PR’s late payment crisis

The dreaded outstanding invoice is something that hits all PR firms eventually, leaving bosses umming-and-ahhing about whether they should risk alienating the client by cold-calling them up and asking for the cash. When Sharon Flaherty, CEO/founder at Cardiff-based comms agency Folk was waiting for one client to pay a £30,000 invoice, she took matters into her own hands – driving nearly three hours to their office to demand payment. 

“I’d just set up the agency and they were one of our first retained clients,” she remembers. “They wanted to pay instalments of £2,000 a week. Sending emails back-and-forth to their finance team wasn’t working, plus I had freelancers to pay… If I hadn’t visited them, looked in the white-of-their-eyes and said, ‘Look, my new business might go under,’ they might never have paid.”

Late payments and unpaid invoices are a source of irritation – not to mention anxiety – for many PR firms right now. More than half of SMEs saw an increase in late payments during 2023, with a third saying they spend 21-30 hours per month chasing clients, according to a recent Payit by NatWest survey. A separate report by Xero last year also found small businesses are typically waiting 29.4 days to be paid. 

In the world of PR – where firms tend to be smaller and without robust accounting teams/systems – the problem seems more acute. A spate of PR firms has folded in recent years, most notably Talker Tailor Trouble Maker whose clients included Wagamama, Deliveroo and Poundland; a report by restructuring firm Azets found the agency’s problems were partly caused by “several late payments from clients”.

“Most of the time there’s no malice and clients are genuinely embarrassed it’s happened, probably because they’ve missed a payment run,” says Flaherty. “But I also think there’s a lack of understanding of what a small business looks like. Many big companies don’t realise small companies don’t have millions of pounds in investment funds or in the bank.”

Slow to move

Even though the government’s Prompt Payment Code obliges companies to pay small businesses in 30 days, the code is voluntary meaning many businesses aren’t abiding by it.

Perhaps it isn’t surprising why so many clients aren’t coughing up on time. After all, many are facing cashflow struggles of their own – due to an unhealthy blend of spiralling energy bills, soaring business rates and waiting on their own client’s late payments. 

However, some large corporations with multimillion balance-sheets are also being tardy with payments, leaving smaller firms at the mercy of their terms. In March, Coca-Cola UK, Formula One Marketing and Reckitt were all shamed in a “rogue’s gallery” of slowest payers to UK small businesses by campaign group Good Business Pays. 

According to their research, Coca-Cola’s average payment time was 110 days. However, this pales in comparison to their soft drinks rivals Keurig Dr Pepper (which owns 7Up, Schweppes and Dr Pepper) who were widely criticised in 2022 for setting payment terms of nearly a year (360 days) with their PR agencies. 

Because many PR firms prize having prestige (and lucrative) accounts in their portfolio, they’re less likely to kick back on late payments for fear of being seen as unprofessional or desperate. This politeness can stymie payments even further. 

It doesn’t help that many PR companies lack an accounting team, or the resources to hire a dedicated CFO/accountant. Often, it’s tasked to the CEO, staying late in the office with a stressed look on their face, calculator app open on their phone and a pile of invoices mounting on their desk. Designating a staff member to chase invoices would be a huge help.

Taking action

Locating the person in your client’s finance department who’ll be processing your invoices can save valuable time. “When chasing invoices, you’ll always hear the words ‘speak to finance’,” says Flaherty. “But finding the right person in the finance team means you can have a direct conversation with them, which is more useful than chasing the client.”

The past few years has also seen a spate of innovative new fintech apps such as GoCardless and Stripe, which smaller PR companies can use to accelerate payments. Chaser – the clue’s in the name – does all the nasty invoice-detective work, while allowing customers to make instant card payments (Chaser reckons invoices get paid an average of 16 days faster).

However, Flaherty points out the legacy tech systems of many large corporations makes it difficult to use these services. “Their processes are a little archaic,” she says. “These people are unlikely to bank with Monzo or Starling. But I love it whenever anybody sends me a Stripe invoice – it sets up a new payment in your bank.”

Should PR firms be charging interest on late payments? It’s a difficult subject, says Flaherty. “We have it [interest] in our contract of 10-15% but we’ve never used it – it’s not good for a relationship, is it?”

She suggests the industry should think more like big tech firms. “Maybe it should be like Google Ads. If clients don’t pay them on time, they switch it off [the service], meaning you’ll see a direct impact because once your traffic stops, then so do your sales. If clients see what turning off your PR overnight could do, maybe they’ll change... I just think earned media gets deprioritised sometimes.”

“Everybody knows that businesses live and die by cashflow,” she adds. “It doesn’t matter how good your reputation is, if there’s not enough money in the bank.”

CIPR members have access to the Croner business support helpline for free legal and commercial advice. 

Christian Koch is an award-winning journalist and editor who has written for the Sunday Times, Guardian, Evening Standard, Metro, Director, Cosmopolitan, ShortList and Stylist.