What is Royalty Accounting?

"Royalty Accounting" do Record Labels and Music Publishers use a specialized accounting practice to manage and track Royalty payments. This involves using specific legal and accounting techniques to account for Royalties, such as advances, splits, recoupments, cross-collateralization, deductions, escalations, etc.

Royalty Accounting is a subset of a company's general accounting and focuses on the specific needs of the music industry, which standard accounting may not support. The results of Royalty Accounting are typically recorded in the company's financial records.

Royalty Accounting Explained

We strongly advise you to watch the video below to be quickly operational.

Reprtoir's Royalty Accounting Workflow Explained

When creating Incomes and Expenses, they are automatically associated with Contracts, and the system generates Operations that reflect debit and credit movements of Incomes and Expenses.

Operations allow for fully automated recoupments, including the Cross-Collateralization mechanism for recouping Expenses on multiple Contracts of the same Rights-Holder.

The outcomes of Operations are displayed in real-time in the Contract Balance.

To end a sales period, you must start by closing the Contract Balances of the Rights-Holder. The total amount of the Contract Balances will be transferred to the Rights-Holder Balance, and the Contract Balances will be reset to zero.

Therefore, the closed Contract Balances can receive new Incomes and Expenses without affecting their balances.

To proceed, you must generate a Statement from the Rights-Holder Balance. The total amounts of the Rights-Holder Balance will be transferred to the Statement, and the Rights-Holder Balance will be reset to zero.

To end a sales period, you must automatically or manually send the Statement to the Rights-Holder. By this action, the sales period is permanently locked, and the Rights-Holder can access the sales period details in their rights-holder portal.

Once a Statement is sent, you can create a Payment to track your business that you can manage from the Payment list.

Prerequisites for Reprtoir's Royalty Accounting

To accurately calculate Royalties, it's necessary to:

◼ 1. Adding Assets Metadata and Sales Identifiers

To accurately calculate Royalties for the Assets controlled by your Organization, you must add them to your Reprtoir Account.

To guarantee the proper matching of revenue-generating Assets with sales in the Royalty Statement file, this is crucial to add Sales Identifiers that the Statement Provider uses.

These Sales Identifiers may include standard codes like UPC/EAN, ISRC, ISWC, or third-party custom codes.

Before importing metadata, verify that you have identified all the codes used by your Statement Providers to avoid any matching issues.

Learn to add Albums, Tracks, Videos, and Works.

◼ 2. Adding Clients and Rights-Holders

The Clients (or "Statement Providers") and Rights-Holders of the Organization must be added to your account.

Learn more about adding Companies and Contacts.

◼ 3. Adding Contracts

The Money In and Money Out Contracts with Royalty Splits must be present.

Learn more about adding Contracts.

◼ 4. Linking Contracts to Assets

Linking contracts involving royalty splits with specific Assets is essential to ensure fair income distribution among Rights-Holders. This association will facilitate the automatic calculation of royalty splits, making distributing income fairly among all Rights-Holders easier.

◼ 5. Setup Organization Currency

The Organization Currency is crucial to managing Rights and Royalties in Reprtoir. To avoid errors, please double-check that the Currency assigned to your Organization is correct before you use the Royalty management solution.

◼ 6. Adding Initial Contract Balances (Optional)

The Initial Contract Balances correspond to any outstanding debits or credits at the beginning of an accounting period.

When an Organization migrates from another royalty system/software to a new one, they probably will need to assign Opening Balances to their Rights-Holders to allow the continuity of operations from their old system to Reprtoir.