Not all audits are painful. Auditing what rates you charge for advertising can be very revealing

Tax season is upon us, with the April 15^th deadline quickly approaching. One of the tasks at my household over the past few days has been gathering the necessary documentation so that we can visit our tax preparer in the coming days.

                Many people I know do their own taxes. It does save them money, but we pay the fee to obtain peace of mind. Early in our marriage, my wife and I did our own taxes. One year, we awaited a $545 refund check (this was long before the miracle of direct deposit!). When the brown envelop arrived from the IRS, the check was for $45 with an explanation that we had made an adding error and this reflected the proper amount. Devastating! That marked the last time we did our own taxes at my household.

                There are other reasons for having someone else do them. Most notably, we have a trained professional do them to reduce our risk and likelihood of an audit. After all, who likes an audit?

                While audits are generally considered a negative, there are good things that can come from an audit, and something I suggest you consider with your advertising department. When was the last time you audited your advertising rates?

                For me, it is an annual ritual. Right there with gathering up my Goodwill receipts and W-2s. Every year, this practice generates revenue for my operation.

                The old school approach was to draw up a new rate card every year, with anywhere from a 1 to 5% rate increase. While that might still happen in some markets, it is no longer the common practice. Often times, the traditional newspaper rates are steady and a newspaper is working on packages and other incentives combined with print to get additional spending. While I would love to tell you that we can steadily raise rates and enjoy the bountiful harvest, it is just not the reality we live in anymore. And that is OK.

                You can still look at the rates you’re charging and look for opportunities to tweak rates. The audit process will expose those rates, especially the very first time you do such an audit. In an advertising department rate audit, every rate is subject to review. Every rate—the published rate card, various service charges and special deals.

                Just because you do the audit, does not mean you have to raise the rates. But what I have found from past experience is that there are rates that your newspaper is charging now that have not changed in years. Last year in my audit, I found a rate that had been overlooked for over a decade and I adjusted. It was a sizeable increase for 2015 revenue. It was like having a nice medium sized advertiser open up in my market, and all I did was adjust slightly a rate.

                There are a few specific areas that I would review to see if there might be opportunities to change pricing and how you are doing business:

·         Premium positions – For most newspapers, premium positions have been a standard offering since the early 2000’s. But have you changed your pricing during that time?

·         Obituary pricing – It is fairly standard to charge for obituaries at most newspapers. While it is vital content for our newspapers, it is also a strong revenue line. A quick examination of your obit rates, rate structure and what levels are being used is very revealing.

·         Legal notices – I always ask and verify the legal advertising rates at a newspaper. There are state regulated rates for some categories, and it is very important to verify that you are charging those designated rates. Charging more than is allowed is an obvious problem, but charging less than the stated rates is leaving money on the table.

·         Auto / Real Estate deals – Remember that special package you set up with the local auto dealer, if he agreed to increase his spending over prior year spending a few years ago? If it is still in place, make sure they are still holding up their end of the bargain.

·         Post it notes – Some newspapers can add the post it notes to the front of their publication. This is a highly valued marketing opportunity, which has increased in value in recent years. Has the rate changed?

·         Any flat charge or sponsorship program – These programs often are set in place and quickly forgotten. After all, the squeaky wheel gets the grease. These programs are often times good programs with good advertisers, so they never get attention. It is always a good idea to take a look and make sure we are still priced properly.

Thankfully I’ve never been audited by the IRS (knocking on wood as I type this!). That can be a grueling process I’m told. In the case of a rate audit at your newspaper, it shouldn’t be a taxing experience for your or others involved. More often than not, I believe you’ll find additional revenue opportunities.