The Importance of Royalty Software – For Small and Mid-Size Business

In my last piece, I briefly touched what big publishers have long realized: that to manage their rights and royalties accounting efficiently and accurately, they need to employ a dedicated royalties software program. Today I take a general look at what royalty software features are also key for small to mid-size publishers to be competitive.

The Case for Royalty Software at the Small to Mid-Size Publisher

We’re in Hard Times for even the biggest players in the book business – just recall headlines from this past August, when Barnes and Noble was considering selling itself, and it closed it’s flagship store in Lincoln Center. The squeeze goes all the way down though, and small and mid-size publishers know this firsthand.

The economic backdrop aside, some of the challenges facing smaller publishing houses are the result of technology – technology has made it harder to turn a potential customer into a paying customer, and it has allowed big publishing houses to leverage their size to great advantage. Given this, it can seem incongruous that adding more technology can help a smaller publisher compete – but the evidence is there.

No one gets into the publishing business with the intention of spending the bulk of their time dealing with rights and royalties management, yet that is often just where small publishers find themselves. Instead of discovering new authors and books, then sharing those discoveries with a wider audience, small publishers can find that the bulk of their time is spent calculating complex royalties contracts, across multiple platforms, each with it’s own set of variables. Some turn to Excel to track royalties, and while Excel can be very useful, there are a few key feature areas which Excel doesn’t support, but a good royalty software system does. The following are important features of any good royalty software system:

Royalty Contract Management:

Good royalty management software should support multiple or unlimited royalty recipients per contract, and author splits, so that managing dozens or hundreds of royalty recipients per contract is automated. No one has less time to hammer out royalty amounts for multiple authors on a single contract than the small publisher. Flexibility in parceling out royalties can be a huge time-saver in the long run, and the ability to slice up royalty calculations in many ways within a single contract should be a requirement when shopping for royalty software.

In addition, given that so many books end up with a discounted retail price, royalty software should have flexible rules for taking this into account. A good royalty management system will be able to easily incorporate any changes in actual sale price of a book.

Royalty Accounting:

If you don’t have the resources to have a full-time royalty accounting department, a royalty software system can be an ideal substitute – providing that it has accounting functionality. Good royalty software should support cross collateralization, so that resources can be allocated where they are needed, when they are needed. And to ensure you aren’t caught short if books are returned by a retailer, software should be able to withhold reserves against returns.

Another key accounting feature in royalty software for the smaller publisher is the ability to handle advances, and to make advance payments directly through the software. Also key is the capability to factor in any advance payments into the life of a royalty contract – something no small publisher should be spending hours doing manually, then worrying about keeping track of.

And in terms of payables, a major reason to adopt royalty software is that it can automate royalty and advance payments. A few items to look for in this area are the ability to automate payments, on whatever timetable stipulated by contract (weekly, monthly, annually, etc). And to maximize the efficiency gained by automating payments, look for software that can cut checks directly – it’s far faster if your royalty accounting software can determine what payment needs to be made – then make the payment itself, rather than having to route through your general accounting software.

And finally, of course, is integration with your existing general ledger. Good royalty software will populate your accounting ledgers with all future liabilities. Make sure first that the royalty software you choose is able to accurately calculate what your royalties liabilities are (as outlined in Contract Management above), and second that it will automatically feed this data into your existing accounting framework.

Depending on your needs, you may want to look for specific capabilities with regard to managing sub-rights, including managing contracts and payments in multiple countries/currencies. And if sales tracking or marketing are areas you want to improve efficiency in, there are options to explore in royalty software for these areas too. Finally, you may want to look into software features that will allow authors to investigate their own sales and royalties – an optional feature with several of the better royalty software systems.

Based on the above, you can see how royalty software can help smaller publishers save time and money, and avoid any end-of-fiscal-year surprises of unexpected royalty liability. It may sound callous, but a royalty software system can replace the work of an accountant, and in many instances manage royalties (and all of their inherent idiosyncrasies) more effectively. In a business with small margins and fierce competition, the small publisher needs to leverage any available advantage – and a royalty software system is a great place to start.

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