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An Experts Guide To Surviving An Audit

An Expert's Guide for Licensees: How to Survive a Licensor Audit

As a software licensee, you know that being audited by your brand owners isn't an unusual event. As the industry has gotten more complex and technology has advanced, brand owners have realized that conducting audits is just good business. Licensees now need to put processes and systems in place to respond to audits without disrupting normal operations.

Audits Can Strike Fear into Even the Best Licensee

You work hard to keep track of your contracts, but when faced with an audit, you may start thinking about locking your team in a room, giving them all the data you have and hoping that they can pull information from a variety of spreadsheets into a reasonable audit response. While all that is happening, you also need to figure out how to keep your normal operations running.

It doesn't need to be that way. There are things you can do to prepare for an audit that will avoid the last minute marathon.

The Complexity of the Industry Makes Managing Data Difficult

It would be easy to manage your data if every licensor used the same formats, but they don't. Additional complications arise because licensors are requiring more and more information you can produce based on tracking data that isn't easy to include in your sales system or spreadsheets. For example, these are only a few of the pieces of information you need to track:

Minimum guarantees

Sales validated against the boundaries of your contract

Where sales are being made broken out by retailer, channel, market and more

Royalties of various types broken out by licensor

Adjustments

Recoupments

Once you have gathered all the information, you face the challenge of producing reports in the formats that the licensors demand. It's difficult to fault the licensors for requiring detailed information.

For example, reporting based on retailer, store, territory, state and postal code is critical information for the licensor to help them maximize the visibility of their products.

Automation Is the Key

Licensing software is a complex business. Not only do you need to manage audits easily, but there are other demands on your data. When someone negotiating on the telephone needs information, they need it now. You don't have time to pull the information together. You need it at your fingertips.

You may have tens or hundreds of contracts, and it's just not possible to track them all manually. In addition, your operation needs to be easily scalable. If you receive 50 new contracts, you can't add staff. Technology is available to help you handle an increase in contracts without a problem.

Here are just some of the things the right technology will let you do:

Capture some of the information you need at the invoice level for any reporting period

Enter territories into your database to track sales out of the territory.

Set up relationships to easily report on Target, for example, whether licensors categorize them as mass, discount or specialty stores

Track when you hit thresholds for caps in your contracts

Track deductions by setting up the calculation once and adjusting it per period

Track charge-backs to make informed decisions about extending terms or identifying other types of relief

Dependable Solutions offers the most powerful licensing software in the industry. Our industry experts can assist licensees to set up a system that will allow you to improve communications and streamline processes. You'll be able to make smarter decisions and increase revenue.

Our mission is to make working with brands easier, and we can help you to accomplish that goal, also. Contact us today at 424-213-6663 to schedule a demo or discuss your requirements.

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