Living in a time when the Internet is an integral part of our daily lives and for most of us a day without it is unthinkable. It is no surprise that more and more businesses operate on the Internet. With the rapid development of e-commerce, some related sub-segments have entered the market. Among them are the dynamically developing dropshipping and affiliate sales. It is through these two models that many small entrepreneurs have begun to engage in the fast-growing online environment and make money. In a previous article we told you a little more about dropshipping accounting, and now it’s the turn of affiliate accounting.
What is an affiliate?
Affiliate programs are a form of collaboration between website owners. In them, the owner of a product or service pays a commission to his partner, depending on the type of affiliate program.
How do you make profit?
Pay-Per-Sale program. Here the affiliate site pays a commission when making a sale by a customer who came by clicking on a banner, link or text link from his site.
Pay-Per-Lead program. Here the affiliate site receives its commission if a visitor, who came by clicking on it, registers for use of the site – owner and fills out a form.
Pay-Per-Click progam. This one guarantees payment on the partner site when its user clicks on a banner, link or text link leading to the site – owner.
At its core, the affiliate is a commission activity. On behalf of others or on its own, but at someone else’s expense. This in itself is a business and should be treated as such. Universal company registration, VAT registration, taxation are an integral part of affiliate accounting. However, there is documentation here that is of great importance and must be stored and processed.
When working as an affiliate, it is a common practice to pay a commission when accumulating a certain amount, which is agreed in advance. When the time comes to receive your commission, you should ask your affiliate partner to notify you that he owes you money. Even if the meaning for them is a credit notice you as a service provider have an obligation to issue an invoice under Bulgarian law.
In case the partner company is from the EU, there are the following specifics in affiliate accounting. If the European company is registered for VAT in a Member State, it will also oblige you to submit a VIES declaration.
Speaking of affiliate accounting, we can’t help but mention the cost part. Since you have to pay taxes on your income, you need to make sure that your income is calculated correctly. Remember that gross adjusted income will be the total amount you earn – your expenses. For this reason, you really need to keep track of all your affiliate marketing costs.
Keep your receipts and invoices and follow everything below:
- Web hosting costs
- Affiliate marketing tools (such as your WordTracker membership fees, product pricing such as Adwords Analyzer, etc.)
- Any PPC ad you purchase
- Costs for links and content;
- Other company expenses;
Keep in mind that in the affiliate safe, things are very diverse and specific. This also has a direct impact on affiliate accounting. As this business model has entered the field of view of the National Revenue Agency, our advice is to study your specific case very well and to consult with experts on the subject. Careless treatment of your business can lead to serious sanctions in subsequent inspections by the competent government authorities.
The T&G Consulting team has extensive experience in affiliate accounting and can make it easier for entrepreneurs working in the industry. We will make sure that you carry out your activity officially and in accordance with the existing laws, without worrying that you are violating any regulations. We will find the right solutions for your company accounting.