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Licensors collect significant revenue through effective license compliance programs. However, direct revenue generation is only a fraction of the value that is realized by licensors who have implemented a robust compliance program consisting of targeted audits and data analytics.
There are several critical but less obvious benefits that leading licensors are capturing through their compliance efforts. In this blog, we are addressing the ones we believe are the key benefits to seeking third-party help for your license compliance program.
Working with a seasoned partner with years of compliance program experience can provide a massive boost to operational efficiencies. Connor has worked with our clients to implement best practices for the tools and processes utilized in their royalty analysis and collection process.
These best practices have proven to increase the accuracy of analysis, allow teams to provide better visibility and quality of executive reports and summaries to the business while minimizing manual effort, and enable internal resources to focus on value-add activities (i.e. management dashboards and reports and root cause analysis rather than manual data consolidations or manipulation).
A license compliance program can identify control gaps as well as potential process improvements within the order-to-cash process. An example of a control gap is licensees who have signed a license agreement but never reported royalties to a licensor.
Connor has assisted clients with analyzing this population and providing creative guidance to address this control gap while identifying additional revenue for our clients.
Underreporting of royalties is a problem that is difficult to hamper - especially as we move out of the pandemic period.
In fact, around 90% of our license compliance audits identify under-reporting of royalties. While in some cases, this under-reporting is due to intentional underpayment and non-compliance with contract terms, it is more common to see under-reporting due to the licensee's manual processes or an inaccurate contractual interpretation.
A robust audit program will help a licensor identify commonly misused or misunderstood agreement terms, and this valuable insight can be passed back to the business to explore clarifications of these complex contract terms. Clarifying these contract terms not only supports the accuracy of future reporting but also helps the licensor identify additional licensees who may have similar issues so that these issues can be addressed before the fiscal impact balloons to an amount that is challenging to resolve amicably.
Operational changes during mergers, acquisitions, divestitures, or other forms of operational restructuring frequently cause issues in licensee reporting and as result friction in the licensor/licensee relationship. An active compliance program can help clarify the obligations over the period prior to and up to the organizational change and establish the relationships with the contacts and departments who will take over the royalty compliance process at the new entity. Additionally, an audit during this period can mitigate the operational challenges and control deficiencies caused by these changes and lay the foundation for a continued mutually beneficial partnership.
To maximize the potential benefits of a license compliance program for your organization, you need an experienced partner. Connor Consulting is a leading independent audit firm that specializes in contract compliance.
Connor is a strategic advisor to industry leaders such as ARM, HDMI, Dolby, and many others. Our goal is to ensure our clients maximize ROI and program impact. In fact, Connor’s clients have seen an ROI of 10x every dollar they have spent with our firm and have also seen revenue contributions by license compliance efforts increase up to 24% of their total revenue.
If you would like to learn more about our services and how we can help you with your compliance programs, please contact us to explore the benefits of a contract compliance program for your organization contact royaltycompliance@connor-consulting.com.
