Learn How to Manage Your Affiliate Income by Understanding Cash Flow

Let’s suppose that you’ve got your start in the affiliate marketing world, you’ve completed a comprehensive affiliate course and learned everything you need to know about referral schemes, links, and social media influence, and you’re looking ahead to even brighter things in the future. That’s a great position to be in!

Of course, with rising revenue comes rising risk — it’s extremely common for an entrepreneur to achieve a certain level of success, grow accustomed to it, and fail to account for everything that can go wrong (such as an algorithm update wiping out their traffic). At every stage of your affiliate success, you need to know where you stand overall.

The key? Understanding cash flow. Let’s take a closer look at what cash flow involves, why it matters so much, and how you can keep track of it to keep your business stable.

The basics of cash flow

Put simply — which isn’t hard, because it’s a simple concept — cash flow is the sum of the money entering and leaving a business. It isn’t about profitability or savings. It’s purely a matter of what’s being spent to keep a business running, and what money that business is bringing in, factoring in absolutely everything affecting the bottom line.

You might wonder how this applies to affiliate business, but even the most casual affiliate arrangement has some expenses, such as web hosting or software subscriptions. That’s why you need to be aware of it. (Note: we’re covering the basics here — if you feel ready to get more in-depth, I recommend checking out this guide to small business cash flow.)

Why it’s so important to track

Conducting business without understanding your cash flow is so dangerous because it determines the sustainability — essentially the health — of your operation. Imagine that you decided to start a new affiliate website, and checked the analytics after a couple of months to find that it had made you $200. That sounds like a good a result ($200 is better than $0, of course!), but what if you’d spent $300 on PPC advertising during that period?

The problem with something like PPC is that you can easily set it and forget it, particularly since the costs (which are spread over time) don’t sound intimidating. If you’re achieving a CPC of $0.50, for instance, you might reason that $0.50 is an inconsequential amount of money — but inconsequential amounts add up quickly.

When you lose track of your cash flow, you can even run into major issues such as your PPC campaigns ending or your subscriptions expiring due to specific accounts running dry after late payments or unexpectedly-high expenditure. This can lead to a troubling domino situation in which different aspects of your affiliate platform fail one by one, all due to a lack of liquidity.

How to keep track of your cash flow

With that established, how can you consistently track your cash flow and avoid the issues we’ve touched upon? Well, as an aside, you should first aim to follow best practices for your affiliate relationships: build strong working relationships, diversify your income sources, stay apprised of industry updates that could impact your situation, and keep emergency funds ready to go.

To track your cash flow, there are various viable options, including the following:

  • Manually recording all your finances in a spreadsheet. This takes a lot of time, particularly to set up in the first place, but it can be done if you’re comfortable with that type of software and know how to deploy a formula. Ensure that you log absolutely everything (money going in or out), and you’ll be set.
  • Using a simple financial management tool. Much easier than taking the spreadsheet approach, you can use a free (or low-cost) financial management tool to log your cash flow. I recommended Wave’s cash flow guide earlier, and the Wave Financial app is great for this, but there are plenty of alternatives — here are some more ideas.
  • Hiring a financial expert to help. This might sound exceptionally expensive, but if you keep the hours down, it doesn’t need to be. You can either have them oversee your accounts in general or task them with reviewing one of the two other methods to check that you’re not making any obvious mistakes.

How to maximize your flow of affiliate income

You don’t just want to track your cash flow, of course: you want to maximize it, ensuring that you have as much money coming in as possible. Affiliate payments can arrive at odd times, after all, and terms can shift very suddenly — the more you income sources you line up, the better.

Here are some suggestions on how to do this:

  • Stay updated on the best schemes. Terms and conditions can change overnight, leaving you in a tough position if you’re relying too heavily on a particular scheme. By using numerous schemes (some examples) at the same time, and keeping up with any changes, you can adapt quickly — I strongly suggest keeping up with the r/AffiliateMarketing subreddit.
  • Mix evergreen and seasonal content. Concentrating on just one of these content types will leave glaring gaps in your affiliate link portfolio. Think about the everyday products and services that will always get some attention, and about the occasional (typically seasonal products) that will sporadically become highly popular — for instance, utility products are in-demand all year, but decorative products (viable gifts) will always tick up as seasonal holidays approach.
  • Keep working on your organic SEO. Organic traffic can fluctuate due to algorithm changes, yes, but if you persistently follow best practices, you can successfully navigate those changes. Every ranking improvement gives a boost to every affiliate link on the ranked page and even assists other pages on your site.

Keep on top of your cash flow, and no matter how big your affiliate marketing operation becomes, you’ll always have the confidence of knowing that you’re on a stable foundation and can keep going if you encounter an obstacle. That’s worth fighting for.