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Inside Traditional Publishing: Authors - Are You Auditing Your Royalty Statements?

06/05/2015 05:08 pm ET | Updated Jun 05, 2016

In her article, "Good Agents Audit Royalty Statements," Kristin Nelson (President, Nelson Literary Agency) writes that over the past decade, careful auditing by her agency has recovered over $600,000 for her clients. "Even now, nary an accounting period goes by that we don't recover at least $500 to $3,000 owed to a client."

She also states this jaw-dropping fact: A good percentage of agents do not audit their clients' royalty statements.

I wanted to know how many of my author friends' agents audit their statements, and how many of these authors also audit their own, so I took an informal survey. The authors who responded are split between midlist and bestsellers. Almost all said they read their royalty statements carefully. But nearly half don't audit their statements--mainly because they don't know how.

Two of the 16 authors were reasonably certain their agents audited their royalty statements before sending them on, while only 3 of the 16 reported their agent took the initiative to help them understand them--suggesting this is a conversation agents and authors should be having more frequently.

Here are the questions and results:

Does your agent actively audit royalty statements?

YES - 2
I THINK SO - 5
NO - 9

Do you audit and read your own statements?

YES - 6
READ ONLY - 8
NO - 2

Do you know how?

YES - 6
SOMEWHAT - 3
NO - 7

Has your agent ever walked you through a statement?

YES - 3
ON REQUEST - 2
NO - 11

Royalty statements are difficult to understand. Some of the authors who responded said they "never learned how to read a royalty statement,"or they "read them, but have a hard time understanding what everything means."

One author believes auditing is the agent's responsibility. "I don't audit. That's her job. If I had to, I'd get an accountant to do it. But I figure that's why I have an agent. She would walk me through it if I wanted, but that's one less piece of business I have to do."

Others take a more active role. "I read my statements multiple times. First, just to review them and make sure everything looks right and complete. Then I go through them page by page and compare to the last statement to see if there is something wonky (good or bad), then I write up a memo to my agent with any questions or concerns, or if there is something odd. We then discuss."

"I noticed in my last statement, there were line items for Returns for a couple of books that had been released years ago. That seemed illogical, so I asked my agent, and she passed the question on to my editor. Also, I know that a number of my books have been released as audio books as much as a year ago, but I have seen no accounting for sales of those. So I asked my agent, and she asked my editor. Nobody has explained it yet, but I have done payment estimates based on the statements, and our calculations match." Not surprisingly, this last author adds, "Not only do I know how to read the statements, friends often ask me to interpret theirs."

Sometimes authors who audit their statements find mistakes. "I once found a $700.00 error on my royalty statement from my publisher that I noticed after scouring the numbers. My publisher apologized and said it was obviously an error and quickly corrected it, but would he have noticed if I hadn't looked carefully?"

"For two consecutive royalty periods, I had statements passed on to me from a publisher that had gone through the agency's business department and past my agent that had a glaring error on the first page. Each time, it amounted to an error in my favor of mid four figures. One year the amount totaled approximately $11,000. This was not something anyone should have missed, and certainly not twice. The agent/agency did not catch the error, even after it happened the first time. I did, both times."

"It's important for authors to know that even if you have a representative you trust, nothing replaces arming yourself with all the knowledge you can," author Lauren Baratz-Logsted wisely says. Not coincidentally, Baratz-Logsted zealously reads and audits her royalty statements.

Nelson's article includes a tutorial for authors from her contracts manager. Thanks to their generosity, many more authors can now do the same.

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