The money cycle - 9trh August 2010

It’s interesting the effect this kind of a blog has on people who are; not exactly close, but closer than most.

One of my authors asked me for clarification of something over the weekend, and started off by asking me not to regard it as a silly question and put it on here! It wasn’t a silly question and was probably something that should have been explained to her before. Still it gives me the chance to explain the, for want of a better term, “money cycle” that dominates the publishing industry. After all if you write to get published – then aside from the ego trip that “I’m a published author” brings - you actually want to get paid for your hard work.

The “money cycle”, is based on quarterly accounting. Quarter 1 runs from January to March, Quarter 2 from April to June, 3 from July to September and of course 4 from October through December. If you are selling academic books (to students and or colleges and schools) then Quarter 3 is usually your peak. If you are selling general books and fiction then Quarters 1 and 4 are almost always bigger than 2 and 3 unless of course you have a bestseller on your hands.

The retailers report sales to the wholesalers/distributors/aggregators on a quarterly basis, in arrears, and if you’ve been reading this blog you a while now, you will know exactly how far in arrears some can be. At some point, anything up to 45-60 days after reporting these sales these intermediaries are paid. At some point after that they then pay the publisher. Once all the monies have been collected in the publisher pays out royalties on those sales to the individual authors.

Some retailers deal directly with the publishers and this cuts out the middle step, some, and here the advent of the internet is a big step forward, actually report the sales as they happen, but not all do so, and the bigger they are the less likely this is.

Publishers tend to be committed to reporting all sales (reported to them by this time) to their authors during the month after the quarter ends. We use a 14-21 day cut-off, others vary from this. Any sales for the quarter received after this cut-off point are perforce included in the following quarter. If you think about it, there isn’t any other way of doing it – the quarter has to be closed before payments can be made.

At some point from 30 to 45 (and occasionally 60) days after the quarter end the actual payments start to come in and eventually at the end of this cycle, usually in the 45-60 day period the royalty payments will be made.

I hope this provides a detailed answer to some of the questions about the process and that all important “money cycle”.