Royalty Management Best Practices

Three Royalty Management Best Practices & Necessary Requirements

by David Marlin, MetaComet Systems

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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 bottom line.

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 relationships.

1. Plan.
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.

2. Optimize.
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 system.

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 systems.

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 at all).

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.

David 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 co-chairman of 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 Systems blog.