Unilever and Diageo ‘too slow’ to pay suppliers
Unilever and Diageo have been removed from the UK government’s Prompt Payment Code (PPC) – a voluntary scheme to improve payment timelines to suppliers, including advertising and media agencies – for failing to settle bills on time. Unilever and Diageo have both insisted the accusation is unfair. Their payment terms have not changed, they said, but rather the criteria set by the PPC has.
Agencies have been left waiting for payment by big brands
The PPC launched last January and saw chief executives of major companies commit to settling all invoices within 60 days. Small suppliers had to be settled within 30 days. To remain on the program, these companies had to ensure at least 95% of invoices were paid within the set timeframes.
The goal was to reduce the financial burden being placed on businesses as a result of slow payments. This is a particular problem for the ad industry globally. In the UK, a 2017 report from FastPay found that marketing providers were waiting an average of 86 days to be paid by clients, with some waiting as long as 120 days.
Meanwhile, over in the US a survey of 100 brands by the Association of National Advertisers found that 37% were lengthening their payment terms. The average wait time for agencies in 2020 was 58 days.
Unilever was among the first of the PPC program’s signatories.
However, they have now been formally removed for “failing to honor their commitments” to pay within 60 days. It said that Diageo was paying less than a third of its invoices within 60 days, while Unilever was paying only half of invoices in the UK within 60 days.
The Drum understands that the figures leading to Unilever’s removal were skewed by the payment terms it has with larger organizations, which had mutually agreed to longer timeframes. In its recent reported figures, Unilever said its average payment time to all suppliers (not just agencies) was 64 days.
A spokesperson said previously consideration had been given that Unilever prioritized its SME suppliers with payment terms of 30 days, but this consideration was removed.
“We’re disappointed to have been removed, given that our payment terms have not changed in any way and it is the PPC criteria that has changed since we joined. At Unilever, we are committed to paying all of our suppliers fairly and on time,” the spokesperson added. “We believe we do still fully honor the spirit of the PPC and our most recently reported figures confirm we have paid more than 98% of all our invoices on time, including prioritizing our SME suppliers who are paid within 30 days. While we are disappointed with this outcome, our focus at Unilever will continue to be paying all our suppliers on time and prioritizing our SME suppliers, and this will not change.”
Meanwhile Diageo was removed after missing the cut-off by 2%.
“While the code has changed, our commitment to ensuring all suppliers are paid on time has not. In our latest report, 97% of our SME suppliers and 93% of all suppliers were paid on time. We will continue to work hard on our payment practices, with an acute focus on SME suppliers, reflecting the original intent of the code,” a spokesperson explained.
The Times quoted the scheme’s lead Liz Barclay claiming the two brands had failed to “engage” with her, leaving her no option but to delist.