Don’t play at Casino Royale – understand royalty audit procedures

Don’t play at Casino Royale – understand royalty audit procedures

You had your hot idea. That flash of genius and creativity, and realising that there was a killing to be made you rolled it out pronto, shoving it gladly into the hands of eager licensees who were slobbering all over each other at the mere prospect of getting a piece of the action. Nobody blames you for that. But did you stop to consider how you are going to keep tabs on your royalties? No? Well you’re not alone, and like many others you’ll probably have to undertake a royalty audit to make sure you get what’s rightfully yours.

If intellectual property is a part, or maybe even the whole, of your business then you’re more than likely not getting everything you’re owed. Some experts in the field of royalty auditing estimate that owners of IP (that’s business speak for intellectual property) are typically underpaid by up to 30 per cent by their licensees. Sometimes that’s from genuine error, such as when inventory codes and the like get changed (ever dealt with a company 100 per cent on top of their inventory? Thought not) and other times from deliberate misreporting.

If you don’t want to leave your revenue up to the roulette wheel of royalty reporting then consider sending in an expert. Someone who knows how to dig deep through the files, get that information and make sure the transactions are made, all with the minimum fuss. No. Not James Bond. Though that would be pretty cool, right? Hire the services of a pro company that handles royalty audit procedures, and you can be sure that you’re in safe hands.

Hopefully when you drew up your contract with the licensee you included a clause specifying a royalty audit. If you did, well done you, if not then you’re still within your rights to request one. Although the licensee will have to devote resources to meet the demands of a royalty audit, they shouldn’t baulk at one. After all, it’s your IP they’re profiting from and you have a right to get exactly what you both agreed on.

It’s more than likely that an audit will turn up some unpaid or underpaid royalties. It’s a fact of the business, and unless serious and malicious fraud has been going on it isn’t worth losing a licensee and the business they have been generating over it. Make sure that exactly what is owed, including any due penalties, is agreed on as well as a timescale for payment and move on. Hopefully the audit will ensure it doesn’t happen again.

Royalty audits aren’t exactly the most glamorous aspect of business but they are a necessary one, especially if you want to ensure your revenue is accurate. Although they may seem expensive, royalty audits typically earn their cost back several times over.

Worried you might be out of pocket? Contact an expert today and find out what you’re owed.

This helpful business advice was sponsored by HW Fisher. For more information and expert advice on royalty auditing procedures visit

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