The news that Fortuna PR Ltd., has filed a petition in front of the Mumbai bench of the National Company Law Tribunal to recover dues from Reliance Communications Ltd flashed around PR WhatsApp groups on Monday.
It is unusual for anI Indian PR firm to be in the news for suing a client for recovery of payment.
PRmoment India reached out to the firm’s managing founder, Harsh Wardhan, who, however, declined to comment on the move.
But this development, is a sign of a rising new trend, that of PR firms in India seeking the legal route to recover their dues. Previoulsy PR firms have tended to keep quiet and bear the losses, but with increasing professionalism PR companies are no longer willing to turn the other cheek.
Subhash Pais, founder and business head, i9 Communications, said, “In recent times I have been hearing about PR companies sending legal notices. Companies have started putting their foot down.”
Pais elaborates on the devastation unpaid dues cause saying, “In an under-funded industry like PR, choking cashflow, the lifeblood of business, it causes a lot of chaos. It causes bad blood, it affects pay checks. This further impacts talent when it’s coupled with the malaise of low pay that is already there.”
Pais further commented that he supports the move by Fortuna PR 100 % and he wishes PR agencies would draw the line somewhere.
Pais asserted that while its’ difficult to say how long the quantum of dues being cited in news reports (43 Lakhs or Rs. 4.3 million) have been pending for Fortuna; he recommends pulling the plug on clients that delay payments beyond a quarter. He adds that a legal recourse is the right approach for long delayed payments.
Agreeing that you need to take action against clients who do not pay up, Kunal Kishore Sinha, co-founder, Value 360 Communications says he has strong views on the subject, “I have clients who have wrapped up their business and left the country with unpaid dues.”
Value 360 communications is currently taking legal action against two companies #Fame and American Swan. Both firms along with Blogmint are part of New Ventures. All 3 firms have been wound up and the promoter has moved to Singapore, making it even more difficult to recover the dues.
Sinha says, “The Government needs to provide some sort of safeguards to service providers. We have sent legal notices but there is no one at the India address.”
Sinha adds that Value 360 has sent out legal notices to various companies to recover an estimated Rs. 1 crores for 2017. Of these, Value 360 has recovered Rs. 45 lakhs and hopes to get the rest by the end of the year.
Fiscal discipline can minimise unpaid dues
Subhash Pais estimates that at any given time, PR firms in India have about 14 to 15% of their turnover locked away in delayed payments. A 30 day payment credit end up being paid in 70 or 80 days.
“i9 Communications’ Subhas Pais puts the amount of bad unrecoverable debt for PR firms at 4 to 5 %, an assessment other PR firm owners agree with. Pais says this coupled with delayed payments makes cashflow very tough.”
Bullying of PR agencies
While in the case of, say, bad car loans, recovery is possible though repossession of a car; where PR services is concerned the only concrete recovery is payment.
Speaking out strongly on the issue, Pais says, “A client comes riding in on horse, he wants everything done yesterday, he wants the best service for which he doesn’t want to pay the world. Which is fine, but we should at least be paid for services rendered. They bully the agency when it comes to payment.”
Pais says, “On principle I avoid such notorious clients. There are times when we haven’t responded to an RFP because the marketing communications fraternity across the board has not been paid. The guy is just not professional enough."
Solutions to Unpaid PR Dues
NOC from previous PR firms
Subhash Pais says the PRCAI should call in for an industry paper on non payment of dues and on bullying of PR agencies.
One way to address this is by getting a No Objection Certificate ( NOC) from the previous PR firm. He says, “The media buying agencies do this. At the time of an agency switch, they will not do any media buying for a new client unless they get an NOC from the previous media being firm. Law firms do this as well. There should be something basic and similar for PR firms as well. It will do them a lot of good.”
Creating a registry of non-paying clients
Kunal Kishore Sinha says, “Fortuna PR has set a great example by fighting this. If the unpaid dues by Reliance are 43 Lakhs as has been reported then that could be three months’ salary for a smaller PR company.”
Sinha adds, “At the process level, as a deterrent, we need to create a central registry, a civil record of defaulters who do not have intention to pay. With this we can sensitise other PR firms. This will mean that defaulters will end up with either freelancers or smaller PR firms, no organised large firm will touch them.”
A registry is an idea that Pais also supports saying, “ Over a year I can tolerate one quarter of unpaid dues not more than that.”
Value 360’s Kunal Kishore Sinha recommends pulling the plug on clients who do not pay for 90 days.
At the same time, a registry may be tough to implement practically speaking. In UK, for example, agency CEOs tend to share information about troublesome accounts informally amongst their network. There is no pubic registry as such.
Exercising Fiscal Discipline: Setting cashflow norms
Kunal Kishore Sinha also suggests exercising cashflow discipline. At Value 360, work stops if payment is due for 90 days, at 120 days a legal notice goes out. These norms were set by the firm over a year ago.
“If you do not respect your money, no one else will”, says Sinha.
PRmoment India spoke to Nitin Mantri, president, PRCAI about this.
Says Mantri, “The PRCAI has been aware of such issues and we are working with all our members to ensure there is a policy that works. We expect to introduce this in January 2018.”