accounting

Accounting Tips for Running a Website for Passive Income

  • I started my first AdSense website nearly 10 years ago. I initially believed that you didn’t worry much about financial management. As long as I drove enough traffic to my site, I could just collect whatever money I earned. Boy, was I wrong.

    When you are running any website to generate passive income, you are going to need to manage your money carefully. Here are some tips to make things easier.

    Set Money Aside for Taxes Every Month

    Taxes are a big deal for every business. When you have a day job, you don’t need to think about them at all. Your boss takes out a share of your paycheck every month and gives it to Uncle Sam. When you run a passive income site, paying taxes is entirely your responsibility. You need to pay every quarter. The due dates are listed on the IRS website.

    You need to know how much money you will owe in taxes every month. Don’t plan on paying them at the end of the year. You won’t have enough money on hand. You can always use outsourced bookkeeping services if you get stuck.

    Estimate your yearly taxes and set aside money every month. If your income increases, you are going to be bumped into a higher tax bracket and need to start setting more aside.

    If you are selling products in states that have passed local sales taxes, you will need to plan on paying those as well. Find out what the local taxes are in every jurisdiction you operate.

    Keep Careful Track of Any Expenses

    It is entirely possible to run a profitable AdSense site without spending a dime. However, online entrepreneurs that invest in useful tools, marketing services and paid links for SEO tend to be the most successful.

    While investing in premium solutions is a great way to scale your passive income business, you need to track your finances carefully. You may not realize how much money you are spending on these services until you start your bookkeeping. I subscribed to Aweber and planned to use it to build an email list. I wasted over $400 on my subscriptions before canceling it, because I finally realized that email marketing wasn’t necessary for my business model.

    You may also be spending a lot of money on unnecessary services. Keep a record of all your expenditures. Try to gauge the ROI of all of your investments and cut out any that don’t seem to be paying off.

    Monitor Income Fluctuations

    Some businesses provide much more stable cash streams than others. The appeal of passive income businesses is that they don’t require much maintenance. However, they also tend to be very cyclical. Some months will perform very well, while others will tank. I have found that in some niches, my earnings are best during the first couple of weeks of December and the worst in the first three weeks of January.

    It is important to see how your cash flow changes from month-to-month. You don’t want to estimate your yearly profits based on a couple of good months, because you may end up budgeting for things that you can’t afford (like that Mercedes SLX you have been eying). Try to even it out throughout the year.

    Accounting is Crucial for Running a Passive Income Business

    Running a website that generates passive income is a great way to make a living. It is one of the ways Facebook earns money. Unfortunately, it can be a nightmare when it comes to managing your finances. It is important to have a good accounting system in place.