Working practices at advertising giant WPP have been put under the spotlight after hundreds of UK staff were instructed to help bolster Christmas cash coffers by delaying critical supplier payments.
Frontline staff at a major subsidiary of WPP-owned Kantar this week received an email telling them to wait until next year before paying outstanding invoices.
“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,” an email seen exclusively by City A.M. stated.
It asked for help chasing cash owed to WPP and “slowing down payments to our creditors”.
Small businesses believe such practices could breach the government’s Prompt Payment Code (PPC), to which WPP is a signatory.
WPP, the world's largest advertising firm, has hung its hat on a bumper final quarter after a troubled year that has included three revenue downgrades.
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 greater than 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 was “an unethical and debilitating practice that kills off 50,000 businesses every year”.
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He added: “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.”
A spokesperson for WPP said "WPP policy, which applies to all subsidiary companies, is to pay vendors in line with contractual obligations and any extended terms agreed with suppliers."