ANA Study Shows Payment Terms for Most Marketing Services Increased In 2019

Longest Terms Are For Agency Fees And Research; Production Payment Terms Also Lengthening

NEW YORK (March 10, 2020) — Payment terms for a wide range of marketing services increased in 2019, notably for research, agency fees, production, and talent, while terms for agency fees and research were the longest of any service, according to a new study by the ANA.

The report, Payment Terms: Current Practices for Marketing Services, revealed the primary reason for extending payment terms was to improve marketers’ cash flow.

While payment terms varied according to specific services, the range was between 41.1 and 59.9 days. About 10 percent of respondents have payment terms, before any discounts, of 90 days or more for both agency fees and research.

Overall, the study showed that in 2019, 37 percent of respondents extended payment terms while 18 percent reduced them; for a vast majority (91 percent) they stayed the same. The study noted that percentages exceed 100 percent because a marketer could extend payment terms for one service, shorten them for another, and remain the same for others.

“This study shows that marketers are reviewing payment terms very closely and are not hesitating to implement changes they believe are necessary.” said ANA CEO Bob Liodice. “This is especially true regarding terms for agency fees, research, and production, all of which have been lengthened.”

The report revealed that payment terms for research and agency fees are the longest — and both were considerably longer compared to a similar ANA study in 2013. Payment terms for production also showed a significant increase (see chart).

ADDITIONAL FINDINGS

The study also revealed:

• Changes to payment terms are primarily driven by finance/CFO and procurement. Payment term reductions were almost always initiated by finance while procurement’s role was to implement/enforce the new terms.
• Extended payment terms can have negative consequences, notably strained relationships with vendors, reduction in flexibility, and higher prices.
• Almost 30 percent of respondents said they are “very/somewhat” likely to change their payment terms for services within the next year, including 14 percent who are “very likely.”
• Two-thirds of respondents said they have a process in place to regularly monitor/enforce payment term policies.

The study also offered conclusions:

• Some publicly held companies have focused on working capital initiatives to drive cash flow. One such initiative is extending suppliers’ payment terms.
• When considering payment term length or if changes are warranted to current terms, many factors must be considered. These include length of relationship, services provided, amount of spend, the percent of revenue the marketer represents to the supplier, and the past history of terms, among several others.
• Business models and livelihoods of smaller players in the marketing supply chain can be threatened by extended terms. This includes some agencies, research companies, production companies, and editorial houses. Such companies are not banks. They require a predictable cash flow, often don’t have access to large lines of credit, and have pricing models that do not reflect the costs to their business resulting from extended terms. Both marketers and smaller suppliers should proceed with caution to ensure that the terms of their relationship — including payment terms — are sustainable.

METHODOLOGY
The report covered the findings of an online survey conducted by the ANA during January 2020. A total of 109 client-side marketers participated. In addition to the quantitative survey, in-depth qualitative interviews were conducted which provided rich insights and perspective.

A copy of the full report can be found at www.ana.net/miccontent/show/id/rr-2020-ana-payment-terms.

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ABOUT THE ANA

The ANA (Association of National Advertisers) accelerates growth for marketing professionals, brands, and the entire industry. With a mission to shape the future of marketing, the ANA sets the agenda for the industry, connecting its members to unparalleled expertise, industry-leading resources, and an influential global network. Representing over 1,600 companies — including 1,000+ client-side marketers, 600 marketing solutions providers, and 20,000 brands — ANA members collectively influence $400 billion in annual marketing spending. By championing the 12-point ANA Growth Agenda and the CMO Growth Council, the ANA drives actionable change, empowers marketers, shapes the marketing ecosystem, and delivers exceptional experiences at every touchpoint. Since 1910, the ANA has been setting the agenda for industry transformation. It enables marketers to advance their ambitions, make better decisions, and create lasting impact for their organizations and the industry.

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