How to handle producer advances

When a producer's getting paid, the cost can be handled a few different ways depending on the circumstances. 

Often this is all laid out in their contract, likely falling into one of the two below options. If the contract calls for another way to handle, reach out to your catalog manager and they'll help sort it out. 

If the producer is also entitled to a % of net profits

In this case the producer becomes another payee in IC, so the simplest way to account for the advance is to add it as a transfer against their balance, which must be recouped from their share of the net. 

E.g. in the case of a $1000 producer advance and a 15% producer split:

$10,000 income
-$5000 expenses
= $5000 net
15% producer split
= $750 producer share
-$1000 producer advance
= -$250 producer balance

This means the cost of the advance is borne by the producer in full; other payees are not affected. Note that in this simpler version the artist recoups "faster" than in the more complex version below. If the label recoups in full, this becomes moot. In both versions it's possible for either the producer or the other payees to recoup before one another, depending on the advances and split %s.

A more complex version involves accounting the advance as an expense, and reducing the advance transaction by the Advance * Producer Split amount. 

Using the same example as above, with 15% of the advance subtracted from the transfer amount, we get:

$10,000 income
-$6000 expenses (the $1k producer advance is now also a shared cost)
= $4000 net
15% producer split
= $600 producer share
-$850 producer advance (the $1k advance less their share of that expense ($150))
= -$250 producer balance

This version makes it so the artist and the producer are recouping at "the same speed," since the advance is being shouldered by all the participants in the net profit share (producer included). If/when the label recoups in full (as in this example), the speed at which the participants recouped is moot, which is why the producer balance is the same for both scenarios.

If the producer is not entitled to a % of net profits

In this case their advance is really a production cost, which gets added as a regular expense on the release. 

As with all expenses, this means the cost is shared by the other payees and the catalog.

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