Best practices are important to the success of just about every industry out there – from food service to real estate. However, for those dealing with royalties best practices are critical.
The publishing, music, rights management, energy, technology, life sciences, and intellectual property sectors are all heavily dependent on licensing agreements. This reliance means that effectively managing royalties – and everything that comes with them – is essential.
Royalty management requires accounting perfection to ensure internal and external audibility and to maintain relationships with clients and companies. 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 clients, and negative impact on 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.
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 product codes, revenue data, and contracts, 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 inputs. Then keep an open line of communication with input sources to ensure timelines are accurate and deadlines are met. Also, 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 the number of 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.
Some of these processes may be manual, such as licensees with few payees or contracts, but most will require an automated system. 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 drastically 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, managing royalties manually becomes prohibitively expensive and risky. When this happens, a royalty management system will do wonders for your productivity, bottom line, and client 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 perhaps product management systems.
Another decision you need to make is whether to use a software as a service (SaaS) option. The 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. 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 royalty accounting? 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.