Royalties processing software typically has many inputs and outputs, so it must be compatible with many other forms of software. It must also be user friendly so that data can be entered manually when necessary. However, as the calculation and processing of royalties is an extremely complex task, royalties processing software must necessarily be quite sophisticated. It usually requires training to use. This training is most often provided by software vendors upon installation for a new client and when the software is upgraded.
Royalties processing software must be able to import data from contracts and sales reports and use this data to produce royalty statements and export expense information to general ledger or accounting software. Unless digital versions of contracts are created at the same time as signed contracts between authors and publishers, data about the terms of the contracts must be entered manually to royalties processing software. The contracts will have information about who owns the rights to different formats of an intellectual property and how these intellectual properties may be licensed. The contracts will also specify how an author or other creator of an intellectual property will share in the start up costs of a new project. This usually means that lower percentages are paid as royalties until start up costs can be recovered.
After sales of a book, recorded piece of music or invention begin, royalties processing software must import the data and apply to the terms of the contract to calculate royalties due. A contract will specify the intervals in which royalties will be paid, such as every 30, 60, 90 or 120 days. The royalties processing software will produce royalty statements at these intervals and write checks or conduct an automated funds transfer to an author’s bank account. If a publisher pays advances to authors, that publisher’s royalties processing software must be configured so that royalty checks are not written until accrued royalties balance the amount of the advance.
Some royalties processing software is designed to be used by any business that pays royalties as part of their cost of doing business, such as publishers, oil and gas companies, music labels and manufacturers who pay royalties to inventors for their patents. Other royalties processing software is more specialized. Specialized royalties processing software is more commonly used in the music industry as licensing arrangements and business relationships tend to be more complex than in other industries that pay royalties.