Work out royalty payment instantly with clear inputs, formula shown and shareable results.
Royalty agreements usually combine a percentage of net sales with a minimum guarantee and a recoupable advance. The licensee pays the higher of earned royalty and the guarantee, then offsets any advance already paid, so the cash due can be nil while royalty is still accruing.
Earned royalty
Earned = Net sales x Royalty rate %
Payable
Payable = max(Earned, Minimum guarantee) - Recoupable advance, floored at zero
Indicative calculation. Actual entitlements depend on the licence wording, the definition of net sales, territory carve-outs and withholding tax. Not legal advice.
Gross invoiced value less returns, trade discounts and, usually, freight and sales taxes. The definition is the most disputed clause in most licences.
Almost never. Advances are typically non-refundable but recoupable against future royalties.