Amazon accounting can be tricky- especially if you’re a new seller. In this blog post, we will explore everything you need to know about Amazon accounting- from the basics to more complex concepts. By the end of this guide, you will be an expert on all things Amazon accounting!
Getting Set Up: Where to Begin
If you’re new to Amazon accounting, it can be tough to know where to start. This guide will walk you through the basics of setting up your Amazon accounting so that you can get a handle on your finances and make smart decisions for your business.
The first step is to choose accounting software that will work for you. There are a few different options out there, so take some time to research and find one that fits your needs. Once you have your software set up, you’ll need to input all of your financial data. This includes information on your sales, expenses, inventory, etc.
Once you have all of your data entered into the system, it’s time to start tracking your progress. You’ll want to keep an eye on your sales numbers so that you can see how well your business is doing. Additionally, you’ll need to track your expenses so that you can keep them in check. By staying on top of your finances, you’ll be able to make sound decisions for your business and ensure its long-term success.
Why is Accurate Amazon Accounting Important?
As an Amazon seller, it is important to have accurate accounting in order to make well-informed business decisions. Good accounting practices will help you track your sales and expenses, understand your profitability, and make tax time a breeze.
There are a few key reasons why accurate Amazon accounting is so important:
1. You need to know your profitability.
If you don’t know how much profit you’re making (or losing) on each sale, you won’t be able to make informed business decisions about pricing, product selection, ad spending, etc. Accurate accounting will help you understand your margins so you can make smart decisions about where to invest your time and money.
2. You need to track your expenses.
From inventory costs to shipping fees to advertising spending, there are a lot of expenses that go into selling on Amazon. If you don’t track these expenses carefully, it will be very difficult to manage your cash flow and keep your business profitable.
3. You need to stay organized for tax time.
Good record-keeping is essential for tax time. If you don’t have accurate records of your income and expenses, you could end up paying more taxes than you owe or missing out on valuable deductions.
4. You need to make informed decisions about growth.
If you’re thinking about expanding your Amazon business, accurate accounting is essential. You’ll need to understand your current profitability and cash flow in order to make smart decisions about where to invest your time and money.
5. You need to protect your business.
If you ever get audited by the IRS or Amazon, accurate records will be essential in proving your case. Good accounting practices will help you avoid costly mistakes that could jeopardize the future of your business.
Things You Need to Know About Amazon Accounting for Sellers
As an Amazon seller, it is important to understand the company’s accounting policies and procedures. This will ensure that you are correctly reporting your income and expenses and paying the appropriate taxes.
There are a few key things you need to know about Amazon accounting:
- Amazon uses the accrual method of accounting, which means that revenue is recognized when earned, not when received. This can create a timing difference between when you make a sale and when you actually receive payment from Amazon.
- Amazon deducts various fees from your sales proceeds, including commissions, shipping charges, and referral fees. You will need to account for these deductions when calculating your net income.
- Sales tax is typically collected by Amazon on behalf of the seller. However, in some states, sellers are required to collect and remit sales tax themselves. Be sure to check the requirements in your state before selling on Amazon.
- Accounting for inventory can be tricky when selling on Amazon. If you use the Fulfillment by Amazon (FBA) service, inventory is considered sold as soon as it is shipped to Amazon’s warehouse. If you are selling products yourself (not using FBA), then inventory is only considered sold once it is delivered to the customer. In either case, you will need to track your inventory levels carefully to ensure accuracy in your financial reports.
- Amazon provides monthly reports detailing your sales activity, including revenue, commissions, and fees charged. You can use these reports to track your progress and performance over time.
Keep these things in mind when preparing your financial reports, and you’ll be on your way to a successful Amazon business!
How do I record the costs of goods sold and inventory?
Assuming you are using accounting software, there are generally two ways to approach recording the cost of goods sold (COGS) and inventory. The first method is to record COGS as an expense when inventory is sold. To do this, you would set up your inventory items in the software with their respective costs. When you sell an item, the software will automatically deduct the cost of that item from your inventory balance and record it as an expense.
The second method is to track inventory levels and values on a periodic basis (monthly or quarterly). In this case, you would not enter costs for each individual item but rather total up the value of all remaining inventory on hand at the end of each period. The COGS for that period would then be calculated as the difference between the ending inventory balance and the beginning balance, plus any purchases made during that period.
What is tax compliance?
When it comes to taxes, there are a lot of rules and regulations that businesses have to follow. Tax compliance is the process of making sure that your business is following all of the tax laws and regulations that apply to it. This can include things like filing your taxes on time, paying your taxes owed, and keeping accurate records of your income and expenses.
Following the tax laws can be complicated, but it’s important to make sure that you do it right. If you don’t comply with the tax laws, you could face penalties from the government, including fines and interest charges. You might also have to pay back taxes that you owe, plus any interest and penalties. In some cases, you could even be subject to criminal charges.
So what do you need to do to make sure your business is complying with the tax laws? First, you need to understand what the tax laws are and how they apply to your business. You can find this information on the IRS website or by talking to a tax professional. Once you know what the rules are, you need to make sure that you’re following them. This means keeping accurate records of your income and expenses, filing your taxes on time, and paying any taxes owed.
If you’re not sure whether you’re doing everything right, it’s a good idea to talk to a tax professional or accountant. They can help you make sure that you’re following all the rules and help you fix any mistakes that you might have made.
Accounting Tips and Tricks
As an Amazon seller, it is important to keep track of your finances and stay on top of your accounting. Here are some tips and tricks to help you with your Amazon accounting:
- Keep track of your inventory. It is important to know how much inventory you have on hand at all times. This will help you keep track of your expenses and income.
- Stay organized. Organize your finances so that you can easily track your expenses and income. This will help you make better decisions about your business.
- Use software to help with your accounting. There are many software programs available that can help you with tracking your inventory, expenses, and income. Choose a program that fits your needs and budget.
- Hire an accountant. If you are not comfortable doing your own accounting, consider hiring an accountant to do it for you. This will ensure that all of your financial records are accurate and up-to-date.
- Stay on top of your taxes. Amazon sellers are required to pay taxes on their income. Be sure to set aside money each month to pay your taxes.
- Keep good records. Good records will help you in case of an audit. Be sure to keep all receipts and documentation for your expenses and income.
- Plan for the future. As your business grows, you will need to reinvest some of your profits back into the business. This will help you expand your business and take it to the next level.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
- Monthly Finance Meeting Agenda
- 9 Steps to Master Your Ecommerce Bookkeeping Checklist
- The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
- What Is a Profit and Loss Statement?
- How to Read & Interpret a Cash Flow Statement
- How to Read a Balance Sheet & Truly Understand It
Final Thoughts on Amazon Accounting
If you’re an Amazon seller, then it’s important to understand the basics of Amazon accounting. This guide will give you a rundown of everything you need to know, from how to keep track of your sales and expenses to how to file your taxes. By understanding the ins and outs of Amazon accounting, you’ll be able to keep on top of your finances and run your business more efficiently.