Advertising spend is often a “black box” at many companies and when budgets and economic conditions are tight, it can be the first area to be cut. The correlation of ad spend to revenue is usually not well understood, while spending reductions will presumably flow directly to the bottom line. That approach, however, may have the opposite impact as intended, as companies watch revenue and profits decline. According to a recent article in CFO, many finance executives don’t have a good understanding of the advertising budget.
It could be a good opportunity for internal audit executives to put an audit of the advertising spend and effectiveness on the audit plan. “In any decisions about advertising, it’s critical that CFOs have a better understanding of advertising activity and results,” writes author Grant Fitz. “Rather than relying on internal subject-matter experts to make the call, CFOs need to partner with them to determine if an increase in advertising spend is the right move for the business.”
