It's Time to Automate Contract Reconciliation

July 17, 2018

By Jamie Miller

Kunal Mehta/

Back office costs like contract reconciliation aren't top of mind for buyers or sellers, but as technology adds new layers of capability to advertising, stakeholders must inevitably dedicate more people and resources to the back office. By one estimate, nearly two-thirds of fee income at the top 50 independent agencies is allocated to staff costs. Meanwhile, holding companies have made centralization of back-office functions the centerpiece of their strategies to increase efficiency and reduce costs. And yet, for all the resources spent on contract reconciliation, IAB standards define full delivery at a discrepancy threshold of 10 percent or less. In other words, contract reconciliation is costly, inefficient, and inaccurate. Automating the contract reconciliation process isn't just about cutting costs for stakeholders, it's about raising the bar for every transaction in the marketplace.


How did we get here and why does it matter?

There's no logic of design in today's contract reconciliation process. In fact, the process is the product of a distrustful ecosystem. Instead of a marketplace built on trust, the various stakeholders in ad tech have each built their own models for campaign reporting. With those models have come an army of vendors, and the net result is that we've created a system where there are watchmen for the watchmen. Most digital media is bought and sold according to "actual" delivery tied to a specified vendor's numbers, hence why so many vendors have popped up over the years. The redundancy in reporting vendors is made more problematic by the fact that they use a manual process, dominated by Excel spreadsheets and fraught with discrepancies. As a result, digital advertising under-delivers in terms of transparency and accountability.


A marketplace for reconciliation models

As with other industries, blockchain has become a buzzword solution that offers an alternative model for reconciliation that automates workflow from end-to-end. The reality is much more complex. To automate reconciliation, the contracts which govern delivery and the methods of reconciliation must be described, standardized, and adhered to by the parties involved.

At the moment, every agency uses custom contract terms. Moreover, there are numerous methods for reconciliation; in some cases, large publisher networks use different methods for different properties within the same portfolio. So, how can we move away from one-off contracts?

If the overarching concepts of each contract are described, and all the potential terms which govern each of those concepts can be defined, then a taxonomic structure and uniformity can be created. From there, a marketplace with such a ruleset would allow buyers and sellers to match on terms such as viewability and fraud in the same way that they arrive at a mutually agreed upon price. Ultimately, such a marketplace won't arrive at a single model but will standardize around a few common models.

When the method of reconciliation is agreed upon, and well understood at the creation of the contract, automation can happen. With the activity around smart legal contracts gaining steam, the ability to automate binding agreements has the potential to expedite reconciliation, billing, and payment transfer more efficiently than ever.


Automating contract reconciliation benefits stakeholders in different ways

Agencies, on behalf of their advertiser clients, currently bear the brunt of the contract reconciliation process, and so it's easy to see how automation will allow them to cut costs and better allocate resources. Rather than dealing with bespoke reconciliation processes for each client, agencies will be able to standardize and streamline their operations, making it easier to add new clients without adding backend office costs or increasing the complexity of their operations.

By automating contract reconciliation, we'll see a significant boost to the economic health of the publishing model. Publishers will be able to redirect resources currently allocated to contract reconciliation to revenue drivers like audience development and premium content production. In other words, publishers can take their focus off the backend office and shift it to their product.

One of the greatest benefits of automating contract reconciliation is that it gives stakeholders a better opportunity to demonstrate value because buyers and sellers are truly speaking the same language from the point of contract execution. Agencies, brands, and publishers can track progress and payments against a standardized set of terms and effectively mitigate the post-campaign renegotiation that happens in today's ecosystem. In effect, automating contracts means our industry can get out of the legal business and return to marketing.


Jamie Miller is the SVP of operations at NYIAX. She has more than 10 years of experience in the advertising technology industry in both large corporations and startups.


The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.


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