Managing Controllable Spending

9 Apr

The ANA recently released the results of its sixth annual spending survey of 250 marketers regarding their 2012 budgets.  Not surprisingly, budgets are not going up much, if at all.  In fact, half of those surveyed indicated that budgets would be flat and one-third stated that budgets would be reduced from prior year levels.  As part of their budget management efforts, more than 8 out of 10 marketers are being asked to “tightly manage” their controllable spending.  Not surprisingly, the focus on controllable expenses is being extended to the organization’s agency partners as well with more than half of those surveyed indicating that they would ask their agencies to cut internal costs.

The not so good news is that some of the categories of expense reduction being targeted ranging from the elimination of employee training and development to shifts in media mix to lower cost media channels can negatively impact a marketer’s effectiveness in the near-term and over the long-haul.

What if there was an option available for a marketer to meet their organization’s budgetary guidelines, without sacrificing their ability to build brands and to profitably drive sales and market share?

It might surprise some to learn that the ability to boost available budget and drive efficiencies is closer than they think.  The answer comes in the form of a contract compliance and performance audit of an organization’s marketing agency partners.  In a majority of client/agency relationships the right to audit is specified within the master services agreement.  However, most marketers don’t avail themselves of this legal provision, which yields both improved financial controls and recoveries while leading to improved agency efficiencies and performance.

When was the last time your organization conducted an agency fee reconciliation or conducted an independent billing reconciliation that included actual versus estimated costs along with 3rd party vendor remittance data?  Have you recently checked to determine whether early pay discounts, annual volume rebates or your pro-rata share of agency group buying discounts were being captured and returned to your organization?  Do you currently review your agency partners’ monthly time-of-staff investment reports?  Reconcile them quarterly?  Engage in dialogue with your agency partners to evaluate ways to streamline processes that can reduce your costs and bolster their margins? If the answer to any of these questions is “no” then you could be leaving money on the table.

How much money you ask?  In our experience, it is not uncommon for a compliance audit to yield financial recoveries, future savings and risk avoidance benefits in the 3% to 9% of audited dollar range.  While periodic compliance audits make good legal and financial sense, they can also serve as the impetus to strengthen the client/ agency relationship by establishing and tracking performance criteria while identifying mutually beneficial process improvement opportunities.  Interested in learning more about the ANA survey results? …  Read More

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