I used to think that blogging was just about setting up a website and adding content. When I first started this blog a few years back, I didn’t give a lot of thought about the cash management issues that may arise with running a profitable blog. Granted how to start making money was more of an issue back then. But things change.
Over time, I started getting a trickle of income, then a bit more. Then I started thinking about what to do with the extra money?
I’m not earning earth shattering income, but it’s enough that I started having concerns about tax consequences. What about reinvesting the money? Can I spend it in ways to write off the income?
I also ran into new issues as my blog has attracted some interest from readers over seas. I’ve had inquiries from potential business partners from India. They don’t allow paypal money transfers in India, so I’ve had to ponder ways to transfer money overseas without using paypal.
On the ecommerce side of things, I’ve had to send money to China to purchase inventory. There are a number of foreign exchange services that charge different fees. Even when the other party can accept paypal, you may want to research other products to get the best savings on your money transfer.
I’m getting close to the point where I have started researching the cost of hiring a VA to handle some of the work. That means additional expenses in human resources.
At some point in the future, I’ll probably need to high some kind of professional financial consultant or look into other professional cash management solutions to help me out with cash flow issues.
The thing with starting an online business such as blogging or an ecommerce retail business is that it’s so easy to start up that you can easily neglect issues that might arise with earning an extra online income.
Here are a few things that I’ve learned about managing my extra income:
Keep Your Extra Income Separate
It can be easy to co-mingle your funds into your existing bank accounts. But at the end of the year you may have to account for the extra money for tax purposes. Also, you need to keep track of your income and expenses and it’s just so much easier to do that if you have a dedicated bank account for your business.
Research Overseas Money Transfers
Invariabley you will start to do business overseas. Sending and receiving money overseas actually costs money. I didn’t give this issue much thought when I started this blog. However, I realized that the fees for a money transfer will eat into your income. Find the best deals for money transfers or negotiate the fees into your payment arrangements.
Plan Ahead to Reinvest Your Money
Be aware that you will want to reinvest some of your profit and plan ahead. As my blog grew, I found that I wanted to spend money on various things such as upgrading my servers, advertising, social media and blogging products, etc… Some of these items are recurring expenses. That means that I make sure that I plan ahead to ensure that my monthly income exceeds these expenses. I want to make sure that my cashflow doesn’t go into the red. This can be harder than it sounds because when you are running a business, it can be hard to predict how much profit you’ll earn from month to month. I’ve had months range anywhere from $200 to $1000. I try to keep my monthly expenses below the lower end of my income range.
Think on any Tax Consequences (Do You Need to Hire a Professional)
At some point, you want to have the problem of too much money. But that also comes with it’s unique issues. Most importantly taxes. As you make more and more money, at some point you will need to figure out how this affects your taxes. This is especially true when you earn a regular income as well. I’ve found that taxes can get… complicated as you start having multiple sources of income in your household. As far as the income from the online business goes: I try to balance out the income so that at the end of the year it’s as low as possible for tax purposes. Income for tax purposes is generally money that’s left over from your profit minus your business expenses. It’s not a problem to have your business expenses cancel out your gross profits when you are earning a small amount. As you start earning more, it’s trickier. At some point I know I’ll need to get a tax adviser or hire a cpa to help me sort it all out. Just one more expense…
These are far from all the cash flow management issues that happen behind the scene of blogging. These are just a few of the issues I’ve run into and know that are common to almost anyone who is looking to make money online. When you’re starting out, you never think that making money can be a problem. While it’s a good problem to have, you want to think and plan ahead to manage your cash flow wisely.