The Flip Side

1 Oct

compliance auditingRather than focusing on how the client / agency relationship is out of alignment as the basis for a financial compliance audit… consider this.  Proactive marketers, with highly satisfactory advertising agency / media buying relationships use “best practice” compliance auditing as a mechanism to maintain a good relationship and to support staying with their current marketing partner. 

One AARM client example.  The client’s marketing department recently (together with procurement’s support) initiated an agency media performance and billing compliance audit.  The stated audit objective was to confirm Marketing’s past experience and opinion that their agency has done an exceptional job over the last 6 years.  The audit was an agreed-to preemptive strike.  

The client’s procurement group is required, via corporate policy, to initiate a competitive RFP process every 5 years on each material vendor’s services.  Stakeholders engaged the audit process with full expectations that their agency would be found to be in compliance in all the requisite and important financial / stewardship areas.  Results were then to be used to support an ongoing relationship with the Incumbent, and as a means to avoid the potentially disruptive and costly RFP cycle. 

There was a catch.  The audit could not be a “wand-over” quick-check with sampling or haphazard testing procedures.  And could not be conducted by the company’s internal audit group, or by an external generalist firm.  Management required a specialist firm be engaged, to enable an unbiased assessment as to the health and clarity of the agency’s financial treatment.  A software enabled deep-dive data auditing capability was to be employed, industry best practices were to be compared and all agency billing areas were to be covered; including retainer-fee basis, commission application, labor charging practices, and pass-through costs. 

From a service provider’s perspective, it is refreshing to see the client / agency relationship being considered, in more than a neutral fashion but as a basis to inspect and a rationale to stay the course.  Agency change is disruptive and not guaranteed to meet expectations.  The time (market opportunity and real) it takes to bring any new agency partner up to speed and integrate them into the corporate fold is material.  We always suggest, where possible, an advertiser exhaust all reasonable effort to remedy a relationship with the existing service provider in the marketing area, rather than make a knee-jerk or non-required change. 

Our client in this case is doing it right.  They have set expectations, they are testing against those expectations as a good control practice, they plan to adjust process or control issues that come out of the review, and they will go forward with an even stronger proven relationship.  The agency is on-board, clearly has a vested interest in cooperating with the inspection, and will also benefit from any new level of financial transparency and understanding derived from the work. 

Audit should not be primarily about suspicion, gotcha, cost recovery, or selective issues.  Audit is about consistency, learning, strong financial awareness, compliance and continuous improvement. 

An additional benefit from a consistent / proactive audit program is the ability to challenge any new CMO’s suggested agency changes.  If industry statistics serve, it is likely that any given large advertiser will have a new CMO within the next 12 to 18 months, and they may want to change agency partners – what can you do? 

Go audit, stay happy!

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