← All playbooks·Buying and negotiation

Playbooks · Buying and negotiation

Audit whether agency rebates were passed through

This job produces a documented gap (or clean bill) between the agency rebate owed to the client under its AVB agreement and the rebate actually credited. It feeds the decision to demand a reconciliation payment or escalate to a contract audit clause.

What you need first

  • Client's gross media billings by media owner for the audit period, from agency finance reports or media plan
  • Agency's AVB (Agency Volume Bonus) grid with each relevant media owner, showing tier thresholds and rebate percentages, from the agency-media owner trading agreement
  • Agency's total billings across all its clients with that media owner for the period, from the media owner's volume confirmation letter, not the agency's self-report
  • Client's actual rebate credit notes or invoice credits issued for the period, from client finance records
  • The IO or agency-of-record contract clause defining how rebates are calculated and passed through, from legal/procurement

The procedure

  1. Pull the client's gross billings by media owner for the audit period from finance reports
  2. Obtain the AVB grid showing tier thresholds and rebate percentages for each media owner
  3. Confirm which tier the agency's total consolidated volume with that media owner landed in, using the media owner's own confirmation, not the agency's claim
  4. Calculate the theoretical rebate owed as client billings times the confirmed tier rate, adjusting the base if the agreement calculates on net-of-commission rather than gross
  5. Sum the rebate or credit notes actually issued to the client for the same period
  6. Subtract actual from theoretical to produce the gap in absolute value and as a percentage of billings
  7. Send the gap with supporting tier documentation to the agency for reconciliation or trigger the contract's audit clause if unresolved

Worked through with numbers

Client's TV billings through the agency for the year: €4.2m. Media owner's volume confirmation shows the agency placed €38m across all its clients with that broadcaster group, landing in the top tier at 6% (tier 2 was €25-35m at 5%, tier 1 below €25m at 4%). Theoretical rebate owed to the client: €4.2m × 6% = €252,000. Credit notes actually issued to the client for the period total €126,000, which is €4.2m × 3%. Gap: €252,000 − €126,000 = €126,000, exactly half of what the tier entitles the client to. Read this as the agency having applied a rate roughly one tier below what its own consolidated volume achieved, which is the pattern to check first rather than assuming fraud.

Where it goes wrong

  • Don't take the agency's stated tier at face value, get the media owner's own volume confirmation, because agencies round down consolidated volume or report it a tier low
  • Don't apply the rebate rate to gross billings without checking the contract, since some AVB grids calculate on net-of-commission billings and the base shifts by the commission percentage
  • Don't compare against the annual figure alone, check for quarterly or interim rebates already paid, or the gap will double count amounts the client already received
  • Don't accept a client-only volume figure as proof of tier, the tier is set by the agency's total volume across all its clients, so a client-level number alone can't confirm or deny it

How to know it is right

Recompute the theoretical rebate independently from the media owner's own AVB documentation and confirm the tier and base match what the agency claims before presenting the gap.

Terms used

← All playbooks Calculated in Media buying software →