Earning money online is nothing new, nowadays anyone can be a freelancer, a brand owner, an influencer, or anything in between. So earning money through social media is not unusual but many who do earn this way miss essential elements! Regardless of the amount of money, keeping track of finances is essential, especially for those who are working alone and have no one else to lean on. So here’s why income statements are important for individuals who earn over social media and how they can benefit from them!

What are income statements?

Before even starting the money earning journey, people need to educate themselves on important terms in relation to their business. One of those terms, tied with finances, is the income statement – or in other words a financial statement that presents the overall performance of the workflow itself. This paints a picture of how profitable a certain period was and how much money was earned or in other ways lost. Regardless of whether the income is inconsistent or regular, it can be of great importance in the long run for many reasons! A lot of newcomers seem to skip this step, but this is an essential step in any business and finance tracking that can help in so many ways!

Helps with management

Being your own employer has its benefits, but it also has its cons as well – one being that you have to do a lot of things on your own. Many companies have designated job positions and people who manage finances and similar data, but when you are not a large business you need to handle it yourself. Nowadays, anyone can use a paystub maker or an easy generator to do so. Not having this can cause a lot of issues down the line. Being unable to properly keep track of profit or potential losses is never good and it will only set you back in the long run. So having things such as income statements, definitely helps with keeping track of things and being more organized when it comes to finances!

Create goals

Without having a proper analysis of the current citation, you’ll never be able to set proper goals, let alone reach them. Many influencers and entrepreneurs who work through social media, have to keep track of their monthly finances along with their other social media stats like followers. In that kind of business, exposure, followers, and income go hand in hand, so keeping an eye on them can truly boost the profit. Once everything is on paper, setting short-term and long-term financial goals is possible, while regular income statements help with showing the current state of things! Even if you don’t have any significant goals or amounts of money in mind, it’s still a good idea to think in that direction.

Spot inconsistencies

There is nothing worse than having a lower income than you are used to – and this is a common thing when it comes to earning online. In most cases there is no set amount of money a person can earn from social media, the only exception is getting sponsorships for a duration of time. Other than that, a lot of people have inconsistent incomes each month that are the result of many different things, from traffic to follower count and similar things which can greatly influence the amount of money a person can earn. So through keeping track of finances, finding certain inconsistencies, and spotting patterns are essential! Even if earning money on social media is just a profit on the side, it’s still worth it to put more effort in the long run!

Create better strategies

In order to create useful strategies, combining the past, present and possible future are key in order to see success. A lot of people who do work online, especially on social media have a hard time creating a business strategy, due to a lack of knowledge and resources. But keeping an income statement can truly help with this and just generally help business owners to make better financial decisions in the future! Since the individual is the boss but also the employee in this situation, building a strong financial strategy to fall back on is the way to go!

For legal reasons

As someone who earns money, having to pay tax is an essential thing that comes with it – a lot of people are switching to working online and through social media so it’s not so uncommon. The ongoing topic of influencers who are true tax-payers is neverending, but as someone who earns funds through it, proof of the amount of money earned is essential! This goes for anyone who is either doing it as a full-time job or a hobby, having income statements for future taxing is a must! Depending on the type of business and the amount of money, the taxes and laws will apply differently – so make sure to check that out beforehand, while having an income statement regardless!

Proof of success

If there is anything that can measure someone’s success, their financial gain is certainly one of them! As someone who works as a one-man company, it’s important to have certain proof of prior success, especially when seeking sponsors or potential collaborators. Most people who work through social media draw their financial gains from ads and product placements, but some strive to work with other people and collaborate with them. An income statement is like an ID or a passport, it shows who you are and where you’ve been, so it’s definitely good to have to lie around! The bottom line is, having this kind of proof is great for the achievement value but it can also open other doors as well!

At the end of the day, having an income statement serves many purposes, it certainly brings more good than anything! It might seem redundant for people who are their own bosses, but it’ll actually help with many things that come with earning through social media! Many people end up losing their success and not turning it into something profitable with simple mistakes, this way you’re able to keep track of your money and plan future endeavors while following the law!

About the Author

Christie Ferr is a freelance writer that specializes in topics about technology.  She is an alumna of the University of Pennsylvania and currently a resident of San Francisco.