WEBINAR: Peter Czapp discusses the inside track for your agency

By Peter Czapp, director

The Wow Company


The Drum Network article

This content is produced by The Drum Network, a paid-for membership club for CEOs and their agencies who want to share their expertise and grow their business.

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July 8, 2016 | 5 min read

The inside track for agencies on getting paid

Peter Czapp

Managing cashflow is perhaps the single biggest challenge facing any growing business and marketing agencies are no different.

While there are some excellent client companies out there who pay debtors within two days of receiving an agency invoice, on average most clients pay within 41 days, while slow payers can take up to 95 days. All it takes is a couple of clients to not pay on time to take agencies down. Many companies have gone bust simply by being too lenient.

So what can you do?

Asking for a deposit up front is your right – it is not an insensitive move. Of course, talk through ideas with a potential client and plan ahead, but do not begin a project without asking for payment in advance. There is a thin line between generating an informal and comfortable environment for a client and making poor financial decision.

Reduce your payment terms to ‘by return’. If you agree on 30 days’ credit then you cannot start asking for the money until day 31. The banks should be lending money, not you. In a recent survey, only 19 per cent of agencies asked for payment within 7 days – a shocking statistic.

Ensure to retain leverage when taking on a project. Do not send a website live or begin branding until you have been paid. As stated in an Agency Works survey article, over servicing is the biggest profit loss for agencies. This is common and easily avoidable mistake that can have dramatic effect on you profits.

As displayed below, a whopping 63 per cent of agencies are leaving more than 10 per cent of payment until completion of a project – this can put immense pressure on the relationship between an agency and a client, as the dreaded date approaches. Early or on demand payment is not imperative to keeping up with payments, but falling under this category is a huge blunder made by many companies. Keep regular installments so you can keep track of payments and make it organised between you and your client.

payment times chart

Ask for external help – Market invoice can help for stubborn clients. While you need to pay for freelancers, office time and resources, Market Invoice will find you the best rate within 24 hours.

Add a clause into the contract which demands interest on late payments, for added security. This will increase incentive for early payment and avoid unnecessary pressure.

Go cardless. Direct debit as a method of collecting cash is far more efficient, especially if you have lots of retainers. The direct debit system is extremely helpful for project based work.

If you are still on Sage, you are at a massive disadvantage compared to to Xero users, so consider making the switch. The small business survival rate on average as a miniscule 41 per cent, whereas the survival rate amongst Xero users was 88 per cent.

Xerov vs Sage

How to make more profit

It is very likely that you are getting better at what you do – the quality of agencies increases every year, with new theories, market research and the rise of technology. Therefore, if you are still charging per hour then you are simply billing less. One of the biggest setbacks agencies face is that they sell time, when they should be selling value.

A client hearing ‘I am going to create you a corporate video for £5,000’ is far less exciting than hearing ‘how about we create some content that will get you half a million views’. People want to invest in creativity and ideas, not calculations.

To pitch or not to pitch

There is much debate over whether pitching to clients is corporate and unfashionable. Yes, clients want a personal relationship with their agency. They want to be listened to and guided through their ideas by a company that are not just there to pick pocket. However, pitching is still a very important contributor of making profit. When agencies were surveyed on whether they were pro or con pitching, the top earners were more likely to pitch.

To enter the bracket of the top selling agencies, you need to hit the million pound barrier. To win bigger projects, you need to set bigger thresholds, and to win bigger projects, you are going to have to pitch.

This webinar is available to listen to here.

Peter Czapp is co-founder of The Wow Company.


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