How to Pay Affiliate Marketers [11 Methods & Payment Types]

When brands enter into a partnership with an affiliate marketer, many tend forget one thing

Paying out their affiliates on time.

This can lead to tough conversations with affiliates, a lack of trust, and in the worst case scenario–the affiliate removes your offer from their active campaigns.

Affiliates run a business, and if it’s one thing I’ve learned running a business myself…

Cash flow is so important to the life of a business.

Luckily, this can all be easily avoided with the proper procedures and technology in place.

Below, we’ll share the different methods of payment options, structures, software and payment gateways that will help you stay on top of timely payments.

Let’s begin.

What’s an Affiliate Payment?

An affiliate payment is compensation paid to an affiliate for promoting a product, service, or website.

This promotional activity is typically part of an affiliate marketing program, where individuals or companies (the affiliates) promote a product or service on behalf of another company (the merchant or advertiser) in exchange for a commission.

How to Pay Affiliate Marketers on Time

1. Set up your affiliate agreement.

Before any form of payment is made to an affiliate partner, I’d recommend having your affiliate agreement reflect exactly how your affiliates will be paid.

You want to align your agreement with your company's financial policies, operational capabilities, and strategic goals.

This means clearly defining the following:

• Commission structure
• Payment thresholds
• Payment frequency
• and any potential deductions or fees that might be incurred.

When you do this, both parties will understand the payment terms and avoid problems later.

The agreement should also mention the best ways to pay, such as PayPal, bank transfers, checks, eWallets, or other platforms.

It's important to include a section on currency considerations, especially when working with international affiliates. We need to know who is responsible for currency conversion fees and how exchange rates will be decided.

Additionally, the affiliate agreement should address tax considerations. In some places, tax documents may be required from affiliates, so it's important to clearly state these rules.

Lastly, always include a clause about payment discrepancies. Clearly state the process an affiliate should follow if they believe there's an error in their payment, and outline the timeframe within which they must raise any concerns.

2. Set up a Payment Schedule.

When determining a consistent payment cycle, consider both your company’s cash flow and what's attractive to affiliates.

Whether it’s monthly, bi-weekly, or another frequency, consistency is key.

This not only aids in financial planning but also establishes trust. Informing affiliates in advance about payment dates ensures they have clear expectations.

3. Calculate Earnings.

Accurately tracking the performance metrics related to each affiliate is paramount.

If you have affiliate management software or use an affiliate network, it can automate this task. Make sure there is a clear explanation of how earnings are calculated. This includes clicks, leads, sales, and other measurements.

4. Verify Payment Thresholds (if any):

Setting a minimum earning threshold before payout can be helpful for administrative reasons, but it's vital to strike a balance.

Set it too high, and you risk demotivating new or smaller affiliates. Make sure to clearly communicate this threshold in advance and ensure that affiliates can easily check their current earnings.

If you use an affiliate network, they usually take care of the minimum payment threshold. The affiliate can easily change it afterwards.

5. Gather Payment Information:

Requesting detailed payment information is crucial, but so is ensuring its security.

Establish a secure method for affiliates to submit their payment details. Regularly update and verify this information to prevent potential payment issues.

6. Handle Tax Documentation:

Especially relevant for international operations, ensure you're compliant with tax regulations in both your home country and in the countries where your affiliates are based.

Clearly communicate what tax-related documents affiliates need to provide and offer guidance on how to fill them out if necessary.

Here are some of the basic forms needed before payment can be processed:

• W-9 Form (for U.S. based affiliates): This form is used to request the taxpayer identification number (TIN) of a U.S. person, including a resident alien. The affiliate needs to fill out this form if they are a U.S. person.
• W-8 Series Forms (for non-U.S. based affiliates): These forms are used by non-U.S. persons to certify their foreign status and claim any applicable treaty benefits.
• Form 1099-NEC: Starting from 2020, businesses in the U.S. use this form to report non-employee compensation, which includes affiliate commissions.

7. Process Payments:

A streamlined and efficient payment process is vital.

Notice how in the example below, ShareASale ensures payments are made every month? It builds trust with the network, and the affiliates don’t need to go chasing down overdue payments.

Consider automating payments where possible to reduce manual errors. Ensure that the payment method chosen by the affiliate is available and that payments are made promptly to maintain trust.

If you’re not using an affiliate network, but instead an affiliate software, you can still automate this with rules based payouts in the portal. 

Take for example the Reditus affiliate software I’ve been checking out below.

8. Send Payment Confirmation:

A simple step, yet critical for transparency.

Once payment is processed, promptly notify the affiliate with a detailed breakdown. This acts as a receipt and offers clarity on any deductions, bonuses, or other variations from the expected amount.

9. Handle Payment Discrepancies:

Despite best efforts, discrepancies can arise.

Create a clear and straightforward process for affiliates to report perceived payment errors. 

Address these concerns promptly and transparently, always keeping open lines of communication.

10. Maintain Payment Records:

Beyond being a good business practice, maintaining detailed and secure records of all affiliate payments is essential for tax purposes and potential audits.

It also aids in resolving any payment disputes that may arise in the future.

Typically, your affiliate software or network will have all of this information on file, so it’s much easier to keep track of.

We also recommend that you provide your accounting team access to the affiliate payment portal as well.

11. Review and Optimize Payment Process:

As with any business process, regular reviews are crucial.

Seek feedback from affiliates on the payment process, and be ready to make adjustments as the business grows or as technological and financial landscapes evolve.

Wrapping up our Steps to Paying Affiliates

So there you have it!

Short, sweet, and to the point.

Paying out affiliate partners shouldn’t be considered a complicated process.

There are so many tools, affiliate software and networks to help process these payments automatically, so your affiliates should always be paid out on time and accurately.

Ultimately, when affiliates are compensated promptly and accurately, it paves the way for a trusting and fruitful partnership that benefits both parties.

Ensure you stay updated with the latest trends and regulations, and always prioritize the satisfaction of your affiliates, as they are pivotal in driving growth for your business.

Until next time.