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By Maddy Smith
FirmDecisions’ most recent report gives a comprehensive guide to compliance auditing for advertisers.
FirmDecisions’ report highlights some of the top reasons as to why most major advertisers now use contract compliance auditing to manage their agency contracts in a smarter and more effective manner.
Contract compliance audits are designed to ensure that your agency is complying with the agreed financial and legal terms of an advertiser’s agreement, particularly relating to fees and billings, testing the level of protection and transparency being provided by the terms of the existing contract.
The audit is not about ensuring value is being delivered – this is the job of cost controllers and benchmarking specialists.
Rather, it looks to ensure the agency is complying to the financial agreements in the contract, such as ensuring projects are reconciled and invoices are billed against actual expenditure and not to estimate.
Furthermore, any discounts, agency trading benefits and balances must be returned to the client.
“The marketing budget is often one of the largest expense items in a company’s profit and loss statement”, the report explains. “This is why it’s good corporate governance and business practice to ensure that this money is being used to secure maximum ROI”.
This includes ever-more stringent corporate governance, the increasingly complex and fast-evolving marketing communications ecosystem, the explosion in the number and type of agencies and the fundamental drive towards transparency in marketing services.
An essential management tool, contract compliance auditing helps to shine a light on the reality of how agencies are actually performing against the contracts in place.
FirmDecisions’ recent report explores some of the key points to be considered when considering an audit. It outlines what a contract compliance audit is, explores why a compliance audit should be undertaken, explains who should perform the audit and also debates when one should be carried out.
The report also delves into some of the potential implications and outcomes of a compliance audit and lists some examples of FAQ’s which all advertisers should consider.
In summary, this report reveals that a key benefit of carrying out an audit is that it can often provide an early indicator to the health (or otherwise) of commercial relationships and give indicative direction on how to better manage them in the future.
So do compliance audits only apply to media agencies or can any type of agency be audited?
In short, yes. As explored in the report, although this guide sets out recommendations for how advertisers should audit contract compliance with media planning and buying agencies, all different types of agency relationships can actually be audited for contract compliance.
These include full service, creative, digital, PR, direct marketing, events management, research, production, sales promotion, point of sale marketing, field force, social media, and influencer management.