Most companies that receive revenue from licensing their technology do not have a program in place to insure that they receive the correct amount of royalties. They should.
Why? Because they may very well be leaving dollars on the table—and considerable amounts, at that!
Most companies have procedures in place to insure they do not overpay expenses. However, few companies–even highly ethical companies–have procedures in place to assure expenses are not understated. Where licensing is concerned, this results in an under reporting of fees to the company that owns the technology. If your company is reselling its patent licenses, you may be missing out on significant revenues that are due to you. For any company, but particularly one whose only product (and therefore, its only revenue stream) is patent licenses, it makes good business sense.
There are a number of reasons to review the ways in which your clients are report the licensing revenue due to you.
- Licensees inadvertently fail to report correct royalties.
- Licensees purposely fail to report the correct royalties.
- In patent licenses, accounting practices may not record sales of new or upgraded products or services.
- In software licenses, users may be unaware of the license requirements.