The UK’s creative industries are being undermined by late payments. Findings from business finance company MarketInvoice have revealed that 48% of businesses in the creative industries were paid late in 2018.
Businesses that make up the creative industry are typically smaller companies – usually agencies and consultancies – that provide services to a range of sectors, from TV and film to design and publishing. These smaller firms are typically beholden to lengthy payment terms, meaning they must wait upwards of 90 days before their invoices are paid.
According to MarketInvoice, in 2018, a typical invoice worth £38,137 was settled 13 days beyond payment terms leaving the industry £1.1bn out of pocket at any given time. Larger companies were more likely (51%) to pay the creative industries later than smaller businesses (41%). While some companies do settle their invoices on time, one in seven (14%) take more than 14 days beyond agreed terms to pay.
The number of invoices settled beyond 14 days of agreed terms has reduced between 2014 (23%) and 2018 (14%) but year-on-year changes in the percentage of invoices paid late has significantly fluctuated. In 2014, 55% of invoices were paid late compared to 66% in 2015 and then down to 53% in 2016 before rising to 64% in 2017.
To find these numbers, MarketInvoice analysed 15,736 invoices between 2012 and 2018 (from 501 companies in the creative industries) to a range of businesses.
Phil Dean, managing director at creative agency Certain commented: “As a business that’s growing, you inevitably become short of cash because you’ve got to fund that growth and clients aren’t always brilliant payers. In our world it’s not a problem doing the work, it’s [a problem] actually getting paid.”
MarketInvoice has now partnered with The Drum, plus investors Creative England, as well as trade and policy bodies the Creative Industries Federation and the British Interactive Media Association to support companies in the creative industries sector.
Caroline Norbury MBE, chief executive of Creative England, commented: “As a specialist creative industries investor, we work with creative businesses across the country every day. We know that lengthy payment delays can cause talented, profitable businesses to fold. Small, ambitious creative businesses make big upfront investments to deliver major projects for clients but often don’t have the financial reserves to cover long cash-flow gaps. That’s a waste of talent and lost [gross value added].”
Anil Stocker, chief executive officer at MarketInvoice added: “Landing a big project in the creative industries can be a breakthrough moment for most. Being hindered by long payment terms and, worse still late payments, can really derail these young businesses.”
The terms of an invoice normally dictate a long payment period that can be up to 120 days, leaving businesses with a cash flow gap in the interim. Invoice financing from companies such as MarketInvoice can provide access to needed iterim funding.