When Suppliers Turn Into Lenders

Events agencies have enough difficulty as it is setting up their shows and soliciting participation from exhibitors and attendees. But in the United Kingdom, getting paid on time is proving to be increasingly problematic for them as well, new survey data show.

Conducted by Conference & Incentive Travel (C&IT), the survey of 200 UK-based corporations and agencies delving into their event activity in 2013 found many of their clients are trying to stretch payment terms. As a result, the companies are finding their cash flow being affected.

Event planners subsequently are having to adjust their budget planning, with procurement teams needing to understand how late payment affect their business.

“We have standard 30-day payment terms, but if 60 days becomes the new norm in the business world, we will move that way, too,” David Preston, vice president of Kaspersky Lab, noted in C&IT’s online magazine, citmagazine.com. “If agencies need to borrow money to pay their suppliers before they receive payment from the client, they will need to factor in the cost of borrowing money into their quote, which could push up prices and won’t be good for anyone.”

Many agencies reported that the standard payment terms have shifted from 30 to 60 days and in some cases 90 or more. “I have seen a Spanish client ask for 160-day payment terms, which would effectively turn an agency into a bank,” Des Mclaughlin, divisional director at Grass Roots Meetings & Events, told citmagazine.com. “There is an imbalance of power between the agency and some major corporates.”

Late invoice payments are becoming a problem throughout the region. Recent research about companies based in Ireland, for example, found that the Emerald Isle might need to find better payment methods.

According to a survey conducted by Sage Ireland, a business software group, 59 percent of businesses said invoices paid by check were late. Additionally, of those late payments, 21 percent were more than one month overdue.

While 54 percent of surveyed businesses used bank records to track cash flow, only 44 percent used a management solution to centralize information, according to The Irish Times, citing data from the report.

Among event planners surveyed by C&IT, many are finding payment terms becoming a negotiation tool. “We are seeing some corporates saying that they will pay us within 30 days if we bring our costs down,” Alex Hewitt, managing director at AOK Events, said in C&IT’s magazine coverage of the survey findings.

C&IT noted in the report that procurement is not going away, so the challenges of getting paid on time will remain as well.  It advised agencies to examine payment terms closely, “and either negotiate with clients where possible or turn down pitches where payment terms are unacceptable.”