Accounting Basics – Allocating Royalties

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The allocation screen can be a little daunting when you first use it, however it really is very straightforward. When a lot of labels begin using their system they think that we will automatically be able to do their accounts for them, however this unfortunately is not the case and it can require a substantial investment of time get things started.

The basic principle behind the system is this – at the top of the page the royalty description is listed, this will typically list the track that was sold, how many copies were sold and how much money you made from it. It is your job to match this royalty up with your own records to determine how much each of your artists receives from the sale. While we make every effort to make this easy for you with automatic matching, templates and pre-allocations, ultimately you are the one that knows what deal you made with your artists, so if you are unsure go back and check the contract you made with them.

Beneath the top royalty listing you will see a number of rows. The first contains some navigation and a few items we will get onto later. The next four are allocation entry fields for artists, remixers, companies and the label. Based on the information contained in the royalty description, Label Engine will suggest which of your artists are due payment from this royalty based upon the artist and remixer names, and the template currently selected. While we are usually pretty accurate, again we don’t know your label as well as you do, so be sure to double check everything.

For each row, select the correct artist, remixer or company, select an account for them if you wish to separate payment (more on this elsewhere), and enter in either the percentage or the amount you wish to pay them. You can add artists by clicking the ‘add artist’ or ‘add remixer’ links, and delete them by clicking the [x] symbol.

You can also select any companies that should also receive a share of royalties, for example if you have a label assistant that is paid on a percentage basis, or if you are a distributor and are assigning a share for yourself. Company shares can be assigned on a net or gross basis (gross meaning that other entities are assigned a percentage of the amount remaining after that company has taken its cut).

Finally, select the label that the royalty is for, Label Engine will suggest this based on the label name contained in the royalty description. Once you are happy with everything (be sure to double check it one last time), click ‘Save and next’.

When you save a royalty, you automatically select it as being the correct way to allocate royalties for that royalty description. The next time you upload a statement containing a royalty with that same or similar description (Label Engine will do its best to cope with spelling mistakes, name ordering and additional punctuation), it will suggest the allocations you set previously as a match, and the royalty will be displayed in yellow. You will be offered the opportunity to ‘Verify All Matches’ immediately after the statement is uploaded, however we recommend that you take the time to go through each individually and double check that the match is correct, especially if it is the first time you’ve done it.  The matching system works especially well the next time you upload a statement from the same store or distributor saving you a huge amount of time, however no matter how consistent you are in uploading your data to stores or your distributor, different stores will list the tracks in different ways, and for each of these different ways it may be necessary to enter in the allocations again, which upon doing so will save a match for future use.

If you would like to speed up your royalty allocating further, we suggest you look at pre-allocations, available to distribution customers and full or accounting subscribers.

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