The major hospitality associations such as Fedhasa are becoming increasingly concerned about slow payments which the hotel industry is facing. Millions of rands appears to continue and owed to a number of establishments known as ‘billbacks’ by the travel trade.
This word is not readily used within the events industry but with the same ultimate challenge being slow buyer/end-user payments for various event supplies and services clearly amounts to the same concern.
In the billback situation, the end-user purchases accommodation via their appointed agency.
The agency –in turn – books the required needs of their client and a billback is issued.
However the dilemma is that the client requires to keep their cash flow as high as possible – therefore payment is only made to the agent 30 days following purchase. In other words the client has had the order fulfilled while the agent awaits the payment. The issue follows that the agent has to pay the supplier of the accommodation – the likelihood of the agent being able to carry this high financial burden are limited.
In the event industry – the same concerns applies. The independent event contractor books the space and other suppliers on the signed order of bottom line budgeted agreement and has to pay the amount in advance of the take-up. The client is financially risk free while holding the event contractor beyond thirty days in many instances before payment is settled. It is all very well having a very friendly bank manager yet it should be remembered that money is expensive and the additional interest charge for the overdraft can simply mean an increased amount is incurred making the expense greater in relation to the actual event ROI.
It could also mean that the actual contractor may be paid less than anticipated due to increased interest charges.
Clearly a number of clients do not have an easy-to-read pay button on their keyboard or there may be a bigger picture within the client’s mind-set.
Two issues to consider on this matter going forward:
- Hopefully Fedhasa will have success in ensuring that all industry players tow the same line and eliminate billbacks and…
- Without doubt the old adage that whoever holds the purse-strings calls the tune each and every time remains constant.
*Helen Brewer from The MICE Academy is an independent contributor and articles do not necessarily reflect the opinions and views of The Planner.