The following blog post from SC&H Group’s Contract Compliance Audit Services (CCAS) team offers insights into how advertising agency contract compliance audits can strengthen client-agency relationships, promote transparency, and enhance overall return-on-investment (ROI).
Today’s cost-cutting initiatives are straining valued agency partnerships.
Chief Marketing Officers (CMO) are being pressured to reduce agency spend. In turn, CMOs are pushing agencies to do more—build company brand, attract new customers, and adjust to evolving digital and new media trends—with less.
The result: a precipitous drop in the average tenure of agency-company relationships.
Unfortunately, agency turnover is expensive and inefficient, undercutting the original intent of cost reductions. Further, it can weaken advertising efforts, thereby impacting revenue generation and company success.
The Holistic Benefits of Analyzing Agency Contracts
To help reduce turnover, many CMOs are embracing the concept of independent contract compliance audits, which analyze agency contracts and validate contract performance versus goals. These audits are enabling CMOs to identify cost savings and improve efficiency—without compromising agency effectiveness.
Likewise, many advertising agencies are also advocating for independent contract compliance audits, as they help to increase transparency and trust between the agency and company.
Further, they are yielding more defined scopes of work, less volatility, and more dependable workflows.
Maximizing ROI with the Right Audit Timing
CMOs who have embraced contract compliance audits have found that maximizing their audit ROI requires not only the right auditor, but also the right timing.
Therefore, they are engaging independent auditors at five key times:
- During operational and structural changes – Business combinations or reorganizations are difficult times to ensure consistent procedures, accurate application of contract terms, and continuity.
- Prior to initiating agency reviews – Financial compliance is a leading indicator of operational effectiveness, while earned trust and transparency facilitate alignment between the agency and client.
- Prior to ending agency relationships – There is a very short time frame to obtain insights for future negotiations and discover potential improvements to incorporate into the next relationship.
- During high-risk agency partnerships – Agencies with complex contract terms, revenue concentrated in a few clients, or agencies growing faster than their internal controls may need to be monitored more closely to ensure compliance.
- Throughout long-term agency contracts – Familiarity can often be mistaken for transparency, which can lead to complacency and misunderstandings. Periodic audits ensure minor, inadvertent errors do not build into significant issues.
During these times, well-executed audits are strengthening agency-company relationships and helping CMOs to meet organizational objectives.
With the business landscape being more competitive than ever, companies and agencies have far too much at stake to allow disruptions in the most important of business relationships. By implementing independent contract compliance audits, it is possible to strengthen strategic advertising partnerships, enhance ROI, and improve overall outcomes.
Interested in exploring this topic in more detail? Listen to Patrick Gahagan, a Director in the CCAS practice, discuss the true value of agency contract compliance audits in the following SC&H Group podcast. In addition, this SC&H Group white paper reveals the six key traits to look for when hiring an independent agency contract auditor.
Additionally, if you would like to speak to our contract compliance audit specialists directly, please contact us here.