How to Show Free Copies on Royalty Statements

Many publishers provide free books to potential reviewers. Publishers that are part of Kindle Select may offer the Kindle version for free to raise awareness of a book series or gain reviews for a new title. A publisher that uses a marketing service such as Bookbub to promote “free” eBooks can distribute several hundred to several thousand books in just a few days. [Read more…]

Royalty Software Payments Export

Our royalty software can export a file with the amounts owed to each royalty recipient. Importing this file into your accounting software eliminates the need to manually enter the amounts into your accounts payable system. A task that could take an accountant several hours to perform is reduced to just a few minutes. [Read more…]

Reserve for Returns

The reserve for returns clause in many contracts allows the licensee (publisher) to withhold a portion of royalties earned to account for future returns from sales made during the royalty period. This reduces the chance that royalties will be paid on unrealized sales.

The reserve is withheld for one or more royalty periods; usually one, and usually recovered over a single periods. Publishers that pay royalties monthly or quarterly may withhold reserves for 6 to 12 months.

The general ledger entry

Reserves are a delay in payment, not a reduction in the royalties earned. As such they are shown as a liability, and royalty expense is not reduced.

Period 1: 10% Reserve is withheld

Account Type Debit Credit
Royalty Expense Expense $ 1,000
Royalties Payable Liability $ 900
Reserves Liability (Withheld) Liability $ 100

Period 2: 10% Reserve is withheld and Period 1 reserve is released

Account Type Debit Credit
Royalty Expense Expense $ 2,000
Royalties Payable Liability $ 1800
Royalties Payable Liability $ 100
Reserve Liability (Withheld) Liability $ 200
Reserve Liability (Released) Liability $ 100

Royalty Software Application

The Easy Royalties software allows users to have multiple reserve rules. These rules can be based on product format, sales type or the royalty rule that applies to the sales record. Many companies do not withhold any reserves on digital products. Some publishers have higher reserve rates on sales to specific types of customers.

Royalty Software Reserves

Royalty statements can display a summary of reserves withheld and their futre recovery date.

Royalty statement reserve summary

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Royalty Cash Flow Forescasts

An important aspect of royalty accounting is forecasting future cash flow requirements. This includes forecasting when and how much cash is required to pay royalties due and royalty advances. These forecasts are revised each month, based on year to date results and updated information from stakeholders. [Read more…]

Reserves for Returns

Reserves for returns is a key functionality of royalty software.

Reserves are used when your contract allows you to withhold a portion of royalties earned in the current royalty period to cover expected returns that are expected to be received in the next royalty period. [Read more…]

Toy Royalty Software & Contracts

Toy Licensing Agreement Basics

1. Royalty is usually a percentage of wholesale sales.

2. Royalty agreements usually include an un-refundable royalty advance against future royalty earnings and a royalty guarantee. If the agreed upon level of royalties is not reached within a period, the difference is owed to the licensor.

Sample Toy Licensing Agreements

Toy License Agreement – Lucas Licensing Ltd. and Hasbro Inc.(Oct 13, 1997)

License Agreement for use of characters from Adventures of Gumby TV Series for use in Freezer Pops, Coolers, and Fruit Forms







Royalty Accounting Balance Sheet Accounts

The general ledger balance accounts for royalty obligations usually include; [Read more…]

Royalty Accounting Expense Accounts

These are the four royalty expense accounts that track royalty expenses.

1. Royalty Expenses (consolidated). Many organizations have a single roll-up account that summarizes the balances of their royalty sub-accounts.

2. Royalty Expense. This account tracks royalty expenses. [Read more…]

Royalty Accounting Software

Royalty accounting software core functionality requirements are; [Read more…]

Evaluating your Royalty Operations

How do you evaluate your royalty accounting operations? The ten questions we ask when looking at royalty operations are; [Read more…]