Clarity
ROYALTIES MANAGEMENT
Audit Management
Let Clarity ROYALTIES MANAGEMENT help you take control of the audit process.
We can support you throughout to generate complete, accurate and cross referenced data and respond positively and rapidly to demands from the auditor.
When an audits is complete, you'll be in a position to negotiate the best terms, now and for future business.
Take Control
So how should you run a royalty audit?
If you’ve been prepared by a pre-audit check, when the audit starts, you will already have all the information you need for the auditor, and it will be complete, accurate, and cross-referenced.
Once the audit starts, you'll have way more time to respond to any additional requests from the auditor (like sample invoices: they will ask for those and they can’t be prepared in advance). This means the audit will be quicker and the audit duration will reduce - along with the audit fee if you do have to pay it.
Without a pre-audit check in place, you’re leaving the auditor in charge. During the audit, all you can do is react to their requests for information. This means you might not be able to find everything you need in time, and you will miss any opportunities to challenge findings you believe are incorrect.
Remember, a draft audit report can contain reversible findings.
The report details what the auditor thinks is payable, based on their application of the license agreement terms and the information they have at hand……information you have provided.
When elements of that information are incomplete, incorrect, or absent altogether, you lose the ability to challenge the audit findings.
I know this because I’ve been there.
Some time ago, I represented a client who was facing a claim for hundreds of thousands of dollars in findings, a quarter of which were for out of territory sales. After many days of searching, and just hours before the settlement call, I discovered confirmation that my client had permission to sell in the territory.
It was a great find - I had saved them being charged three times the royalty rate (and interest) for what we could show were legitimate sales.
But it was far from the best way to run an audit. If someone had deleted the email, or I hadn’t been as persistent, there would have been no evidence with which to contest the auditor’s findings. A pre-audit check would have meant this could have been avoided.
Another benefit from having a pre-audit check is that you will already have the pre-audit calculations, so you can see the difference between the audit findings and the pre-audit. To be clear, there will be differences, but now you have the analysis to challenge them where there are reasonable grounds.
What’s more, it’s not all about reducing losses……you can find gains too.
Permissible allowances and discounts that you may have overlooked when declaring your royalties mean you could have overpaid the royalty amount. You may even have over-declared by using the wrong royalty rate.
Your pre-audit report will have identified these errors in advance, so you can propose they are off set against any findings from the audit itself.
The bottom line is you need to be prepared for any royalty audit, long before the Licensor has notified you of one. And the best way to make sure to get the best outcome is to prepare with a Pre-Audit Check, and then manage the audit process pro-actively.
So how much will it cost?
We'll agree a one-off fee based on the number and complexity of your licenses which are the subject of the audit, your royalty declaration process and whether you've prepared with a Pre-Audit check.
Whatever the situation, the charge for Clarity ROYALTIES MANAGEMENTto pro-actively manage the audit process will help you negotiate a better outcome.
You'll have the ability to address any issues before the audit, and negotiate a more favourable outcome.
What’s more, you'll have built a stronger relationship with your Licensor, with the potential for more lucrative licenses in future.
Sound good? Contact me to discuss how I can help your business thrive.
A Pre-Audit Check by Clarity ROYALTIES MANAGEMENT can help you pass a royalty audit, so you don't have to pay the auditors fee.
You can avoid many of the pitfalls in the first place by outsourcing your royalty declarations to Clarity Royalties Management
Both options will give you peace of mind and can save you money.