Royalty software solutions
The payment of royalties is a significant cost of doing business in many industries. Oil companies do not usually wish to purchase land from which they extract oil, as they will have little or no use for the land after they have extracted all of the oil they can get from it. Instead, an oil company will offer a contract to the owner of the land. The contract will specify a royalty, or percentage of sales receipts, that the oil company will pay to the land owner for the right to extract the oil from his or her land. A similar principal works for intellectual properties.
Publishers and manufacturers may occasionally conduct an outright purchase of the rights to a song, novel or invention, but only if they believe that the risk of poor sales is low. In most cases publishers and manufacturers will pay an artist or inventor a royalty after they have started selling books, records or manufactured items.
In addition to the payment of royalties, the calculation of royalties due to land owners, artists and inventors can be a significant cost of doing business for mining companies, publishers and manufacturers. Calculating royalties is rarely a simple matter. Percentages may be subject to law or government regulation in many areas where items are sold.
Contracts may specify lower percentages paid to rights holders until start up costs can be recouped. Royalty calculations can be especially complex in the music business as different rates are applied to record sales, airings on radio and the right to perform songs by bands. Sales in foreign countries means that royalties must be calculated in several different currencies at up to date exchange rates.Without royalty software solutions, the administrative costs of performing royalty calculations can severely reduce profit margins. However, these calculations must be performed accurately and on a timely basis in order to ensure good business relationships with the owners of real or intellectual properties.
Litigation over inaccurate or late royalty payments are usually much more costly than performing the calculations correctly. In order for royalty software solutions to reduce the administrative costs of calculating royalties, they must be configurable to a specific industry so that different rates and categories can be taken into account. They must also be able to import sales data and export payment data to accounting software. Royalty software solutions must also be adaptable as new formats and distribution channels evolve.