For many Amazon sellers, achieving the sought-after financial clarity is easier said than done. With so many transactions, fees, and costs to manage, it’s easy to get lost in the numbers.
Bookkeeping solves many of these issues. However, not all bookkeeping systems are created equally.
In this article, we’ll review the top choices for Amazon bookkeeping, various bookkeeping methods, and more.
If you’re looking for a solution to simplify the bookkeeping process, partner with EcomBalance!
Our team leverages 15+ years of experience in the competitive Amazon marketplace to provide customized bookkeeping solutions that suit your eCommerce business.
That way, you can focus on scaling your business while we take care of your bookkeeping needs.
Request a callback with our team to start streamlining your finances!
What is Amazon Bookkeeping? And Why Is It Important for Amazon Sellers?
Amazon bookkeeping is the process of tracking your sales and expenses to create an accurate picture of your Amazon business’s financial health.
For Amazon sellers, bookkeeping is important because it keeps their business’s financial transactions organized.
Bookkeeping for Amazon business offers several advantages, such as:
- It reduces the risk of tax audits and penalties.
- Separate your business finances and personal finances.
- Ensure your reconciliation is error-free.
If you are skilled in the field of accounting, you can manage Amazon bookkeeping yourself. Else you can hire an Amazon accountant to handle it for you. If you’re doing it by yourself, you can use Amazon bookkeeping software to help you handle it.
Amazon Bookkeeping vs. Accounting
Amazon bookkeeping and accounting are two terms that are often interchanged. Though both share similarities, there are a few differences you must be aware of:
| Category | Accounting | Bookkeeping |
| Definition | Analyzing, interpreting financial data for business insights | Recording daily transactions, like purchases and sales |
| Main Focus | Providing financial analysis based on available data | Maintaining accurate and organized financial records |
| Role in Amazon Business | Helps improve profitability, long-term planning, and optimizing taxes | Tracks Amazon fees, sales, purchases, etc. |
| Reports Generated | Balance sheets, P&L statements, cash flow analysis | Transaction logs, categorized receipts, etc. |
| Tools Used | Tax planning tools, financial management software | Amazon transaction logs, expense tracking software |
| Professionals Involved | CPAs, financial analysts | Bookkeepers, clerks |
| Required Expertise | Advanced financial analysis | Basic financial management knowledge |
| Complexity | Involves complex financial analysis | Relatively straightforward and monotonous |
Best Amazon Bookkeeping Software
There are many great bookkeeping software that can make bookkeeping for Amazon sellers easier. However, Amazon sellers need to choose a software that fits their particular bookkeeping requirements.
Some of the top-rated Amazon bookkeeping software include.
Quickbooks Bookkeeping
QuickBooks, through QuickBooks Live Bookkeeping, offers real-time support through certified QuickBooks Pro Advisors. The tool assists Amazon business owners who need hands-on help without committing to a full-time bookkeeper.
Services include setting up new books, cleaning up new books, and monthly bookkeeping, with pricing based on monthly expenses. This ranges between $200 to $400 a month.
Though the tool ensures tax-ready books, it’s not without its shortcomings. QuickBooks Live will not handle invoicing, e-commerce inventory management, or financial advisory services.
Note that even though QuickBooks certifies their bookkeepers, there is no guarantee that the professionals may have the in-depth accounting knowledge you need for your Amazon business, as they may simply just know how to use QuickBooks.
Xero Bookkeeping
A noteworthy option making it to our list is Xero, and for various reasons at that. First, it’s an affordable, cloud-based accounting software that integrates with over 1,000 apps. Beginners shouldn’t worry too much about the technicalities, as Xero offers a user-friendly platform. Plus, it also allows unlimited users across all pricing plans.
Xero’s main features include automated bill and receipt capture through Hubdoc, basic inventory tracking, project tracking, and advanced analytics. You gain more access to Xero’s features the more advanced the plan you avail.
Given Xero’s flexible and easy-to-use accounting platform, it’s a great choice for growing businesses. However, if your business is more complex, you’ll need to avail yourself of their higher-tier plans to make the most of Xero’s bookkeeping services.
Wave Bookkeeping
Amazon sellers looking for a free option can consider using Wave — a cloud-based accounting software that helps you accomplish basic accounting tasks including bookkeeping, invoicing, and expense tracking. Wave also has a mobile app that allows users to manage invoices on the go.
Many users have reported its ease of use, especially when setting up. This makes it an appealing option for budding Amazon entrepreneurs, especially for those seeking an affordable solution and without deep accounting experience.
Of course, you can’t expect advanced features to come with the basic plan — a plan only available to a single user. The Pro Plan, which starts at $16 per month, offers more customization features than that in the free plan. Also, note that live chat and support are only available for the paid version.
Bench Bookkeeping
Bench is an online bookkeeping service that assigns dedicated in-house bookkeepers to manage your financials. Every month, the Bench team is responsible for categorizing transactions, reconciling bank accounts, and preparing financial statements.
The tool is ideal for businesses with basic financials but not suited for those needing to scale or switch providers, as it uses proprietary software incompatible with other accounting systems.
Bench’s pricing starts at $249 per month, making it a competitive bookkeeping choice in terms of price. It also provides a one-month free trial, unlimited in-app messaging, and calls with bookkeepers.
For businesses that are behind on their bookkeeping, Bench offers catch-up services at an additional cost. The default system uses cash-based counting, with accrual-based accounting costing sellers extra fees amounting to at least $100 a month.
A2X
A2X is an award-winning bookkeeping tool that integrates multiple eCommerce platforms, including Amazon, with software such as Xero, QuickBooks, and Sage. It banks on the power of automation when accurately transferring sales data, refunds, and fees from Amazon into your accounting system.
Because it relies heavily on automation, there is less of a need for sellers to get involved with manual data entry, which can sometimes lead to more errors. Also, automation helps keep your financial records precise and accurate.
A2X supports multichannel selling, unlike other bookkeeping tools, as it allows the integration of sales data from various platforms into a single accounting system. This can be particularly beneficial for sellers who do not want to limit themselves to the Amazon marketplace.
ConnectBooks
ConnectBooks is an accounting software designed for Amazon sellers, integrating seamlessly with QuickBooks to automate the bookkeeping process and improve financial management. It offers real-time synchronization of sales, fees, taxes, and shipping costs from Amazon to QuickBooks, providing 100% accuracy in data transfer.
The bookkeeping tool does this by reconciling each Amazon transaction to its corresponding marketplace payment. Also, the software extracts and analyzes data from marketplace reports by using advanced algorithms developed by bookkeepers to guarantee accuracy.
Aside from that, ConnectBooks provides fully customizable, real-time indicators that help businesses compare metrics like sales, profit margin, and ad spend across different time frames.
Accounting Methods for Amazon Bookkeeping
To track your Amazon sales, you can choose from the following accounting methods.
1. The Accrual Accounting
The first accounting method is accrual accounting. The accrual accounting method records revenue and expenses as they’re earned rather than when they’re paid. With this method, you will have an accurate view of revenue and expenses over time, eliminating the volatility of cash accounting.
Accrual accounting is a necessity for businesses with inventory. The accrual method will pair transactions when your customer’s payment does not clear until the beginning of the following month so that your monthly sales are more accurate and reliable. Those Amazon sellers who want more information about their business’ financial position may find this accounting method helpful.
2. The Cash Accounting
Cash-based accounting is often used by small businesses, but Amazon FBA sellers won’t benefit from it. Revenue and expenses are recognized in cash accounting only when the transactions occur, which can be problematic for businesses that accumulate inventory.
And that can especially confuse Amazon sellers.
Considering Amazon pays every two weeks, some months may look profitable, but those profits may not be a true reflection of the sales for that month. However, when you spend a lot of money restocking your merchandise in one month, that month will appear to be a loss.
6 Steps to Handle Your Amazon Seller Bookkeeping
By now, you know how important bookkeeping is to help your Amazon business run smoothly while making a profit. With the right approach, you can stay organized, track your financial standing, and simplify tax season.
Here are 6 simple steps to help you manage your books efficiently:
Step 1: Choose the Right Accounting Software
You should start your Amazon FBA bookkeeping by finding a cloud accounting software that is right for you. Using the best accounting software is easy. It runs reports quickly, improves e-commerce inventory management, and prevents mistakes. There are two types of accounting software, either single entry or double entry.
Single-entry accounting aims to write down all of your business’s transactions in a single ledger. While single-entry accounting is quick and easy, it doesn’t track liabilities or assets and can make mistakes. It also doesn’t provide much information about how your business is doing. It isn’t ideal for businesses with inventory.
In comparison, double-entry accounting is much more detailed. With this software, you can track the information you need for income statements, cash flow statements, and balance sheets. Double-entry accounting can also help you determine how much you’re making and keep track of the status of your Amazon business.
A double-entry accounting system is likely to be the best option for eCommerce accounting.
Step 2: Set up a Chart of Accounts
After that, you can create a chart of accounts for Amazon’s bookkeeping. Accounting lets you keep track of where your money comes from and where it goes. But for your books to stay organized, you’ll have to categorize transactions. First, decide which categories to use. And you will need a chart of accounts for this.
The chart of accounts is a way for your business to distinguish transactions by categorizing them. It provides a broad overview of all areas of your business that spend or make money.
A chart of accounts contains five accounts, which are:
- Assets – which also has sub-accounts: Cash, Savings account, Accounts receivable
- Liabilities – sub-accounts for liabilities include Payroll liabilities, Accounts payable, Accrued liabilities,
- Shareholder’s equity – sub-accounts: Retained earnings, Preferred stock, Common stock,
- Revenue
- Expenses
The chart of accounts is created by starting with your asset accounts. Then you need to set up your liabilities. Then you proceed to shareholders’ equity. After you list your assets, liabilities, and shareholder equity, you will list revenue and expenses. Your revenue and expenses correspond to your income statement.
Step 3: Keep Track of Your Cost of Goods Sold
Next is to keep track of the cost of goods sold (COGS). This will allow you to determine your gross profit. Keeping track of the Cost of Goods Sold (COGS) can be challenging. But understanding COGS is crucial for understanding your true profits. Your Cost of Goods Sold is the amount you spend on the goods you make or acquire.
COGS is calculated by adding the cost of the item or good you bought, as well as all the costs associated with bringing the item to market. The fees, shipping, purchase price, tariff and duty payments, etc., are all items on this list.
Here are three methods to track the cost of goods sold:
- Average Cost method: ACO tracks the average cost over time of each product. Using this option, you can track costs regardless of when they were purchased.
- FIFO: FIFO stands for First In, First Out. This method makes it easy to track which products are arriving first and at the lowest price so you can sell them first.
- LIFO: The term LIFO means last in, first out. Using this inventory method, you can keep track of the newest items you plan to sell first and for the highest price.
Step 4: Record Your Entries
Now that your system is up and running, it’s time to start using it.
Maintain regular records of every transaction that involves money. You may want to schedule a specific time each week to do this. To make Amazon FBA bookkeeping as fast and clean as possible every month, the organization is key.
Step 5: Figure Out How Much Storage You Need
The most important thing to consider regarding Amazon is your storage requirements. Inventory on Amazon is arranged on a first-in, first-out basis based on how long you intend to store your product.
You will be charged a different storage fee every month based on the products you sell and other factors, including:
- amount of daily items stored at Amazon Fulfillment per month.
- month in which the product was sold.
- Dimensions and volume of your product.
- Size tier of the product.
- Is your Amazon product classified as dangerous goods?
There is an additional fee if you plan to store your products for a longer period. For products stored in Amazon fulfilment centres for more than a year, the company charges long-term storage fees.
Monthly long-term storage fees are charged based on the amount or volume of the unit. Approximately $0.15 per cubic foot, or $6.90 per cubic foot, will cover the higher amount.
Step 6: Keep a Recordkeeping System
You will be able to track your transactions more effectively if you have a recordkeeping system and streamline it over time. Here are some tips for maintaining your records:
- Keep records of expenditures and revenue.
- Separate your personal expenses from your business expenses.
- Check your records regularly, ideally twice a month.
- Keep a record of your finances.
You can print four reports based on your financial transactions: a balance sheet, an income statement, an accounts payable report, and an account receivables aging report.
When is the Right Time to Outsource Bookkeeping for Amazon?
That will depend on the size of your eCommerce business.
The longer your business continues to grow, the more profits it will make, but the less free time you will have. Accurately managing your books is important. However, it is time-consuming. If you are too busy managing your Amazon business, possibly it is time to hire an Amazon bookkeeper and leave the task to him.
If you outsource your Amazon bookkeeping, you will have more time to focus on sourcing inventory, staying on top of Amazon trends, and growing your business!
How to Choose the Right Professional Bookkeeping Service
With plenty of bookkeeping services to choose from, picking the right one is a lot harder than it sounds. Several factors come into play — these are some factors to consider before finalizing your choice:
1. eCommerce Expertise
Choosing a professional bookkeeping service with a strong background in Amazon selling is a must, considering that eCommerce businesses operate in a high-stakes environment where minor financial mishaps can impact profitability.
These professionals must be well-versed in the dynamics of online selling; they need to understand various revenue streams, such as direct sales and Amazon FBA (Fulfillment by Amazon), as well as the nuances of Amazon’s fee structures, including referral fees, fulfillment fees, and advertising costs.
Working with the right experts ensures that your financial records accurately reflect your business’s performance and that you’re taking full advantage of available tax deductions.
2. Integration Capabilities
A seamless integration between your bookkeeping service and existing systems is required for efficiency. Choose a professional service that can connect easily with Amazon Seller Central, your accounting software, and any other tools you use for inventory management and sales tracking.
3. Reporting and Analytics
A significant part of effective bookkeeping is detailed financial reporting. The right service should provide insightful reports on major eCommerce metrics, like sales, ROI, or inventory turnover.
These reports must be easily understood so you can identify trends, monitor cash flow, and be informed about pricing and inventory decisions.
4. Scalability
As your Amazon business grows, your bookkeeping requirements will likely change as well. Some bookkeeping services are well-suited for smaller businesses with simpler financials. It’s wise to pick a bookkeeping service that offers scalable solutions.
This might include flexible packages that allow you to adjust your level of service based on transaction volume or the addition of new sales channels.
5. Customer Support
A bookkeeping service provider may have a powerful tool, but if the customer support is lackluster, you might have to think twice. You want a partner who is receptive to your inquiries and able to discuss any bookkeeping concerns you may have.
EcomBalance has these qualities, making it the ideal choice for Amazon sellers. Our in-depth expertise, easy integrations, and personalized bookkeeping solutions will keep you ahead in the world of eCommerce. Simplify your bookkeeping today with EcomBalance!
EcomBalance Is Here for You!
Being a successful small business owner means you can’t handle everything yourself. To succeed in your business, you must have reliable people and tools to track, store, analyze, and use your business finances. That being said, let EcomBalance help you!
EcomBalance is a reliable bookkeeping service for the eCommerce industry, including Amazon. We offer the best US-based bookkeeping services for growing eCommerce businesses. At EcomBalance, we’ll handle your AR and AP, pay vendor invoices, run payroll, etc. Just create a free account to contact us and get a specialized quote based on your additional requirements.
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About EcomBalance
EcomBalance is a monthly bookkeeping service for eCommerce companies. EcomBalance handles your bookkeeping and sends you a Profit and Loss Statement, Balance Sheet, and Cash Flow Statement by the 15th of each month. EcomBalance also has a sister company, AccountsBalance, that caters to agencies, software companies, coaches, and other online companies.
Frequently Asked Questions (FAQs)
Many sellers have asked us about bookkeeping and how it impacts their Amazon business. To help clarify these concerns, we’ve compiled a list of frequently asked questions:
What Are Common Bookkeeping Mistakes Amazon Sellers Make?
Amazon sellers make numerous bookkeeping mistakes. These are the ones you must watch out for:
- Failing to track all expenses.
- Combining personal and business finances.
- Inaccurate inventory tracking.
- Ignoring tax obligations.
- Inconsistent record keeping.
How Often Should I Update My Bookkeeping Records?
The frequency of updating bookkeeping records depends on the size and complexity of your Amazon business. Daily updates suit high-volume sellers, and weekly updates work for moderate sellers. For all sellers, monthly bookkeeping is good for generating reports and reconciling bank statements.
What Financial Reports Should Amazon Sellers Generate Regularly?
Amazon sellers should generate the following reports regularly to stay on top of their financials:
- P&L Statements
- Balance Sheets
- Cash Flow Statements
- Inventory Reports
- Sales Reports
Conclusion
Although bookkeeping might seem tedious, it’s an essential component of running an Amazon business. By implementing effective bookkeeping practices, you can gain a deeper awareness of your financial standing, make data-driven decisions, and ultimately rake in bigger profits.
Our team at EcomBalance holds over 15 years of bookkeeping expertise, and we know the ins and outs of the eCommerce industry because we started as sellers ourselves.
This background enables us to provide personalized bookkeeping solutions for your eCommerce business, ensuring your records remain accurate and up-to-date.
Get a personalized bookkeeping strategy with EcomBalance today!
