Blogger: Janet Kobobel Grant
Literary agencies handle authors’ advance payments and royalty payments one of two ways:
1. The money is split–generally 85% to you, 15% to your agent–at the publishing house.
2. One hundred percent of the money is sent to the agency, where it is split, and the author’s sum is sent to him or her.
From the outset of our agency’s existence, we selected option #2. If your agent isn’t doing this for you, he or she is taking the easy way out of providing you a service.
By having the money sent to the agency, that agency will:
- Know that the money was sent to you. If the agency receives only its portion, it doesn’t know if you got yours. Since the bulk of the funds are the author’s, a publisher that’s having trouble finding the funds to pay could easily send the 15% to the agent but not the 85% to the author. That agent would assume the rest had been sent to the author.
- Check that the amount sent was correct. Recently a client’s advance payment was sent to our office. But the publisher had failed to send the right amount. Instead, the publisher sent what they initially offered for the book not the increased amount I had negotiated. In all likelihood, someone in accounting looked at paperwork that indicated the initial amount offered but failed to check the contract, which stated the increased amount. If the author’s money hadn’t been sent to me, it would have taken me some time to figure out why the agency’s portion was incorrect. But with the entire sum presented in one check, the error was obvious and quickly spotted. And the author didn’t happily skip off to the bank to deposit an incorrect check.
- Double-check that royalty payments are correct. Reporting royalties and paying the correct amount is a complex business because the book is likely to be published in many formats, at varying discounts, with returns, reserves and licensed subsidiary rights added to the equation. I spend hours pouring over royalty statements to determine if the payment for a client is correct. Seeing the sum sent to a Books & Such client is very different from studying a report that only reflects what our agency earned. Spotting errors is hard work, but it’s made even harder if the reviewer isn’t looking at the total rather than a portion of the total.
- Make certain the check to the author is made out correctly. That might seem pretty straightforward, but an agency will be more sensitive to whether an author is incorporated and whether that payment is made out to the author or the author’s corporation. When it comes to reporting income to the government, you want the money to be in your corporation’s column, not your personal column.
- Send out 1099 forms to clients rather than having the publisher do so. Once again, this is a place for the agency to check that the figures on the form are accurate. If the numbers are reported through the publisher, it’s up to the author to make sure they’re right and to make sure the 1099 is made out to the author or to the corporation, depending on how the author’s finances are set up. (For the record, the publisher frequently makes out our agency’s 1099 forms incorrectly, applying them to my Social Security number rather than to the agency’s Federal ID number. It becomes our job to correct that with the publisher while we send out a correct 1099 to our client.)
Agencies that set up a system in which they receive payment directly from the publisher don’t have the same incentives to check that all is being handled appropriately for the author. And it’s much harder to spot the problems, even if the agency looks for them.
So, while on the surface it might seem better to have the money headed your way directly from the publisher, in actuality, you’re short-circuiting an important aspect of what your agency should be doing for you.
. . . you’re short-circuiting an important aspect of what your agency should be doing for you. Yeah, like math. I mean, writers and math, need I say more?
Thanks for the great explanation. I love that B&S is so friendly and so businesslike all in one package.
LOL! I have a minor in math. However, it wasn’t in accounting, so I’m agreeing with you. 😉
Based on Janet’s bio, she isn’t an accountant either (or a lawyer). Which suggests that the ability to read statements can be learnt – you don’t need a degree to do it.
Sarah – Spot on, baby! Writers and math – ha!
You first have to start with a trustworthy agent. If you don’t trust your agency, you might as well hang it up. When you trust them, you follow their advice. They’re the ones who know the business and represent you. I know people who don’t trust their agents or have had issues over money with them. There will always be a few bad apples out there. Do your work before you sign with agent and it will give you miles of smiles later down the road.
Wow, Janet. Great information there. Thanks so much for sharing.
Janet, in my dealings with another agency, I received the check directly. When I discovered that Books & Such would payments and issue a check to me, I was surprised and a bit disappointed. But now I realize that it’s a good thing. Thanks so much for the explanation.
Anything that absorbs the business headaches is a gift, allowing authors more time to focus on writing. Thank you.
Wow! Sounds great to me!
My question is, do you take out the money for Federal and State taxes for the author? If you take out State taxes is for where the author resides or is it California because that’s where your agency is located?
Lori, to answer your question, we do not deduct state or federal taxes. That would create an entirely different relationship with your agent. Your publisher likewise will not make those deductions for you.
Again, another reason why we appreciate the Books and Such team. Thank you, Janet!
Janet, a tangent question: People are people and thus prone to mistakes, as illustrated in your second point above. How much assurance is there that a publisher’s statement of the exact number of books sold is accurate as of each royalty check?
Rick, without doing an audit, it’s impossible to know the accuracy of a statement. After working with publishers for awhile and studying over the many royalty statements I see for our authors (think several inches high for each publisher’s royalty period), I have a pretty good idea which publishers are likely to have accurate statements.
Then that becomes yet another plus for reasons to have an agent. On their own, authors would have no experience and no way of knowing whether a particular house is lax or diligent in this important area. Thanks, Janet!
Love this breakdown of the reasons behind this decision. Thank you for this insight into the industry.
More great insight into the agent-publisher world! Thanks, Janet! 🙂
Janet, Thanks for this insight into what happens behind the scenes. It’s overwhelming (even for this former CPA), which makes me all the more thankful to have the experience of your team working on my behalf.
Good information to know. Thanks for posting. 🙂
Thank you for explaining this. It makes much sense.
Thanks so much for this information, Janet. It does make me think of a question, though. Should an author create a corporation? What benefits does that bring?
Ann, that’s a very complicated question and depends on lots of factors. The simple answer is,no, you shouldn’t unless you are making regular, significant amounts of money. Forming a corporation requires an attorney and all the fees associated with that, plus more forms at tax time. For most authors, insufficient income makes this just a complication.
This is excellent information to have, Janet. Thanks for sharing.
Oh wow I had no clue there was an option. And what great info! Thank you for sharing this Janet. VERY good to know!
I should be extremely happy to have an agent take care of these transactions for me. Now, if I can just find her!
In checking your clients’ royalty statements from publishers, is your concern fraud or incompetence by the publisher?
Also, how often do you find an error that you manage to get corrected? And are those errors typically the result of fraud or incompetence?
It’s hard to assign motive to a publisher who makes an error. Sometimes it’s a differing view of what the contract calls for; sometimes it’s an accounting error; sometimes it’s beyond comprehending how the final numbers were derived.
This makes so much sense. Thanks for the explanation, Janet. I appreciate your wisdom.
Wow Janet,
Thanks for the information. Very important stuff to know coming in.
Blessings,
Becky
Janet, your way certainly makes sense to me. Thanks for an enlightening explanation.
As a yet-to-be-published author, who doesn’t have an agent, I found this blog post very informative and helpful. When the day comes that I get my manuscript accepted, do I then try to find an agent to handle all these matters?
Thanks for these details Janet!
In Mozilla Firefox how do you customize the toolbars to different colors and styles?
Rathjen
Janet, thanks for the inside view. I had no idea how the financial end of publishing works.
This is a great post, Janet. Thank you. I do so appreciate having an agent/agency who vets not only contracts but royalty statements. Things get particularly difficult (but a problem we writers all love to have) when foreign sales/publishers are involved, contracts are not written in English and payments are made in Euros, etc. Our agents are such a blessing in our lives, more than we can ever know!
I wonder how long (and if) my comment will stay here…
Just a link to a post by Kristine Kathryn Rusch :
http://kriswrites.com/2012/08/08/the-business-rusch-the-agent-clause-deal-breakers-2012/
If you wonder who that is, I’d suggest you go and check her credentials on Wikipedia. A,d if you feel the need to cross-check, of course please do.
I read the blog you linked to and found the post showed a lack of understanding about why an agent receives a commission for the life of a publishing contract. Also, some of the language that the post suggests is in most agent’s’ contracts is language I’ve never seen in a representation contract. I found agents painted in the blog post with a broad brush, which is one of the drawbacks of the brevity of blogs. We all tend to write in generalizations about very complex issues. And controversy brings readers to blogs. Just sayin’ …
Thank you for answering as cordially to what I wold have taken as an offense.
To the point : Can you please explain to ME why an agent would receive a commission for the life of a publishing contract ? Truth to be told, I don’t get it either. (May be because in France, we don’t really have that many agents… )
SFReader, the reason an agent receives a commission for a project as long as that project remains at a publishing house (before rights revert) is because the agent placed that project at the house and continues to stay involved with the marketing and other aspects of that book until it goes out of print. At that point, the agent sees that the rights are returned as the contract specifies. While that might seem a yawning sort of job, it’s surprising how often publishers try to add qualifiers to the rights reversion that the contract disallows. In other words, the agent monitors and cares for the project through its life cycle at a publishing house.
Since a copy of the statement should accompany both the 15% check and the 85% check, that should provide all necessary information for the agent to cross check figures. Suggesting that the presence of the other 85% of the money will somehow add information is absurd.
The statements an agent receives with the 15% show numbers that are 15% of the total rather than 100%. So the author and agent actually receive statements that look different. While an agent can check that the 15% is correct, he or she must assume the author’s statements reflect the other 85%.
Then why not have the contract ask for a copy of BOTH sent to both the agent and author ?
Maybe the publisher would be willing to send copies to both. I don’t know since I’ve never been in a position to ask.
Ultimately the author-agent relationship works because trust exists between the two parties. Many of the questions emanating from this blog indicate a lack of trust. It doesn’t mean the author is stupid or naive to have money sent to the agent, but that the agency has proven to be trustworthy.
Why?
Why would a writer want to add another delay between getting her money from a publisher?
Why would a writer not want to take the time to learn to read royalty statements herself?
Why do so many of you want to cede responsibility for your own finances to someone else?
I’ve freelanced on and off for years in the back end of publishing (copy editing, proofreading, typesetting, etc.). Yes, 1099s are a pain. Yes, learning about self-employment taxes is not a day on the beach. But we have tax software and tax agencies that can help for a relatively small fee.
Writers who don’t want to put out the effort to keep an eye on their own finances are writers who are not going to catch the mistakes that inevitably are made. Agents and agencies are not perfect, nor, when last I checked, were they accountants.
Learn how to take care of yourselves, and have the checks split. Agents are employed by writers, not vice-versa.
Meryl, the issue isn’t just the correct 1099 but understanding royalty statements, which often are like a complex puzzle. They seldom are straightforward. Most authors look at them and have no idea how to interpret them. I’ve often spent entire weekends with my calculator and stacks of royalty statements. Your comment is akin to saying authors should just figure out contracts rather than having an agent work on contracts. Our agency receives no benefit from having 100% of the money sent to us because we immediately cut checks for our clients from the money sent. It’s all about service to our clients. The easiest thing to do is to have the publisher send the 85% direct to our clients.
Why can’t the agency do this with just a statement? Are you physically counting the money? I understand this a lot more if you were taking the taxes out, but that seems to be a “headache” left to the writer.
Writers need to learn some of the business side of this or they leave themselves exposed to not getting all they earned. Even experts on reading statements make mistakes.
In a sense we are counting the money in that we’re making sure the check is for the correct amount. A statement from a publisher could say one thing, and the statement another. That actually happens sometimes.
Er … I’m an adult, and can do math. I’d be ashamed to depend on someone else to double-check my revenue statements.
If you could only see what many of these royalty statements looked like, you wouldn’t be so confident that they’re straightforward and a simple matter of doing math. Each publishing house has a distinctive way to communicate what happened with the sale of your titles. Most are convoluted enough to stymy my clients who ARE accountants.
That’s very kind. You miss the point, though. It doesn’t matter if it’s stymiesome. It doesn’t matter if you can do it better than I can. If I’m earning money, even if it’s paltry money, it’s my responsibility to go over those royalty statements. I might appreciate help, but it doesn’t matter what you do or don’t; I’m still going over my own statements.
Do I let other people go over my day-job payment details, or decide my stock investments, or otherwise handle my money? No. Nor should I. Would you?
And really, genius-level IQ here – I can concentrate, I can learn. If you can do it, I can do it, as many other writers do.
Why don’t you educate writers, instead of patting them on the head and telling them you’ll handle their money? You’d save yourself time. Don’t assume we’re idiots.
Our clients receive copies of their royalty statements, and all the info is available to them to dig in as deeply as they want. It’s interesting that you seem to think I’m implying my clients aren’t intelligent, when my goal as an agent in that everything I do is to take responsibility for the business side of the relationship with the publisher. If I concentrate on that angle, the author is free to concentrate on the creative/marketing side. This is about being a team, each concentrating on his/her strengths. I’m not withholding information, but I am working to check it. If you’ve never had an agent provide this service for you, perhaps it would help to think of what an agent does as what an accountant does for you in preparing your tax reports.
That accountant makes available to a client any information the client wants to know, but the accountant relieves the client of the necessity to understand each form and how to fill it out.
Why is this such an upsetting process for you? What’s behind your strenuous objection?
No you silly writers need to count it for you you simply cannot do that for yourselves!
Plus your money is earning us interest while we …er count it for you! You need us to do this and make sure its correct lest you happily skip off to the bank with a wrong amount. oh my. purrr.
Ooh, Agent Sydney, you’re revealing our secret. Because I earn so much interest from the time I deposit that silly writer’s check and walk to the mailbox outside the bank to drop the author’s check in. And we all know how high the interest rate is. Signed, Getting Richer By the Second.
every little bit helps fellow agent, every little bit helps! And who said anything about bank interest rates, there are other secure higher rates, and silly writers can be made to wait while I give them only a little bit of the 85%, they will never know. Publishers contact me not silly writer. purrrr.
Agent Sydney, your cynicism knows no bounds. Since most projects never earn out, there aren’t even any royalties to earn big-time interest on.
So what agent twisted your tail?
meowww. it is sad. it is true most don’t earn out, but we shrewd agents can still gain from that. You are one of those *yawn* good agents, who obviously cares about silly writers! Sydney wishes all agents to be like him–bad agent! MEOW! but that is okay if you do not follow me–more tuna for me! Off of silly writers back *wink*.
Sydney will let you have last word since it is your blog (see how nice Sydney is to fellow agent? Sydney not so nice to silly writers! believe me!) But know that Sydney is growing to be FAT cat with all agents Sydney has in stable. Even with projects that do not earn out–sydney earns! sydney is bad agent meeeow. sydney is not so uncommon as you mz good agent thinks! purr.
Sydney must go now. Sydney has many many form rejection letters to send! then catnap for Sydney!
PS oops Sydney made mess in cat litter. Sydney meant ‘many silly writers in stable’. (though Sydney has some agents in there too! *lick fur*
yawn.
I understand some authors want to receive this service, but would you sign an author who did not want to split payments? What if the author sent you a photocopy of their check/royalty statement for you to check against the one you received from the publisher?
Every agency has its bookkeeping set up to either handle 100% of the money or 15%. So, if a potential client felt strongly about how the money was handled, the agency would have to decide if it wanted to represent that author badly enough. It would be a decision to handle that client’s money differently for years if not decades to come. So, yes, an agency might offer representation, but that becomes a much bigger decision for a writer who would be treated “exceptionally.”
“the author didn’t happily skip off to the bank to deposit an incorrect check.”
Being such children, you’re right that authors shouldn’t worry their empty little heads about the real world issues and leave it to the grownups such as the agents. We are absolutely too stupid to take care of ourselves.
What part of being a team with an agent don’t you get? The agent’s job is to handle the business side of publishing for an author; the author concentrates on the creative side.
It makes good business sense. If agents were just ripoff artists, why would best-selling authors have agents?
Why do you interrupt an author/agent team working together well as meaning the agent thinks the author is stupid? The author is creating the product that makes money for pete’s sake. I have unending respect for the author.
What’s really the underlying reason for your antagonism toward agents?
After looking at this, now I want an agent more than ever. Although I have a CPA, you need someone representing you that knows to look for all of this stuff.
Also, could you talk a little more about how an author can incorporate and the advantages for doing this?
Beth, first the disclaimer that I’m not an attorney or an accountant. But I’ve seen clients incorporate before it made sense and others not incorporate when they should.
When the author is getting regular contracts and royalties on past contracts, the amount of money begins to be more significant. That’s the time to consider incorporating because it enables you to receive disbursements for your expenses rather than taking your expenses as part of your salary. That reaps benefits when it comes to paying taxes.
But incorporating only makes sense when the author is earning a five-figure amount. And I’d talk to an accountant before incorporating because it does require an attorney and is financially a good choice only when you have a pretty nice sum coming in every year.
Sometimes author receive a multi-book contract and decide to incorporate, but that might be the best choice. Generally only when regular income from royalties as well as from contracts are in place does it make sense to incorporate.