Thursday, June 23, 2011

Lesson 6: Show Me the Money

Now that you know your royalty percentage, your next question is, "How often do I get paid?"

Not often enough.

Unlike the day job where you get a paycheck at least twice a month, most publishers pay you twice a year. Others pay quarterly or even annually. And publishers send the money anywhere from three months to six months after sending the royalty statement.

So if your publisher issues royalty statements as of June 30 and December 31 and your book releases on March 1, you will probably receive your first statement sometime in July. But your check for the sales shown on the June 30 statement may come as late as December 31. And that's assuming you didn't get an advance or you sold enough copies in the first four months to earn out the advance. If not, you'll be waiting even longer for your first royalty check.

There really isn't much you can do about this. It's just the way things work. However, read the contract and make sure you know when royalty statements and checks are due. If you don't get them on time, ask for them.

If yours is a traditional book, the contract will probably allow the publisher to withhold a reserve against returns. This may be as high as 15-25% for hardcover books and trade paperbacks and 35-50% for mass market paperbacks, or the contract may merely allow the publisher to withhold a "reasonable" reserve. Withholding a reserve is fair because distributors can return unsold books for a refund. What isn't fair is when the reserve amount is higher than the expected return rate or the contract gives the publisher complete discretion by leaving out the word "reasonable." A good contract will also provide that amounts held for a certain period of time (usually two accounting periods or a year) will be released from the reserve fund and sent to the author with the next royalty payment.

Returns aren't common for POD and e-books, however, so those contracts should not allow the publisher to keep a reserve against returns. And if the contract covers more than one format, make sure the reserve applies to only those formats with multiple-copy print runs.

You don't want your contract to contain a joint accounting clause, which allows the publisher to offset royalties for one book with the unearned advance and author's expenses from another. If your first book doesn't earn back its advance but the second one does (or vice versa), a joint accounting clause would let the publisher apply the excess royalties from the more successful book to the remaining advance on the less successful one. There is some justification for joint accounting among the books covered by a multi-book contract since they are all part of the same deal. But watch out for joint accounting clauses that let the publisher apply royalties earned under one contract to the shortfall on a different contract with the same publisher.

On the other hand, you do want your contract to include an audit clause. This clause gives you the right to audit the publisher's financial records showing sales and expenses for your book. Ideally, you also want the contract to say that the publisher will pay the auditor's fees if the audit shows a discrepancy of 5% or more in your favor, but most of us don't have the bargaining power to insist on it.

Audits are expensive, so this clause is rarely applied. Even so, if you believe the publisher is paying you less than it owes you, simply threatening an audit may convince it to review its records and pay you any discrepancy. But the threat is worthless without an audit clause.

And we all want our publishers to show us the money.

Kathryn Page Camp

1 comment:

  1. This is a great post, Kathryn. Very informative. All stuff we authors need to know. Thanks.