With influencers and agencies time and again locking horns over payment cycle, Social Samosa sets off to find out the root cause of the phenomenon.
On December 05, Kalyan Karmakar (@FinelyChopped) Tweeted about the payment cycle issues, opening the Pandora’s Box, with leading influencers and bloggers sharing their opinion on this evil of sorts.
From “the signatory is travelling” to the need of a new payment mechanism – the Twitter thread brought to light everything that is wrong when it comes to the payment cycle of influencers. Influencers shared their woes of not receiving their payments on time for reasons unacceptable by norms.
The conversation brings into limelight, the client-influencer tug of war, where the former is sometimes genuinely stuck with cash-flow issues.
Finding the root cause
On being contacted by Social Samosa, Karmakar said that while he has faced payment issues, he has always gotten his money eventually, so far. “My hypothesis is that it's smart cash flow management and lack of professional respect for the supplier/ vendor/ creative person,” he adds, commenting on the cause of such issues.
A lack of understanding of Principal to Principal relationships in agencies, is also a cause according to industry veterans.
“Parties with mutual obligations created by a contract are principals. A principal may have consequent obligations that depend upon fulfilment of a particular contract but not contained within it. This is typical for intermediaries. The intermediary cannot hold performance obligations hostage to actions or parties outside the contracting principals,” Paritosh tweeted explaining Principal to Principal relationships.
This is not the first time an influencer or agency has pointed payment cycle issues. In 2015, Karan Joshi, Co-Founder, TwentyThree and Founder of @WeAreMumbai, brought spoke openly about not receiving payments for 7 whole months from a leading agency.
The same has been the issue with agencies, when a number of times leading players have publicly spoken about not receiving their dues on times, in spite of legal commitment.
“The delays mainly arise due to the key people (with whom you are interacting) moving out from agencies/ brands or the necessary documentation is not sufficiently carried out with the influencers,” shares Manveer Malhi, Head of Digital and Partner, iGenero.
Lack of right declarations and documentations are another reason to cause delay in payment to influencers. Lavin Mirchandani, Founder, GetEvangelized explains that when individual influencers sign up with large agencies, they have to go through a vendor empanelment process to be able to bill the agency and receive payments. Many a times influencers participate in the campaign without completing this process because either the brief came to them at the eleventh hour, without much time for the empanelment or they did not have the requisite documents ready.
The finance teams, in many cases located in satellite offices, have their own prescribed processes to verify and approve vendors, more so, they require pro-forma invoices followed by a purchase order and a physical copy of the invoice in a prescribed format to be able to release payments. They have a tough task of suddenly empanelling 30-50 new vendors with inconsistent documentation while they are under the pressure of balancing campaign deadlines with company policies.
“While this is a seamless process for any corporate vendor, it’s difficult for individuals who are not used to the grind,” expresses Mirchandani.
Is there a solution?
While influencer marketing has emerged as a field of marketing in itself, it still suffers from inconsistency and lack of pre-defined regulations. To overcome the aforementioned issues, advance payment to influencers seems like an apt solution, according to the industry experts.
“At iGenero, as a thumb rule for all influencer marketing campaigns we request our clients to pay 100% in advance. This has eliminated almost all of our issues regarding payments pertaining to influencer marketing,” shares Malhi.
Certain influencers such as Naina Redhu and Shubham Mansingka have established complete advance payment as a norm. Agencies too follow the same route by taking a particular amount in advance.
“We have a standard structure with clients. For retainers - end of the month invoices are raised and payment comes after 30 days. It works well with the larger companies, barring a few exceptions they don't delay. For production, we take 50% advance. Clients usually comply. For media, depending on the length of the relationship with the client we take 100% upfront or 50% upfront or if the relationship is old we bill them at the end of the month and payment comes after 30 days,” opines, Harshil Karia, Managing Director, Schbang told Social Samosa.
Mirchanda on the other hand, opined that it is equally important to educate the clients about this issue and the required measures.
“Influencer engagement needs to be approached as a combination of media buying or a production activity,” Mirchanda says. “Content is being produced by the creators on behalf of the brand and the content is being published by creators for the brand. Both these types of activities warrant an advance payment which is an accepted norm in the industry. If agencies educate their clients, it’s a good first step in the process.”
Celebrities too, do not go ahead with a 100% advance and so there should not be such an extreme difference for other creators who are micro celebrities in their own right, concludes Mirchandani.
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