5 Brilliant Accounting Lessons in Affiliate Marketing

byJnsiah

2.5K followers

6 years ago

1. Run affiliate Marketing like a Business

The affiliate marketing idea starts as a passive income generating venture for most people. People have it as a side job to subsidies their income. There are others who want to profit from it and make a successful business out of it. No matter you're underlying decision to start affiliate marketing, there is a business element to it that needs to be considered. Non-profit ventures like churches, clubs need to account for their income and costs. For those who want to run affiliate marketing as their passion, it is worth considering the business element and keeping records of where the money is going, even if you do not want to make any income.

2. Understand your income

As an affiliate marketer you earn commission from marketing products and introducing premium customers. This is your income. Any related amounts paid from marketing for Amazon, click bank etc is the income you are making. The amount of income will make or break your business. Make sure you are accounting and keeping proper records of the income or commission earned each month. Depending on your direct cost which we will look at next you will want to earn as much income as possible so that you are not out-of-pocket. For a sustainable income from your business, think about building a subscription business.

3. Understand costs of affiliate marketing

As I am well aware there is always a new product on the market for digital marketing. We are encouraged to try it and then the payment sets in after a month. You may use very little of the software but continue paying for it until you cancel. Keeping records of all your costs is key. Review these costs at least monthly and get rid of those you are not using but still paying for. This will reduce your cost. Break your costs down into two. There is the direct cost. These are costs directly related to your income. For those costs if you don't incur them you won't be able to generate an income. An example is your WA premium, without paying for the premium you cannot build the needed wordpress website to generate the income you need.

4. Gross Margin

When accounting for affiliate marketing, you can quickly estimate your profit before indirect costs by working out the gross margin. Gross margin is the difference between your income or commission and your direct costs. Before any other costs you can easily work out whether you are making money in your affiliate marketing venture. Aim at a higher gross margin, this will cover your overheads. You can also work out a gross margin percentage. Gross margin percentage is the difference between income and costs divided by the income. Aim for 50% and above gross margin percentage. It takes time to reach that but if you budget these numbers in your early stages of WA you can work towards achieving them or even doing better.

5. What are your overheads

Overheads are broken down into fixed and variable. The fixed overheads are also known as sunk costs. These are costs that you will incur even if you do not run an affiliate marketing business. An example is your rent cost. You will still pay rent on your property even if you do not do affiliate marketing and you will still be paying for your laptop if you do not use it to blog. But you will not spend hours blogging or incurring costs on the stationery for your blog if it wasn't for affiliate marketing. That is your variable cost. The time you spend in affiliate marketing, especially the time you spend researching and blogging. What is the opportunity cost of that time. How much will you have earned if you had utilized that time somewhere else. This is value you need to consider. In the end, the total of your income less all the costs will get you your profit before tax.

Conclusion

Accounting is a subject that gets pushed aside. Accounting goes beyond compliance, it paints a clear picture of where we are spending our money and how much is coming in. Having a budget set up will help you to work towards achieving your budget and reducing costs where necessary. In short, it will promote business efficiency in your affiliate marketing venture. The good news is there are free accounting software that will help you to easily track your sales, direct costs and overhead. The software can also generate reports showing whether you are making a profit or loss. But before the software can do its job efficiently it has to be fed with the data the right. I hope you will now keep track of your affiliate marketing financial data and achieve the maximum income possible. Wish you the very best.