Strategically Speaking: 19 Tips for Better Cash Flow Management

Royalties
18. Royalty Advances: Circumstances permitting, royalty advances should be staggered and tied to specific contract-based deliverables to increase the chances that the final manuscript is submitted as scheduled and cash retained for as long as possible.

19. Return Reserves: Many royalty contracts include provisions that allow the publisher to retain a portion of the author’s royalty payments in anticipation of future returns. Publishers sometimes are reluctant to enforce the return-reserve provision because of the potential implications for author relations. If you decide to implement the clause, it should be done on a going-forward basis with new titles rather than retroactive enforcement.

Managing cash always is a challenge, especially in book publishing, where
bills sometimes are “paid” with customer returns. The effort should be managed
by the finance department, but the full support from the organization’s leadership is essential. The program launch should include discussion of the reasons for the change in policy and the expected benefits.

Strengthening an organization’s cash position is a team effort, and the impact will not be felt overnight. The program should be launched before it is needed. If a cash crunch develops that cannot be met by short-term changes in policy or bank credit, the available options likely are to be few and far more draconian than those mentioned here.

David Hetherington is director of major account sales for Baker & Taylor’s Digital Service Group and an adjunct professor at the Pace University Graduate School of Book and Magazine Publishing. He was previously managing director for strategic business development for Integrated Book Technology, and has held senior positions in finance, operations and manufacturing with some of the industry’s largest firms, including Simon & Schuster, Reader’s Digest Association, BearingPoint Consulting, Wolters Kluwer Health and Columbia University Press.