Magazine article Editor & Publisher

Prep List for Circulation Audit

Magazine article Editor & Publisher

Prep List for Circulation Audit

Article excerpt

There are two types of flags to watch out for in a circulation audit. A red flag alerts auditors to potential deductions. A white flag is what newspaper managers will be waving while they surrender paid copies because they didn't attend to the red flags.

While the Audit Bureau of Circulations has been known to let first-time offenders off with a warning, wise newspaper execs will take corrective action in advance in order to avoid Circulation Court completely.

Almost anything an auditor can find, good newspaper managers can find as well if they know where to look. Occasional reviews of records and controls will help identify systemic flaws and circulation misstatements. Periodic self audits will help ensure clean numbers.

A good place to start is by looking up and down the list of categories on your newspaper's circulation records for signs of unusual trends or aberrations. A competent auditor will require reasonable explanations to account for variances. That's why it's a good idea to keep some type of log that backs up these occurrences.

As time goes by, it becomes increasingly difficult to remember events that influenced circulation numbers. A log can link increased single-copy sales to exciting headlines, or decreased sales to inclement weather or late press runs. It can also refer to special sales promotions or other programs driving home-delivery totals.

Numbers change for a reason. A short-term increase in home delivery followed by a reversion to previous levels waves a red flag to auditors, signalling "samples" may have been counted as paid copies. The next step would be for the auditor to interview carriers or to review their bills for any credits they might be receiving to compensate for extra copies, known as circulation reducing credits.

Circulation reducing credits are another red Hag. They alert auditors to the possibility a newspaper is buying circulation. Credits would be issued for unrecorded returns, samples or carrier extras.

Most newspapers extend return credits to distributors for unsold copies. These return totals are reflected on a billing statement and should tie to circulation records. To avoid accounting for all returns, a paper might issue nondescript credits on bills for unsold copies without the accompanying return totals.

Other single-copy red flags include low wholesale rates, excessively large route allowances or rate adjustments, and rebates or reduced wholesale rates designed to raise sales to predetermined levels. A paper that makes it financially attractive for distributors to dump returns does so for obvious reasons. I know one paper that operated a route Where the sales bonus per copy exceeded the wholesale rate and the "rebate" exceeded the "purchase price "The distributor could make a profit by throwing papers away -- a practice that helps create ostensibly "successful" hawker programs.

Nondescript credits on home delivery carrier bills can mask extras, samples or reimbursements for the lack of good orders. An auditor coming across unexplained credits will normally ask for supporting documents. If documents include statements such as "10 extra copies for 10 days" or "for no good telemarketing starts,' the next stop would be finding out how many copies were involved and making the appropriate deduction.

If a newspaper's home delivery is 100% office collect, its testing involves counting route lists and subscription orders. However, a higher office collection percentage (but not 100%) does not necessarily imply reduced risk. …

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