Costs and Advances - A complete Guide

Welcome to the fifth step of your onboarding journey! By now, you’ve configured your settings, imported your catalog, set up your contracts, and imported your sales. Now it’s time to manage recoupable costs and advances, an integral part of royalty accounting.

In this guide, we’ll explain the distinction between costs and advances, how to create them, and how they integrate into your royalty workflow.

Understanding Costs and Advances

What Are Costs?

Costs represent expenses such as marketing, artwork, or mastering that you wish to recoup before paying artists. These are tied to specific contracts and can follow two types of recoupment behavior:

1. Shared Costs: Recouped from the contract’s gross income (before applying the artist royalty rate).

2. Artist Costs: Recouped directly from the artist’s share.

What Are Advances?

Advances, on the other hand, are lump sums paid to artists as an advance on their royalties. Advances are linked to a specific payee and are typically recouped entirely from the artist’s share.

Costs & Advances Key Differences

• Costs are recouped against all sales linked to a specific contract and cannot be cross-collateralized across multiple contracts.

• Advances are recouped from the payee’s share net of any taxes and can optionally be tied to specific contracts for targeted recoupment.

How to Create Costs

There are two ways to create costs on eddy.app: bulk import or manual entry.

Option 1: Bulk Cost Import

Using the Bulk Cost Import feature, you can create recoupable costs in bulk. There are two versions of this tool:

• The latest version (recommended) allows for more flexibility, faster workflows, and seamless error correction.

• A legacy version is still available but lacks the advanced features of the updated tool.

For a detailed guide on using the Bulk Cost Import, click here.

Option 2: Add Costs Manually

To add costs manually, follow these steps:

1. Click the + New Cost button in the top-right corner of the Costs page.

2. Fill in the cost details:

   • Cost Name: Give your cost a clear and descriptive name.

   • Description (optional): Add any additional context.

   • Cost Categories: Classify your costs (e.g., artwork, marketing, mastering).

   • Link to Contract: Specify the contract associated with the cost.

   Note: Costs are recouped against all sales linked to the specified contract. Cross-collateralization across multiple contracts is not supported.

3. Set the Cost Amount.

4. Choose the Recoupment Base:

   • Artist’s Cost: Recouped only from the artist’s royalty share. Adjust the percentage if the full amount is not recoupable.

   • Shared Cost: Recouped against the gross contract income, with the remaining profit split based on the artist royalty rate.

5. Optional Fields:

   • Catalog Item: Specify related catalog content.

   • Spend Date: Indicate when the cost occurred.

   • Payment Method: Record how the cost was paid.

   • File Upload: Attach relevant documents or receipts.

     

Key Points to Remember

• Costs vs. Advances: Ensure you distinguish between costs (linked to contracts) and advances (linked to payees).

• Shared vs. Artist Costs: Understand the difference to assign costs appropriately.

• Advances Across Contracts: When linked only to a payee, advances are recouped across all contracts for that artist.

• Error Handling for Cost Bulk Imports: Use the error report to identify and correct cost data issues, then re-import your file seamlessly.

With your costs and advances set up, you’re now ready to move to the next step—generating your first statement batch! 🎉 For a step-by-step guide on creating statements, check out our article on statements.