Free Download: Upgrade Your Royalties Checklist and Templates
Royalty accounting – that time honored process of combining catalog income, expenses, advances and contract terms into statements and payments – often gets done using spreadsheets, at least at first.
In fact that’s how we first did them back before we started IC. But we noticed, like you probably have if you’re reading this, that after awhile things start to break down…
- Data formats and templates change, formulas break, updating is a pain, and the process feels like an uphill battle every time; the more your catalog grows, the harder it gets and the longer it takes
- You don’t know what you owe anyone till you’re done, nor do you have a handle on your catalog’s cashflow, making it hard to budget and plan releases
- It becomes impossible to see trends over time; it’s hard to answer simple questions like “how many records did we sell” or “how much money have we spent overall”
- It’s easy to make mistakes, cut corners, or seem like a blackbox (even if you’re not), and your artists and collaborators might lose faith in your ability to grow together.
Add it all up, and you can see why we, the royalty nerds of Infinite Catalog, have created Ready, Set, Royalties – this guide to upgrading your royalty accounting from spreadsheets, plus a checklist and templates to help you choose and implement a better solution, whether it’s us or one of our worthy competitors.
Because when you do have a good solution/process, the entire operation improves…
- You can spend more time/money growing
- You can budget and plan releases more effectively
- You can add more income sources without creating new accounting headaches
- You can sign more artists/songwriters/grow your catalog
- Artists and collaborators trust and want to work with you
Lastly, we want to make you a solemn vow – upgrading to a proper solution will not be as painful as you think. So whether you’re already feeling the pinch of doing royalties in spreadsheets, or you’re a brand new catalog who wants to get it right from the jump, do yourself a favor and follow the steps here – even if you decide not to make a change, at the very least you’ll know that you looked into it and can cross this off your list of things to worry about. With that, let’s get to it!
Get Ready
While it’s tempting to jump right into checking out solutions, we recommend you start by getting ready first. If you’re a new catalog, this can take 5 minutes; if you’re established, it will take longer but is even more helpful, since you’ll need all this stuff on hand to try out/implement a new solution anyway.
The free checklist and templates doc has examples to help you along, and you can make a copy and fill your version out as you go. Here’s what you need to do:
First, list your catalog’s royalty data sources
Royalty data sources are your distributors, webstores like Bandcamp, rights orgs like Soundexchange, and anywhere else your catalog regularly receives income from. You can also include sources of recoupable expenses that regularly need to be factored in, like distributor-related costs.
(Additional, non-regular income and expenses like syncs or manufacturing costs, as well as advances, should be tracked in bookkeeping software or in a spreadsheet – we’ve included our version of just such an “Additionals” doc in the template).
Writing these sources down helps determine which software solutions will work best for you, and can act as a checklist for all the sources that need to be accounted for each time you do a round of statements.
Second, get contracts, payees and splits in one place
Whether or not you have actual written contracts, in royalty accounting a “contract” can be as simple as a payee and a profit share split, which then gets attached to a specific Release, Track, or merch item/whatever else you need to split.
Having your payees and splits organized in one place, like the template in here, will make it easy to create contracts in potential software solutions without needing to start from scratch each time.
Third, list Starting Balances
If you’re starting from the beginning you can skip this step, since everything starts at zero.
Otherwise, you’ll need Starting Balances – the negative/unrecouped, or positive/yet-to-be-paid, balances that serve as the starting point for the new round of royalty statements. These balances are then associated with specific payees/contracts/statements; you should be able to pull them directly from the statements you’ve done to date.
Get Set
Now that you’re ready, set a deadline to choose a solution and explore your options with this deadline in mind. How much time you give yourself can vary, but we recommend a deadline 2-4 weeks out. The most important thing is that you pick an actual date on the calendar to decide by and stick to it.
Here’s a guide to the exploration process, broken into three phases. A checklist version of this plan can be found in the Free Royalty Checklist and Templates.
Phase 1
Tell your collaborators you’re going to get royalty accounting sorted (they will thank you). If you haven’t yet, get yourself ready by getting your Data Sources, Payees and Splits, and Starting Balances lists sorted. Research solutions – here’s us again, and here’s a list of everyone we know about, or of course google/ask around. Book demos/calls with solutions you’re interested in, and/or start digging into free trials.
Phase 2
Do those demos/calls, and start or go deeper on free trials. Share your progress with collaborators, show them the options so far, and get their feedback and questions. Narrow your options down to two or three solutions.
Phase 3
Nail down answers to final questions. Get final feedback / approval from collaborators.
On deadline day, pick the best option and commit to it. Even though creating a perfect/magical/not-too-expensive solution to this problem is what we work towards every damn day at Infinite Catalog, it doesn’t exist – so don’t let the lack of a perfect solution stop you from having a perfectly good solution.
Again: this is a mission-critical task for any functioning catalog, and the key to unlocking a ton more value for yourself and your payees/collaborators, so avoiding the choice is simply choosing to kick the can down the road. You’re making a choice either way, so you might as well make one that improves your situation in the long run.
…Royalties!
Now that you’ve chosen a solution/path, it is really, really important that you keep moving until you’ve completed and sent at least one statement, and not wait too long to finish your first full round of statements.
Relevant note: in royalty accounting, it is always better to do a full round of statements rather than just a few priority payees. Plus, doing the full round at once is more efficient, more likely to yield improvements in your process, and 100% more likely to give you the satisfied feeling of this actually being done, at least till next round.
If you don’t dive in right away, it will be much harder to pick things back up later. Because there is no perfect/magical solution, you’ll wonder why it’s so hard, or why you chose this particular path/solution, and you’ll end up back at square one.
And let’s be honest – while you’ll be happy to get a better solution in place and unlock all the benefits described above, what you really want is for your royalty statements to be completed and payments to be sent, so you can stop worrying about it.
So don’t keep putting it off, and don’t stop till you’re done. Your payees, collaborators, bank account, stress levels, and future self will thank you.