Advertiser Audit Rights: Omnipresent but Seldom Enacted

11 Apr

transparencyVirtually every contract that exists between advertiser and agency partner provides the advertiser with the “right to audit” agency books, records and accounting practices related to services rendered. However, oddly enough, advertisers seldom act upon these negotiated, protective contract provisions in spite of the significant dollars being spent in this area. This is unfortunate for both advertiser and agency alike.

Why? At a time when many client / agency relationships are strained, largely as a result of diminishing levels of trust and transparency concerns, contract compliance work represent an excellent tool for building clarity around and confidence in agency financial management practices, resource investments, and actual performance.

Contract compliance work identifies gaps in understanding that can be negatively impacting client perceptions and agency margins. Whether related to the project briefing, the approval process, rework levels, mushrooming custom reporting requests, and or payment timing issues, independent testing work provides a prescriptive for positive change to benefit all stakeholders.

In our contract compliance practice, it is common to identify process and behavioral breakdowns that have crept into day-to-day activities between client and agency and that can be directly attributed to lack of oversight. Unchecked, bad habits whether accidental or intentional create financial risks that can be very costly to both parties. Periodic compliance work and ongoing performance monitoring can greatly provide new learnings that assist the advertiser to mitigate risks, optimize process, and eliminate unnecessary costs.

Independent audit work absolutely provides assurance and marketing spend governance. It drives in-market performance in a manner that improves the advertisers return-on-marketing-investment. An additional dynamic, born of a consistent marketing accountability program and contract compliance work, is a very real incentive for the parties to reform behaviors that are distracting an otherwise solid client / agency relationships predicated on trust and confidence.

A wise risk management practitioner once shared a somewhat comedic perspective on this dynamic by citing the following question and answer:

“What happens when you lock a wild hyena in a room with an Internal auditor? The hyena stops laughing.”

 Audits can be sobering and should be approached with a healthy and serious level of respect. However, they are not intended to intimidate or strike fear in the hearts of marketing team members or agency personnel. Further, sound audit methodologies should not interrupt client/ agency workflows, nor should they come with an onerous cost in terms of advertiser or agency resource investment required to participate in the process. The goal is to identify opportunities for improved transparency, controls, risk mitigation practices and financial management stewardship, and build long-term relationships.

We see relationships flourish and be strengthened when both parties embrace the process for what it was intended. That is why “Right to Audit” clauses exist and why they are so broadly represented in client / agency agreements in the U.S. and around the globe.

 

 

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