Member Article

‘To audit or not to audit’: FirmDecisions launches ultimate guide to contract compliance

FirmDecisions, the global marketing contract-compliance specialist, launches its ultimate contract compliance guide to help brands get the most from their relationships with agency partners.

With the leading agency holding companies losing significant percentages of revenue and operating margins in 2020 (audits are retrospective in nature), agencies have used the last 18 months to transform their operations – which has had a huge knock-on effect for advertisers/agency relationships. This has created a new dawn for auditing as contract compliance has been put under greater pressure than ever.

In light of this considerable change in the agency landscape and based on insights gathered over 24 years, FirmDecisions has created a ‘how to’ guide to ensure both agencies and advertisers comply with the agreed terms of business.

Looking forward to audits covering 2020 and 2021, FirmDecisions has identified key determining factors in many agencies’ ability to service their clients as per their contractual obligations:

• financial stress on agencies as client spend has been reduced or cut entirely
• the acceleration or introduction of operational efficiency plans within agency groups to better manage the volatility created by the Covid pandemic
• consequential impact on client service levels
• closer scrutiny of gaps in client contracts to ensure agency revenues are maximised.

The guide addresses issues highlighted in reports by the Association of National Advertisers (ANA) on media and marketing transparency in the US and seeks to update brands on ways to achieve a more transparent contractual relationship.

It answers key questions for any marketing or procurement professional looking to better understand how their marketing agency has delivered against their obligations, particularly after these turbulent two years.

Federica Bowman, Global CEO at FirmDecisions, said: “The marketing budget is often one of the largest expense items in a company’s profit and loss statement, making it crucial that the money is being used to secure maximum ROI. Non-compliance is rarely intentional, but for any marketing or procurement budget holders pondering whether to audit or not to audit – the answer is a resounding ‘audit!’.”

She added: “Contract compliance auditing strengthens commercial relationships by establishing transparency, clarity, and good practice. It also allows the agency and the client to resolve issues in a non-contentious environment, via a third party, which may have been overlooked and not dealt with in the past.”

Bowman added, “Contract compliance auditing can often provide an early indicator of the health (or otherwise) of commercial relationships and give direction on how to better manage them in the future – something that has become particularly important since the turbulence of the pandemic.”

Andras Vigh, Managing Director for FirmDecisions UK Data from the latest AA/WARC Expenditure Report points towards a remarkable recovery of advertising spend in the UK. However, it is important to bear in mind that this growth is compared to data from 2020 when advertising spend experienced its largest decline in history. The speed of recovery and predictions for Q4 are very impressive but also somewhat surprising considering current economic uncertainties and headwinds of transport chaos. There are a few factors that may be responsible for this fast recovery, including high levels of media viewership, but also the increased resources and need to deliver new campaigns after budgets were frozen in 2020. Since ‘Freedom Day’, shopping, entertainment and consumption have also increased significantly - fuelled further by savings from lock down and lack of previous opportunities - creating strong consumer demand. Naturally advertising activity tapped into this growth and demand. As I see it, 2022 advertising spend will continue to grow but with some fluctuations as economic growth and advertising spend will mirror each other more closely going forward. With potential inflation, interest rate raises and political instabilities the volatility in 2022 will be high.

This was posted in Bdaily's Members' News section by Business News .