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‘A scourge on the industry’ – how delayed payments are harming Asian agencies

From cashflow hits, to wasted time chasing invoices, to the need to pursue legal action, the effects of missed payments within the communications industry can have devastating consequences. Mumbrella Asia's Eleanor Dickinson investigates the scale of this in Asia.

The end of the year usually means crunch time for those working along the lengthy media and marketing supply chain, and for some that pinch will hurt more than for others.

As marketing clients rush towards meeting their end-of-year bottom lines, it is agencies’ needs that are brushed to one side as their financial recompenses are relegated until another quarter.

A frustrating, but common practise that, judging from stories Mumbrella Asia has run this year concerning late or failed payments, will raise its ugly head in Asia this Christmas.

Paul Farrer, the chairman of global marketing recruitment agency Aspire, is one company owner for whom business in Singapore will not end on the highest of notes this year.

He tells Mumbrella that the company has been left with two outstanding bills from two Singaporean agencies for recruitment fees worth S$23,760 and S$11,700 respectively. The latter is almost a year old, while the former is now almost two years overdue.

Chasing both parties has proved time-consuming and frustrating processes for Farrer and his finance team. “It’s a matter of honour,” he says. “Some business are badly run and invoices get lost but there is no intent to not pay or should I say, steal. It may be a civil issue, but non payment for goods or services is basically theft. In our case, clients use our time and resources with agreed terms of business.

Paul Farrer: ‘It’s a matter of honour’

“If business is tough then why have businesses contracted and incurred the cost? We can be flexible, consider payment plans etc but the first stage is to communicate. However, the two clients who have not paid have not disputed anything, just don’t answer phone calls, emails, LinkedIn messages or acknowledge our existence. I assume they hope that we will just go away.”

Farrer’s comments will no doubt ring true with many agency owners both in Singapore and across Asia.

Following stories on Social Metric’s unpaid bill of S$11,333 to ad platform agency Dianomi and start-up Lovewin stalling its payments to two Singaporean agencies, Mumbrella Asia conducted a survey asking agencies and media owners how long they had had to wait for payment.

The frustration, anxiety and outright anger felt by these agencies was palpable in the comments left.

One respondent from a specialist agency in Singapore, who has had to wait a year to be paid by a client, says: “It’s an obnoxious and age-long practice to arm-twist suppliers and vendors. If one can pre-pay for tickets, rooms and Uber rides, no reason why customers should not pay for a service after they have consumed it.”

At the same time, many worried about the financial impact on their business. A PR professional in Singapore, who claims their payments regularly came in late, says the impact on the firm’s cash flow has prevented them from hiring new staff despite an increasing client workload.

“We only have so many reserves and our staff need to be paid every month. We can’t absorb these costs indefinitely,” says another PR agency owner. “[Clients] just assume they can pay when they feel like it. Yet they would not accept us delivering our work late and missing deadlines, so it’s only fair for them to honour the terms of the same contract they signed with us.”

“It’s a scourge,” adds another respondent from Singapore-based specialist agency. “It harms the industry by making it extra difficult for especially start-ups to make ends meet, and making it harder for them to grow.”

Although the sample size was small – 27 people responded in total – the results from the survey were telling. Nearly 50 per cent of respondents said they had had to wait more than a year to get paid, while around a third said they usually waited between nine and 12 months.

Meanwhile, when asked how often their payments came in late, nearly 60 per cent of respondents said ‘regularly’, while not one responder said their invoices were paid on time.

In every case brought to the attention of Mumbrella Asia, attempts to recoup fees have been permeated by endless chains of chase emails, whereby requests for payments were either ignored or evaded. One survey respondent even reveals how clients have accused their agency of “rudeness” or “extortion” when chased for payment.

The Singapore-based PR agency Right Hook Communications, is another agency left tangibly affected by such practise. In this case, the Singapore restaurant UsQuBa commissioned the agency for PR work, allegedly without telling them the firm was on the brink of bankruptcy.

Marc Bakker: ‘For some, falling short by $13,000 can be disastrous’

According to the bankruptcy creditors’ document, seen by Mumbrella, the restaurant’s owner David Sean Flynn owed $2.7 million to his suppliers, of which S$13,000 was owed to Right Hook. 

“They kept us in the dark until the last second before they went bankrupt,” says Marc Bakker, Right Hook’s marketing director. “For us it was a difference between profit and loss. We ended the year falling short due to the loss of the S$13,000, which for some isn’t an amount you can just shrug off – it can be disastrous for others.”

Flynn has so far not responded to this site’s requests for comment.

While a business struggling to stay afloat is perhaps the most understandable excuse for payment failure, as Farrer points out, why commission services of agencies when a business is in trouble?

Meanwhile, options for agencies who cannot afford to continue waiting for and chasing fees are few and far between in Singapore. 

For Aspire’s Farrer, the next step will be the big one as the company prepares to take legal action against his two former clients. Although court papers have yet to be filed, the company is currently speaking to lawyers about the next stage of action.

“Sadly for [the agencies] Aspire is not a small company that can be bullied,” he said. “Issues like this are happily rare but they are time consuming and reveal the true characters of some businesses. For small business non-payment can have a serious impact on cash flow. Court is a last resort but ultimately enables a recovery of the debt if not the costs involved.”

However, taking legal action in Singapore is no cheap affair. Even when a litigant is successful, the costs ordered to be paid by the losing party are usually only two-thirds of the actual amount incurred.

It is for this reason that firms like Dianomi, which initially threatened Social Metric with litigation, ultimately decided not to pursue legal avenues. Although Dianomi has not been repaid “a single cent” of the outstanding bill, the company’s director of marketing, Julian Peterson, says the fee is simply not worth chasing when balanced against the potential legal costs. 

“In our case, the legal costs will most certainly equal the money owed,” he says. “While we are not currently pursuing the matter, we haven’t forgotten about it.”

New Union, Social Metric’s Singapore-based holding company, has yet to return Mumbrella Asia’s calls.

Meanwhile, Lovewin’s founder Marcus Savage says he is paying back Type A in instalments, while briefing his lawyers over disputed fees allegedly owed to Text100.

Lovewin: ‘Paying back in chunks’

For everyone else in similar situations, options are limited to using financial reserves to cover their own staffing expenses, or creating a ripple effect by delaying payments to suppliers themselves. Like Right Hook’s case, if the bills are never paid, it eventually hits the balance sheet, as well as cash flow.

Down the line, however, for small agencies facing major payment holes the only avenues are layoffs and even going completely bust. The burden of debt is subsequently passed onto another supplier and, thus the painful cycle of recovery continues for another year. 

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