Big brands need to take responsibility for paying on time

The code, which was launched by the Small Business Commissioner and the UK government in January 2021, aims to improve timelines to suppliers, including freelance marketers and advertising agencies, by signing up businesses to a number of voluntary commitments. For instance, all companies on the PPC have committed to ensuring that at least 95% of their invoices are paid on time.

CEOs of major companies signed up to the code have also all stated that they will settle all invoices within 60 days. For Unilever and Diageo, it is this rule that they are reported to have broken. The PPC stated that Diageo paid less than a third and Unilever paid only half of their invoices within 60 days.

While both companies have protested the Small Business Commissioner’s decision, they aren’t the only businesses to have not paid their invoices on time. A number of businesses, including Procter and Gamble and Mars, have been called out for late payments in the past. In fact, the issue has long been a scourge to the marketing and advertising industry – and in particular to those working as freelancers within the sector.

According to research, it is estimated that £131bn is tied up in late payments in the marketing and advertising industry. One in seven companies take more than 14 days to pay on time and, on average, small businesses spend more than one working week a year chasing after late payments – most of which is done outside of business hours.

Late payments have had a disastrous impact on marketing agencies. Businesses within the sector end up losing not only a substantial amount of time as a result of late payment, but also money. Lack of reliable income makes it increasingly hard to invest in long term planning and hire new staff and cover production costs. Moreover, at a time when companies are faced with a number of financial pressures including soaring inflation and the economic uncertainty following Russian sanctions, late payments could put agencies out of business.

For those working as a freelance marketer, the issue of late payments is even more of a financial crisis. Without the ability to receive income from a number of different sources, self-employed marketers are highly susceptible to late payments and, in some cases, can fall into financial disrepair.

With research also finding that almost half (45%) of freelancers in the creative sector do not have enough money to cover work-related costs, the culture around late payments could also put further financial strains on one of the most dynamic and innovative parts of the UK economy: the self-employed.

While last week’s decision to ban Diageo and Unilever from the Prompt Payment Code is set to raise awareness around late payments, column inches alone aren’t enough to solve the issue. Instead, big brands need to take responsibility for paying suppliers on time. Without action, our smallest enterprises will be without the funds to grow their business and self-employed workers will be without the income they need to pay their bills and develop their skills.

Overall, chasing late payments takes up valuable time and resources that could be spent working with clients and driving economic growth. Poor payment practices must be addressed as a matter of urgency by large companies. They should sign up to the PPC, treat their small suppliers fairly and start to take a stand against the culture of late payments.

Andy Chamberlain is the director of policy at The Association of Independent Professionals and the Self-Employed.