Five ways for CFOs to spot and eliminate risk in media and marketing
For too long, marketing has been mischaracterized as an unmeasurable cost. By taking a proactive approach and adding regular, contract compliance auditing into the governance mix, this mischaracterization becomes a distant memory.
Since my background is a mélange of marketing procurement, agency finance, and agency operations, my worldview tends to blur the lines between the functions of a company and cut across siloes. This means that I often focus on delivering actual business outcomes, while at the same time upholding the corporate goals and good corporate governance that we all strive to deliver to our employers and ourselves. Call me a dreamer perhaps, but stay with me.
In a recent edition of CFO Insights, I came across an important and challenging article titled “Supply chain risks: How to identify and mitigate your weakest links”. The Deloitte authors discuss the contributions that procurement (supply chain) executives can make to help create resilient supply chains, as well as ways in which they can mitigate the risks that threaten them.
To add to their article, here are five ways that I believe marketing contract compliance audits can address most CFOs’ most pressing concerns on this topic of reducing risk.
1. Data collection
The report suggests that predictive scoring is essential. As managers of significant budgets, many marketing procurement leaders validate the agency’s fiduciary performance annually using a financial compliance audit. This represents a relatively small investment relative to agency fees and marketing spend. Audits help marketing procurement leaders ensure that agency partners perform to the standards set with and by the client and ratified in a mutually agreed (and, critically, signed) contract.
It’s really important to treat marketing as an investment. Annual audits institute a systematic cycle of data collection, validation, and action planning to level-set the relationship. This in turn leads to a significant improvement in the relationship however long it lasts. It means collaboration focuses on delivering great marketing, not (just) counting the pennies. It’s like going to the doctor for your annual check-up.
2. Framework for investments
The second recommendation in Deloitte’s CFO report is that advertisers should make investments in items that can make the company stronger after the pandemic. Collecting the data as part of a financial compliance audit of marketing partners – across both media and non-media marketing spend – will provide unprecedented insight into how well these partners have managed your time, money, and contractual obligations.
It will help CFOs better understand how well the marketing contract is being delivered against, in this way enabling them to better understand the complexities of the big-ticket item they see on the profit and loss account every budget cycle.
3. Conflicting expectations
CFOs are always asked to balance cost, value, quality, the present versus the future, risks, and corporate reputation … to name but a few. By performing a financial compliance audit, CFOs can validate that the marketing spend is being managed according to the agreement set with the marketing partners.
Once CFOs have this information, they can choose which priority wins out this time; often with marketing – and contrary to popular belief – cost is not the number one consideration. Again, this is not about penny pinching, it’s about good corporate governance, fairness, and trust among strong marketing partners.
4. Managing supplier risk
Through a financial compliance audit, CFOs can benchmark and improve marketing contracts to eliminate unnecessary risk, improve relationships, and ensure that relationships thrive for years to come. By having an annual checklist – just as you have in an annual financial compliance audit – the collective team can agree that they have both benefited from the relationship in the way intended. If there’s a mismatch between parties, then it’s fixable going forward. Regular, recurring budget cycles are prime moments to better understand and sort out major areas of concern.
5. Maintaining flexibility and functionality
When you commission a financial compliance audit, you get a snapshot view of the state of the union – of how services are being delivered in line with your contract. When that’s combined with next year’s vision for all areas of marketing – media channels, creative, production, field-force and so on – you can use the past to predict and shape the future. Contract compliance auditing guides the organization to take the right – and very much better – decisions, from a marketing, finance, and ultimately shareholder point of view.
The contract compliance audit is not a universal panacea to all the challenges CFOs face. But because marketing procurement speak the language of the CFO – because they’re designed to institute and enshrine good governance in a measurable, replicable way – they give finance the level of security and control they’re used to in other complex financial relationships.
For too long, marketing has been mischaracterized as the unmeasurable cost department. By taking a proactive approach and adding regular, contract compliance auditing into the governance mix, this mischaracterization becomes a distant memory.
I’m grateful to the CFO Insights report for cueing me up to make this case for this important but still under-used tool in marketing procurement’s toolbox.
This article was featured in Producers & Procurers iQ.