The PPA Agency Recognition Scheme aims to promote financial security within the publishing industry by providing an indication of the financial health, or creditworthiness, of media planning and buying agencies.
How To Apply
Agencies recognised by the PPA Agency Recognition Scheme may receive advantageous commission rates and credit facilities from member publishers in return for supplying financial accounts each year, although to what extent these are given is the decision of the individual publisher. The scheme increases its effectiveness with the more benefits that a recognised agency receives, and most publishers appreciate that the higher the rewards for being recognised, the more likely it is that the agency will comply with all the terms of recognition.
Making an application (established agencies)
An agency should submit the necessary forms and accounts for the last financial year. Where the figures are more than three months' old, quarterly management accounts consisting of a balance sheet, profit and loss account and cash flow statement should also be provided. Applicants should supply PPA with proof of sound financial planning in the form of cash-flow forecasts and balance sheet and profit and loss projections.
The application is then considered by the PPA Agency Recognition Committee (a sub-committee of the PPA Credit Management Committee), made up of credit and finance executives, which meets every two months. An administration fee of £1000+VAT is payable with each application and thereafter the only responsibility of the agency is to provide PPA with annual financial accounts no later than six months after the year-end, and to continue to meet the terms of the agreement.
To obtain recognition, the agency must satisfy the following minimum requirements:
- A trading record of more than two years
- Annual billings of no less than £200,000 in magazines and newspapers
- Shareholders’ funds (or share capital and reserves) of at least £20,000
- Current assets in excess of current liabilities
- A profit before tax in the most recent financial year
- A client base of at least four companies. If any one client accounts for more than 25% of an agency’s business then credit insurance must be in place. A copy of the policy (including number) must be submitted with the application
- Once recognition is granted, the agency must pay PPA members according to their individual trading terms and conditions. Failure to do so may result in the removal of recognition.
If the agency does not meet the above criteria yet is the subsidiary of a company which does, it may still be possible for the agency to gain recognition, provided that the parent company is prepared to supply the appropriate indemnity. See the section on subsidiaries and groups below for more information.
The confirmation of recognition constitutes a recommendation from PPA to its members that credit and commission be awarded to the agency on such terms as individual publishers consider appropriate. Please note that recognition does not automatically entitle the agency to credit or commission. The scheme serves to make available to members a basic level of information in order to assist them in making their own assessment as to an agency’s creditworthiness, thereby aiming to promote financial security in the industry.
PPA reserves the right to seek satisfactory bank and trade references. The agency should therefore supply a list of magazine publishing houses that it has used during the preceding 12 months. An agency which previously purchased advertisement space through a third party media buyer, should obtain a payment reference from that company.
Making an application (agencies of less than two years' standing)
For agencies which have been trading for one year, rather than the two years that constitute an established agency, it may still be possible to obtain recognition , provided that the applicant is able to satisfy the criteria and the following additional requirements:
- Shareholders' funds (share capital + reserves) of at least £50,000
- Current assets in excess of current liabilities by at least £20,000
Where the applicant is a subsidiary of another company or is part of a group of advertising agencies, see the section on subsidiaries and groups for more information.
Making an application (subsidiaries and group companies)
If the agency is the subsidiary of another company, audited accounts should be provided both for the applicant and for the parent. In addition, form F - an indemnity from the parent company in respect of any liabilities generated by the subsidiary - should accompany the application. In assessing the submission, PPA will be mindful of the financial standing of both the agency and its parent.
Where the applicant is part of a group of advertising agencies, it may be preferable for the holding company to apply for recognition in its own name. It would then be able to extend the recognition to any or all of the related businesses by supplying a parent company indemnity for each.
Making an application (local authority in-house advertising units)
Local authorities wishing to obtain recognition will be evaluated on an individual basis and will have to satisfy a number of professional requirements. Contact the PPA Agency Recognition department on 020 7404 4166 email firstname.lastname@example.org for more information.
MBOs, mergers, amalgamations and other restructuring
Where a recognised agency undergoes a management buy-out, a merger, an amalgamation or any other form of restructuring which materially affects its ownership, a fresh application should be submitted. In order to transfer the existing recognition to the start-up agency, the company will need to supply an opening balance sheet, a projected profit and loss account and a projected cash-flow statement, each certified by the accountant and showing:
- Projected annual billings of over £200,000 in magazines, newspapers and online
- Shareholders' funds (share capital + reserves) of more than £50,000
- Current assets in excess of current liabilities by at least £20,000
- A projected profit in the first year of trading
In addition, the agency will need to stipulate what assets and liabilities have been transferred to the new concern and how outstanding debts to member publishers are to be honoured.
If any one client accounts for more than 25% of the agency's business, credit insurance must be in place. Where the applicant is a subsidiary of another company or is a part of a group of advertising agencies, see the section on subsidiaries and groups above.
The forms which should accompany the application are:
- Form A - This gives details of the location, legal status, ownership and client base of the applicant agency as well as four main publisher trade references.
- Form B - Gives details of the agency's capital structure, its spend across the various forms of media and lists the names and addresses of its bankers, solicitors and auditors.
- Form C - A declaration that the information provided is true. To be signed by the managing director, company secretary, senior partner or sole trader.
- Form D - An agreement to the effect that, in return for being added to the recognition register, the agency will comply with the British Codes of Advertising and Sales Promotion, will pay to member publishers' terms, will supply PPA with audited accounts on an annual basis and will notify PPA of any changes to the information supplied in the original application.
- Form E - A report by the auditors into the solvency of the agency.
- Form F - An indemnity from the parent company in respect of any liabilities generated by the subsidiary.
DOWNLOAD ALL FORMS AT THE BOTTOM OF THIS PAGE
The nature of recognition
The confirmation of recognition constitutes a recommendation from PPA to its members that credit and commission be awarded to the agency on such terms as individual publishers consider appropriate. Please note that recognition does not automatically entitle an agency to credit or commission.
Upon being granted recognition, the agency shall be bound by the terms set out in form D, a counter-signed copy of which will be provided for the agency's files.
Payment to members' terms
Under the terms of the Agreement, the agency undertakes to pay in accordance with individual publishers' payment terms and to meet all reasonable surcharges levied for late settlement. Failure to do so will result in the agency being reported to the PPA Credit Management Committee, which will decide on appropriate action.
Annual submission of accounts
The recognised agency is required to forward to PPA, on an annual basis, a copy of its financial accounts (and group accounts, where applicable) along with a completed form E solvency statement showing that the recognition criteria continue to be met. A full set of accounts should be submitted within six months of the agency's financial year-end.
Should the accounts suggest that the agency no longer fulfils the minimum financial requirements, the agency may be contacted and asked to explain the efforts currently underway to rectify the situation. In order to retain recognition, the agency may be asked to supply management accounts, a personal indemnity, a bank guarantee, or an insurance bond. The directors may be asked to attend a meeting at PPA.
Through the monthly meetings of the Credit Management Committee, PPA is able to monitor the payment performance of all recognised agencies. By regularly reviewing the advertising and marketing press and by maintaining close links with other media trade organisations, PPA is able to keep track of account losses and other developments. Where a particular agency is giving cause for concern and its payment performance is not improving, PPA will arrange a meeting with the directors, principals or partners to gain satisfactory assurances about future performance.
PPA reserves the right to terminate an agency's recognition in the event of it breaching the Agreement or failing to meet the minimum financial criteria then in force. In either case, the agency shall be given 14 days notice of the impending de-recognition and a chance to lodge an appeal.
Once a decision has been made, PPA will also inform its members of the agency's de-recognition.