When a commercial publisher signs up a new writer, it is usual for the publisher to pay the writer an advance against future royalties.
This advance will usually be paid in stages: on signing the contract; on the publisher’s acceptance of the completed manuscript; and on the book’s publication. If the writer has already submitted a full manuscript the publisher might contract to pay the “on delivery” portion of the advance until the manuscript is revised to their satisfaction; and if the writer has been offered a two-book deal then the advance will be split between those two books, which will each receive the appropriate staged payments.
A good agent will negotiate this aspect of the contract very carefullly: while the publisher sets the amount of the advance, the timing of when each payment becomes due can make a big difference to the writer—for example, the amount due on publication can be renegotiated so that this is paid instead on delivery of the manuscript, so improving the writer’s income in the short-term.
One book can mean more than one advance: there could be a hardback and then a paperback sale, and foreign sales can also mean further advances. With a good agent, book club deals, large-print editions and audio books can all add their own smaller amounts to the pot.
The advance is not necessarily all that a writer will earn from that book: remember, it is an advance against future royalties. Each sale of the book will earn its author a royalty. These royalties accrue; at the end of every accounting period the total royalties earned will be compared to the advance that has already been paid. So long as the advance already paid exceeds royalties earned, no further payments will be made: however, with many books, there will come a time when the total royalties earned equals the amount of the advance. At this point the book is said to have “earned out”, and all further sales will generate a royalty cheque for the writer at the end of each subsequent accounting period.
And, despite what some of the vanity publishers might tell you, the writer gets to keep the advance regardless of whether the book earns out or not—so long as the manuscript is delivered on time, and conforms to the specifications of the outline and the contract.