Baxter says: “There needs to be fairness. Payment terms like that are ridiculous. Putting what can sometimes be millions of dollars in limbo like that … multinationals meed to realise that agencies need to manage cashflow. It’s becoming a bigger issue and has started to creep in in this market ... it’s eye watering.”
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