Royalty Management Best Practices
Wednesday, February 13, 2013
Posted by: Sheri Toomb
Three Royalty Management Best
Practices & Necessary Requirements
by David Marlin, MetaComet Systems
MetaComet Systems is an ECPA partner, providing discounts to ECPA members. More
Best practices are important for success in just about every industry –
from food service to real estate. For industries dealing with royalties, best
practices can mean the difference between profit and loss. The publishing
industry in particular depends heavily on licensing agreements. This reliance
means that effectively managing royalties – and everything that comes with them
– is mission critical.
Royalty management requires accounting perfection to ensure
internal and external audibility and control, and to maintain relationships
with authors and partners. This means devoting significant human and technical
resources to the process, as well as allocating time and funds for printing and
postage costs. Failure to properly manage royalties can lead to erroneous
payments, broken trust from authors and agents, and negative impact to your
Royalty management best practices allow you to avoid these
downfalls. These tried and true techniques are proven to help you achieve
results, avoid mistakes, streamline the process, and safeguard your business
Royalty Management is time consuming, yet a perception often exists that it
should not take so long. As a
result many people do not bother to plan their royalty management strategies.
Proper planning means keeping track of your deliverables, including royalty
statements and financial reports, and their deadlines, and knowing when to
start each process in order to finish on schedule.
You also need to stay on top of your inputs, such as revenue data, contracts
and product codes to avoid a backlog or, worse yet, a missed payment. Make sure
you understand how each input impacts your deliverables, and how long it takes
to acquire and process those inputs. Then keep an open line of communication
with input sources to ensure timelines are accurate and deadlines are met. In particular, give yourself the
time that you need to manipulate the numerous Excel spreadsheets and other
files you will receive.
During the planning phase, look for opportunities to optimize your royalty
management process. Should sales be aggregated to facilitate calculations? Is
there a way to decrease or combine the input sources to reduce errors in the
process? Once you hone in on ways to improve efficiency, you can implement
solutions to better manage your royalties.
For publishers with less than about 15 contracts, these processes may be effectively
handled manually with the help of spreadsheets. As you grow beyond 15 contracts,
taking part of the human element out of the royalty management process means
less room for error. Plus, you are not utilizing valuable human resources on tasks
that can be done better electronically. It is dramatically more expensive for
human resources to process all royalty management tasks when they really only
need to do about 20%. You can reduce human effort on royalty management by 80%
or more simply by automating the
process. Reporting and auditing also improve with automation because it centralizes
information and eliminates the need for clunky, hard-to-read spreadsheets.
3. Choose the right
Once you reach a certain contract threshold (typically 15-20
contracts), managing royalties manually becomes prohibitively expensive and
risky. When this happens, a royalty management system will do wonders for your
productivity, bottom line, and author relationships.
There are a number of factors to consider when choosing the right one. First
and foremost, is the program easy to use? Any program you consider should offer
a suite of intuitive tools that simplify the complexities of the royalty management process.
Do you need the system to integrate with other software
programs within your organization? Many businesses do not need integration – their volume
is small enough that the results can easily be inputted by hand into accounting
programs, for example. If however
integration will save substantial effort, be sure that your prospective royalty
management system can integrate with your accounting and title management
Another decision you need to make is whether to use a
software as a service (SaaS) option (SaaS is just a jargon way of saying
web-based). SaaS is ideal for most companies looking to improve their royalty
management. It is often more cost-effective and doesn’t require users to
purchase, install, and update software on various devices and investing in the
IT resources needed to support such an endeavor. SaaS can also provide a better
level of support since the provider can access your system directly rather than
go through your corporate firewalls.
Finally, is the royalty accounting software company a
reliable partner that’s dedicated to royalties and licensing? Choosing a
royalty management software company with limited experience, or one that is
unfamiliar with your industry, could be a recipe for disaster. Ask all
potential software partners about their experience and request multiple relevant
references. Then call and check them.
The answers to all these questions vary by company,
industry, and software, so it’s important to examine and compare all your
options before making a decision. The key is to find the royalty management
program that will perform best for your specific circumstances (if you need one
Managing royalties can be a hassle and a detriment to your organization if done
incorrectly or inconsistently. Don’t let the process put a drain on your time
and financial resources. Implement these royalty management best practices and ensure
your organization is preserving its client relationships, while making the most
out of its time, money, and people.
Marlin founded MetaComet Systems in 2000. The
company helps publishers manage their rights and royalties operations, cutting
costs while increasing revenue, accuracy and business intelligence. Beyond his expertise at helping
businesses solve their rights and royalties challenges, David is committed to
enhancing the technological capabilities of the publishing world through his
work as the
the Book Industry Study Group’s (BISG) Rights Committee, which many in the
industry believe will provide the foundation for publishing’s future growth.
David is a regular speaker and contributor to industry events and symposia. Connect with David and the royalty
management community through the MetaComet