WPP has been accused of putting the squeeze on key suppliers, including freelancers, following reports that hundreds of UK staff have been instructed to delay payments in an effort to make its year-end results look healthier.
According to a report in City AM, staff at data and insight division Kantar this week received an email telling them to wait until next year before paying outstanding invoices.
An internal email leaked to the newspaper read: “Cash balances are one of the most important indicators there are of the health of a business and so every year WPP looks to maximise its cash position reported in the year-end accounts.” It went on to ask for help chasing cash owed to WPP and “slowing down payments to our creditors”.
Ironically, WPP is a signatory of the Government’s Prompt Payment Code (PPC). However, the pressure is on the business to report a bumper final quarter after a troubled year that has included three revenue downgrades. Even Sir Martin Sorrell (pictured) is suffering; in April it was reported that his pay package had plunged from £70m to a mere £48m.
Berenberg senior analyst Sarah Simon said: “We have previously highlighted WPP’s balance sheet is quite stretched relative to the group’s targets. The fourth quarter in the advertising sector is key and these claims suggest things are not going as well as hoped at this critical time.”
“There is also the fact the many of WPP’s firms have earn-out agreements, which will further increase the pressure on group cashflow.”
This week’s email informed staff at research firm Millward Brown of a “reduced supplier payment run” in December. This meant limiting the payment of invoices to those over 90 days old, where exchange rates could move against the firm, if rebate for prompt payment could be received, or to those on short payment terms, such as freelance workers.
Federation of Small Businesses (FSB) chief executive Mike Cherry said: “Delaying payments is an unethical and debilitating practice that kills off 50,000 businesses every year. The Government has made clear that signatories to the PPC should pay suppliers within 30 days, bar ‘exceptional circumstances’. For the UK economy to work for everyone, that means paying people promptly for the products or service they have provided for you.”
WPP has denied any wrongdoing. A spokesman for the company told City AM: “WPP policy, which applies to all subsidiary companies, is to pay vendors in line with contractual obligations and any extended terms agreed with suppliers.”
To leave a comment please register – it takes less than a minute and is free of charge. You will also get our weekly email update The DM Report (to opt out contact email@example.com). If you are an existing user, please log in. If you have forgotten your log-in details please email firstname.lastname@example.org to get them reset!