Industry sector: Business services

Record label: Cash from debtors

'Cash from debtors' means any income you receive from account customers that you send an invoice to, usually at the end of the month. After they have been sent an invoice but before they pay, they are your debtors. When they pay you, the payment is referred to as Cash from debtors.

Depending on the size of your label, your debtors may be:

  • record shops. Small record labels tend to deal directly with record shops that generally sell on a sale-or-return basis. They will only pay you after they have sold the records and may insist that rather than pay you in small instalments, such as on a weekly basis, they pay you monthly or bi-monthly
  • distributors. As your label grows, you are likely to start to use record distributors which do the job of selling your records to record retailers. Distributors do not buy your records but instead take a percentage of the Published Price to Dealer (essentially the wholesale price of your records). As it is the distributor rather than you that deals with the record retailer, the payment for the sale of your records is made to the distributor who then subtracts the agreed percentage and passes the balance on to you
  • digital service providers and streaming services who will pay you a royalty for each track that is purchased or played. You may look to deal with them direct or you may choose to use distributors or aggregators to negotiate on your behalf. Either way, you'll usually get paid what you're owed once a month with distributors and aggregators charging you a percentage of your profits for the service they provide

Payment terms

If and when you use distributors, the payment terms are likely to be fairly unfavourable. A distributor may allow a record shop up to two months of credit before it has to settle its account and your contract with the distributor may grant a further two months before the distributor has to pay the balance due to you.

If you provide digital content for download to a digital service provider, distributor or aggregator you are likely to receive your royalty payments every 30 to 60 days depending on their terms of trade.

Your business stationery

Have some invoices printed for your account customers. A good printer will be able to advise you on layout, style and even content. If you are registered for VAT you must include your VAT registration number on your invoices.