Royalty management and Software

Royalties (sometimes, running royalties, or private sector taxes) are usage-based payments made by one party (the “licensee”) and another (the “licensor”) for ongoing use of an asset, sometimes an intellectual property (IP). Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation.

A royalty interest is the right to collect a stream of future royalty payments, often used in the oil industry and music industry to describe a percentage ownership of future production or revenues from a given leasehold, which may be divested from the original owner of the asset.

A license agreement defines the terms under which a resource or property such as petroleum, minerals, patents, trademarks, and copyrights are licensed by one party to another, either without restriction or subject to a limitation on term, business or geographic territory, type of product, etc. License agreements can be regulated, particularly where a government is the resource owner, or they can be private contracts that follow a general structure. However, certain types of franchise agreements have comparable provisions.

(From Wiki)

Since not all royalty accounting software systems have the same basic capabilities, you will obviously need to choose a solution that supports your company’s needs. To help you in finding the best royalty management software, I will list some general features offered by good royalty software systems. Of course, this is not meant to be an all inclusive list of every question you’ll want to ask, but rather a framework to help you develop your own specification list.

Ability to Quickly and Easily Investigate Artist and Publisher Questions:
It will be important to be able parse your data in many different ways, including ways which you may not yet have anticipated. Does the royalty software system you are considering allow you to:
View sales by authors/ID/titleView royalty calculations by authors/contractIdentify all titles for an authorView all statements and payment histories for an authorsExport research into spreadsheetsFlexibility in Accounting:
Even if your firm isn’t subject to the stringent accounting requirements of Sarbanes Oxley (see our article here), strength and flexibility in your royalty accounting functions is extremely important in running your business today, but also for preparing for future change and growth. A good royalty accounting system will include capabilities for:

Cross CollateralizationAbility to pay on cash or accrual basisAbility to withhold reserves against returns(Including reserves against all sales versus sales of specific revenue types)
Advances-Including: unlimited advances, unlimited types of advances (and other expenses against which royalties are applied)
-Ability to pay directly through your royalty software system
-Ability to specify tax information
-Ability to make payment to a third party
AP Integration
Automated Integration-Automated weekly/monthly/daily payout of advances
-Ability to feed royalty payment vouchers directly to AP
-Ability to cut checks directly from the royalty software
-Ability to designate “remit” payees (i.e. agents, heirs, children, etc.)
-Automated vendor/Authors feed from AP
-Store AP vendor IDs
Ability to manage payments by payment window (i.e. 30, 60, 90, 120 days)Multiple addresses for each AuthorsSupports vendors on holdMinimum payment thresholdsAdditional features to look for, depending on their importance to your business, are:
Sales Integration: Some royalty accounting software systems will directly integrate with your existing sales systems. If you use a CRM system such as Salesforce, check to see if the royalty software you are considering will directly import and export data into it.
Contract Migration: If you have a large number of contracts, it may be worthwhile to find a royalty software system that will directly import this data, including past payments, customer/supplier info, and other pertinent data.

Customizations: Even you don’t currently need any customized features, it makes sense to ask about future customizations. Ask about what any related costs would be, plus what the turnaround time would be for implementing customizations.

Statement Design: Having a number of options for managing or viewing statements is a fairly standard feature of any royalty software system. But because having statements available in the way that you or your clients want is so important, it’s a good idea to ask some general questions about this. Ask about various file formats, file sizes, the inclusion of graphics or graphs, compatibility with mobile devices, etc.