Don't Be A Wimpy: Delayed Payment Schemes Are Self-Serving, Damaging
In the "Popeye" cartoons, a character named Wimpy was famous for his love of hamburgers. But the only thing Wimpy loved even more was deferring payment for the numerous hamburgers he was able to consume in one sitting.
His famous refrain to the restaurateur was, "I'll kindly pay you Tuesday for a hamburger today."
Last month, several global advertisers who spend billions of dollars in advertising took a page right out of Wimpy's book by announcing that they would adopt extended payment terms for services rendered from ad agencies. Standard payment terms are about 30-45 days according to a 4A's survey, but these characters are proposing terms of 75, 90 and in some cases, 120 days.
Deferred payment wasn't right in Popeye's world, and it isn't right in our business.
For most working people, a paycheck for the first half of July will be deposited in their personal checking accounts on July 15.
Imagine if on that date, instead of a deposit, you received a note stating that new payment terms mean that you won't receive pay for your work in June until October 31. How would that make you feel? (It's a rhetorical question.)
Let's say you decide to try and make the best of it. Go to the local grocery store and ask to take home a carload of groceries today and pay for them in November. Let the dentist know that the tooth you are having filled tomorrow won't be paid for until November. Tell the kids that their allowance won't be given out until November. Negotiate with the bank to not foreclose on your house until November. Hope that the insurance company won't cancel your policies between now and November. Ask Walgreen's to provide much-needed prescriptions on the promise that you'll pay in November.
Do you believe that all of these entities would work with you to pay for services four months after the services were rendered? Not likely. And why should they? Payment delayed is lifeblood denied, unless of course, you're a credit-card company that charges interest and profits from delayed payments.
Clients claim the practice will help improve cash flow, but not for their agency partners, which will be decimated by the practice.
This industry is made up of many small businesses that rely on a payment system that is fair, balanced and timely. It allows for a free flow of work across the ecosystem. Ads get produced and run on time. Tweets are posted when the moment is ripe for cultural comment. Point of sale makes its way to the grocery store when the product is being promoted. Timeliness is of the essence in this business.
The expression "time is money," means just that and not "time is money when I determine the time frame."
Unilateral decisions to adopt a late-payment structure undermine the trust that holds this industry together. These decisions to extend payment terms to 75, 90 or 120 days will cause broader damage than these advertisers are proposing. Start-ups won't start up. Agencies and production companies will fold. Printers won't get paid, and coupons won't drop.
The actions of these advertisers are not brave but greedy, and the naked self-interest involved is not only far reaching but downright disgusting. Companies that have them under consideration should stop considering them because an important part of this equation -- the entire ad-marketing industry -- is at stake.
We applaud the companies that are upholding the fair and balanced payment terms that have held us together as an industry for so long. For the others, we can't help but wonder if they have any sense of decency at all.