How to handle when an artist collects income directly
It's not uncommon for an artist/payee to collect income directly, usually via a merch or direct-to-fan sale, which needs to be split with the label or other payees.
There's a few ways to handle (also covered in our Merch Accounting article), but if there are multiple payees involved this is the best way:
- Add the data in as if it was normal income paid to the catalog, so that it's hitting all the proper tracks/contracts and filtering through to the respective payees
- Add a corresponding transfer against the payee who collected the money directly
Note this means the catalog is potentially on the hook for paying royalties to folks for income the catalog itself did not receive. If you're concerned about cash flow and/or that the payee in question will never recoup, you can mitigate that by collecting the money from the payee directly. We'd then enter a second transfer cancelling out the first, so that only the income transactions are left, reflecting the fact that the catalog really *did* receive that income.
If you aren't concerned or don't want to do that, you can let it ride; if the record recoups, the royalties you paid out of pocket to the other payees will be deducted from the royalties you'd otherwise pay to the one who collected the income in the first place, effectively paying the catalog back.
Here's a quick/simple example:
$100 income <-- received by payee instead of label, but still entered as normal
= $50 owed to payee
-$100 transfer <-- to reflect the income was received by payee instead of label
= -$50 payee balance
... which is correct: the payee's balance is -$50, cause they've got $100 in their pocket, half of which is owed to the catalog.