Some brands delaying agency payments or turning off the tap

A large swath of marketers are delaying payment terms or halting ad agency fee distribution altogether as they hit the self-preservation button, Campaign US has learned. 

Multiple agencies say some clients have gone into nuclear bunker mode—either asking for a financial extension of around 30 days, or flat out holding off payment until the economic situation surrounding COVID-19 becomes more clear.  

It’s a mixed-bag out there; not every brand is turning off the tap. For many, it’s business as usual. For now. But those companies fastening belts in the most extreme of ways tend to be split internally, with marketing arms pleading cap-in-hand with the cautious CFO to release funds, according to agency people. 

Daniel Jeffries, of Jeffries Consulting, said: "We've seen a number of clients trying to come to new payment arrangements with their agencies which range from extending payment terms to work/payment holidays.  

"I'm also aware of some brands who have had to take the step of stopping all external payments as they scramble to stay afloat—obviously this hits their agency partners alongside all of their other external partners."

One industry expert, who did not want to be named, stressed that companies tend to have greater cash flow than their agency partners (most of whom they’re already squeezing) and clients should be taking better care of them. 

She explained: "It’s unfair because clients have more cash than these small businesses do. Only hope is that with this legislation going through that some small businesses can get loans. This money will help some agencies survive. Cash is king.

"I think some clients are taking advantage of  the situation because they were already pushing payment terms and have been sitting on cash."

She said she has also been hearing about clients offering to give agencies their payment now if they accept a discounted rate.