Companies’ failure to meet payment terms frustrates media agencies

Nigeria’s marketing communication industry is going through excruciating times because companies are reneging on payment terms and renegotiating with agencies to accept pay cuts, BusinessDay has learnt.

A dependable source in the industry confirms to BusinessDay that most companies have extended the payment terms for business beyond 30 days to up to 180 days, and sometimes over a year.

This development, he says, is adding pressure on the media agencies, some of which can not meet their obligations to banks, the news media and other sources.

The source, who prefers anonymity for fear of being denied business in the industry for speaking out, laments that the delay in payment for contracts executed has been a recurring issue but “as it is now the clients are taking this for a ride without considering the agencies’ pains.”

He explains that the clients delay in payments to Nigerian agencies is stifling agencies and media business. But it appears the agencies in Nigeria are careful of making their protests loud because they want to avoid incurring the wrath of the advertisers who dictate the media business pace. The advertisers are the big spenders in various platforms of media channels, and as such media agencies and the news media dance to their tunes.

A managing director of an agency in Ikeja, who also prefers anonymity, says sometimes agencies wait for six months to be paid for jobs executed with borrowed money, saying “it is tough for agencies doing business here. The banks are also not helping matters. We borrow at over 22 percent per annum, and that is when the banks agree to support you to do the job and wait for payment.”

It is the view of another CEO of a PR firm that debts would always feature in business, especially operations that encourage bill payment after the job is done, but states that when the payment is delayed beyond the agreed time, it is discouraging. The delay is acceptable if it is within 30 days, but these days it is far beyond that.

Assessing the situation, a top manager in an integrated marketing firm says under the delay payments, small agencies suffer more. On the possibility of the industry redressing it, he says it is an individual business contract.

Assessing the industry recently, Tayo Oyedeji, managing director of Media Perspective, says one of the challenges in the industry is the issue of debt/payments to media owners, saying “one of my commitments is to find a way to work with all stakeholders in our industry to expedite payments for jobs confirmed to be completed by media owners.”

He says media agencies need a more transparent process that will give clients, media owners, and media auditors access to agencies system. According to him, media agencies should not be a black box but a transparent system that serves every stakeholder.

He says media debt is an industry and Media Perspectives alone cannot solve it, “but we will take the lead by consistently doing the right things and hope that others will take a cue from us. I think it is more of a process problem than malice or negative intent. Therefore, the more we create transparent processes and disciplined operations, the easier it would be to resolve the debt issue.”

Daniel Obi