There’s been an interesting development in the PR industry. The CIPR Professional Practices Committee has issued new advice on mark-ups. In other words, adding a surcharge to sub-contractors’ invoices, eg for printing, before passing on costs to the client. That industry-standard mark-up has been 17.65% for as long as I can remember.
Up until now, it’s been perfectly acceptable for consultancies to tell a client that mark-ups would be applied but without revealing exactly how much of the final invoice they represented.
Sneaky? You bet. We’ve always taken the view that mark-ups are more trouble than they’re worth.
The first loser is the subcontractor. Sure, he’s been given the job and has been paid the market-rate, but it’s unlikely the client will use him again because he was he was ever-so-slightly expensive (by about 17%, right?).
The second loser is the client who has had to fork out goodness knows how much more than they needed to.
The third loser is the consultancy. They might be a few quid better off but they’ll be losing out in other ways.
For a start, it hardly builds trust. And we all know the strongest relationships are built on trust.
And talk about nasty surprises. What client wants to see a whopping great fee they hadn’t expected?
And thirdly, it can’t half backfire. Any problems with invoices end up being sorted by the consultancy – precious time that could be used more productively elsewhere.
We’ve never covertly marked up services. We know how we’d feel if we were on the receiving end. We’ve always been totally upfront and given clients the option to pay for subcontractors directly or to put it ‘through our books’ for an agreed fee.
So it’s great that the CIPR is saying that greater transparency is now required and that clients should be given the option to pay the subcontractor direct or to negotiate independently with other subcontractors.
The CIPR also says that mark-ups should now form part of a client-consultancy contract and that the calculation should be specified.
Hallelujah for that. Our profession suffers enough from accusations that it’s a black art. This is a welcome step in the right direction.