The Reserve rules tab is where the reserve for returns rules are specified.
Often sales are not final. A product sold today may be returned in the future. For book publishers returns can range from 10% to 30% of sales. Many publishers have a reserve clause in their contract. This allows them to delay the payment of a portion of earned royalties.
Example: 10% Reserve
The table below shows the impact of a reserve for returns on royalty payments for sales transactions.
|Royalty Period||Royalties Earned||Withheld||Released||Total Payment|
NOTE: Reserves are not withheld from the negative royalties calculated for returns activity.
To add a reserves rule select the Add a reserve rule… button.
The Reserve rule window appears.
Example: Reserve on Print Products
This example illustrates a reserve on print product sales. No reserve is withheld on ebook products.
The product format selection limits reserves to Only the following formats: Hardcover, Paperback. Reserves will only be calculated on royalties derived from sales of hardcover or paperback products. Most publishers do not withhold reserves on eBook sales that rarely experience returns.
The reserve Method is % of royalties earned. This is the most common reserve method. The reserve is shown as a reduction in royalties earned. Sales and quantity numbers are not affected.
A 25% reserve is withheld on the first royalty statement. The reserve rate is reduced to 10% on the following royalty statements.
The Reserve period is 1. This means that the reserve is withheld for only one royalty period. Reserves withheld in the June 2015 statement will be released in the December 2015 statement, if the royalty period is semi-annual. If the reserve period was 2 the reserve would be withheld for 2 royalty periods and released in the June 2016 statement.
Traditionally, semi-annual and annual royalty statements have reserves withheld for one royalty period. Quarterly royalty statements usually have reserves withheld for 2 or 4 periods, six months or one year. Contracts with monthly statements usually have a reserve period of 6; six months, or 12; 12 months.
The Recovery period is 1. This means that 100% of the reserves are released in one statement. If the recovery percentage was 50%, this would release the reserves over two royalty statements ((1/0.5) = 2).
The Reporting > Sales Analysis report is useful a tool for determining the appropriate reserve for returns percentage. It can show the returns percentage by customer, edition, format, sales type, territory, title and more.
We recommend that clients use the reserve method % of royalties earned as this does not impact the revenue or quantity displayed on a royalty statement.
The % of sales revenue or quantity methods adjust the revenue and quantity shown on the statements to reflect reductions for reserves withheld or increases for reserves released. These reserve methods often lead to questions when the reported royalty statement sales; that have been adjusted for reserves, do not match the company’s internal sales records.
A royalty statement can display a Reserve account summary. This summary shows when reserves are due to be released and the amount released on that date.