The royalty manager is responsible for forecasting the cash required to pay royalty related expenses. This includes projecting payables for royalties payable and royalty advance payments.
Royalty software can tell you how much in royalty expenses were incurred each month. This allows the licensee; the book publisher, to set aside funds to cover royalty expenses. In Easy Royalties this is done from the Reporting > Royalty expenses report.
Part 1: Royalties Payable
There are two components to forecasting royalties payable.
Part A is what are the royalty expenses on current sales. In the Easy Royalties software this can be accurately projected by running a royalty expense report. This report calculates the royalties owed on actual sales for a specified period.
Part B is projected expenses on projected future sales. You project your future sales and estimate the royalties due.
The sales and marketing manager provides a forecast of future sales. This sales forecast will be broken down by royalty type. A book publisher may forecast sales for print copy sales (10% royalty rate) and eBook sales (25% royalty).
Combining the two forecasts; actual royalties for January through March, and actual sales; for April through June, provides a total for forecasted royalties payable.
Part 2: Royalty Advance Forecasting
The second part is how much in royalty advances will be paid out during the period. Royalty advances are payments made against future royalty earnings.
Part A of royalty advance forecasts includes payments on new contract signings. The royalty manager will ask the appropriate manage for their best estimate on future payments.
Part B is forecasting payments for advances on signed contracts. A book publisher’s contract may call for advance payments on contract signing, manuscript receipt and publication of the book. The royalty manager will have a schedule of future payments that shows the estimated payment dates for each advance payment. This schedule will also show the name of the manager; an Acquisition Editor for a book publisher, that can provide updated payment date updates.
Title – Author – Acquisition Editor: Payment 1 Date & Amount Due
Title – Author – Acquisition Editor: Payment 2 Date & Amount Due
Form this schedule you can create a schedule of amounts due by date with a Microsoft Excel Pivot Table.