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Advertising Agency Audits

A New Year’s Resolution for Marketers

By Advertisers, Advertising Agency Audits, Contract Compliance Auditing, Letter of Agreement Best Practices No Comments

new year resolutionInevitably, as 2012 draws to a close our mind turns to the New Year and we begin to reflect on things that we are thankful for, ways that we can better ourselves as individuals and how we might contribute more broadly to our families, companies and communities.

Having survived the Mayan “Doomsday” prophecy we can all breathe a sigh of relief and focus on the future with a renewed sense of vigor and commitment.  So what will it be?  Shall we resolve to give up caffeine, drop fifteen pounds or go the “I’ll be a better person” route?   Based upon our past resolutions, how should we handicap our chances for success in 2013?   Should we share our resolutions with others, or heed the words of the renowned 16th century English statesman John Selden:

“Never tell your resolution beforehand, or it’s twice as onerous a duty.”

Looking to mix it up a little and try a different approach?  Here’s an idea that will take less than 30 minutes of your time and can yield financial benefits and productivity gains that will benefit your organization throughout the year.   Go to the “Legal” drawer of your marketing services agency filing cabinet and pull out a copy of the letter of agreement for your firm’s agency of record, creative services partner or media agency.  If you’re feeling ambitious, pull all three.

When was the last time you reviewed these contracts?  In our advertising agency contract compliance audit practice too often our clients answer is, “It has been years” or “I have never seen them.”  Sadly, from time-to-time the advertiser cannot even locate a copy of their agency agreements, or at least an executed version of the contracts that govern their supplier relationships in this important area.

Whether your budget is $50 million or $500 million an annual review of your agency agreements is a worthwhile investment of an organization’s time and resources.  After all, the intent of these instruments is to provide the legal and financial safeguards required to protect the organization’s marketing investment, intellectual property and brand assets.   As importantly, they set the tone for the Client/ Agency relationship, establish performance expectations and provide the framework for shaping supplier behavior and resource investment.

The brief review will yield insights into statement-of-work deliverables, agency’s staffing plan and agency compensation methodology.  You might also notice a looseness of terms or that important controlling language is missing.  Once identified, you can set about fine-tuning the document to reflect the current nature of the relationship with that particular supplier and shoring up the language that will afford your organization the level of protection, transparency and control that it desires. 

An initial Client/ Agency agreement review is exactly the first step in any AARM advertising agency contract compliance audit process – a high level risk assessment based solely on agreement terms based on having tested hundreds of such agency agreements on behalf of our clients.  It is this experience and knowing where, in actual practice, financial and performance controls have fallen short of client expectations that set the stage for an expanded assessment of supplier contract compliance. 

Next steps then expand out to stakeholder discussions, agency data analysis, discrepancy identification and on-site audit work.  The net result of the discovery and analysis conducted around contract compliance involves financial true-ups, process refinements, improved reporting and controls and future efficiency gains. 

So as you consider your New Year’s resolutions for 2013, you may want to add a review of your advertising agency agreements to the list.  To assist on the path to improved agency stewardship, AARM is offering a “Free Agreement Based Risk Assessment” to any advertiser who reaches out prior to close of business on January 4, 2013.  Contact Don Parsons, Principal at AARM via email at dparsons@aarmusa.com  and we’ll follow-up to discuss scheduling.