Contract Compliance Auditing

Does your organization believe that its marketing investment can have a profound impact on growth, revenue flow and profitability?  If the answer is “yes,” then implementing a strong marketing accountability program can help boost financial outcomes.

Establishing performance criteria within the marketing function, and across the organization’s marketing agency network, is an important first step on the path to improved results and a higher level of accountability.  This can be accomplished by integrating agency financial performance metrics into the letter-of-agreement, and by linking agency remuneration and or incentive compensation to the desired outcomes.  Each metric and incentive goal should be well defined and directly tied to the organization’s business goals.  However, well thought out and agreed-to measures only lay the foundation – a constant review and feedback cycle is required to achieve the desired sound accountability.

A successful accountability plan must be sustainable and is dependent on the development of an agency performance monitoring discipline, relative to the letter of agreement, whereby progress and success criteria can be regularly tracked and communicated to stakeholders.  Unfortunately, too few organizations follow through and make the relatively minor investment necessary to implement and sustain such an initiative.

Perhaps the best way to jump start the control and feedback cycle is through the initial use of an agency contract compliance audit.  Let’s assume that the letters-of-agreement and agency remuneration programs were properly constructed and aligned with desired business outcomes.  Conducting an independent audit over marketing agency partner (creative agency, digital agency, media agency, PR firm, sales promotion agency, diversity agency) activity provides the requisite unbiased focus.  A well-scripted audit process will focus on testing past agency activity and reporting, detection of outlying transactions, review of parameters in place, metric refinement, and identification of process improvement opportunities to further enhance the program.

Reasons for an independent audit are many and varied, but here are a few key considerations:

1. The organization may lack the depth of resources or subject matter expertise to conduct a thorough assessment of an agency’s contract compliance and performance.
2. Independent auditors can provide agency stewardship insights and “Best Practice” feedback that can strengthen the client/agency relationship while laying the groundwork for improved performance.
3. Contract compliance audit firms have the tools and experience to probe on all aspects of the marketing investment cycle ranging from agency staffing investment assessments and fee reconciliations to comprehensive billing reconciliations of both the agencies’ and the organization’s 3^rd party vendors.
4. The compliance and performance metrics gleaned from the audit process can enhance an organization’s marketing, financial and legal controls while supporting the firm’s corporate governance initiative.

In our experience, advertisers that have achieved success in optimizing their return on marketing investment (ROMI) have done so with the aid of a top-down accountability program.  At the end of the day, all stakeholders want marketing to succeed and to lead the way toward attaining its organization’s cash generation and brand equity building goals.  None more than the marketing team and their agency partners.  With solid stakeholder support, linking your marketing goals with your organization’s desired financial outcomes, creating a culture of accountability, and a dedicated effort to monitor performance, the path to success will become infinitely easier.

Interested in learning more about the potential benefits of a contract compliance and performance audit that can accrue to your organization?  Contact Don Parsons, Principal at Advertising Audit & Risk Management at dparsons@aarmusa.com for your complimentary consultation.