Every business needs an accounting system. It is the means by which the owner controls the cost and manages the business income. Careful recording of financial transactions is key to growing your business. Amazon FBA accounting is all you need to carefully track and trace your business transactions.
What is Amazon Bookkeeping?
Amazon FBA bookkeeping systematically records all the accounting transactions that sellers need to keep track of their sales, invoicing, and inventory. The Amazon FBA bookkeeping software includes:
- Accounts Receivables – keep track of what your customers owe. Your accounts receivables help you to keep track of who owns what. This is vital information for cash flow management
- Accounts Payable – record what you owe your suppliers. It will help you to track when payments are due and make sure that you pay on time to receive settlement discounts where they exist
- Purchases – all your business purchases should go through your Amazon bookkeeping system. It’s essential to understand your expenses so that you know what price you need for your products
- Inventory – inventory management is at the heart of any business. You have to know what stock you’re holding and have access to information on sales, especially where there is a seasonal trend. Without this data, you could miss out on sales
- Sales – you’re in the business to sell so this information is vital. Sales data will help you to make the right business decisions. Bookkeeping for Amazon sellers will keep you abreast of all your sales data
- Payroll – if you have employees, the payroll will help you to keep track of all personnel costs.
With all your transactions tracked through Amazon FBA accounting, you can run your monthly income statements, cash flow statements, and balance sheets to see how business is tracking. You can also use history to make informed budgets and forecasts.
Why Bookkeeping is Essential for Amazon Sellers?
Every business needs a reliable bookkeeping system. How else will you track your sales and expenses? How will you know if you’re making a profit unless you can run reports that show how the business is tracking on a day-to-day basis?
Accounting for Amazon FBA will give you the financial transparency you need to grow your business.
1. To Grow Businesses Profitability
When you have access to data on the products that you’re selling you get a clear picture of what products are the most popular and which make the most profit. You can use the information to grow your business.
Accurate information helps you to make better decisions like when to employ people, when to make a loan or when to change direction. You can use the information from your Amazon FBA bookkeeping software to run scenarios and evaluate the outcomes of various decisions.
2. For Correct TAX Calculations
Business owners must file tax returns every year. If you’re not organized this can be very stressful and time-consuming.
If everything is systematically recorded, you can hand your general ledger to your accountant rather than having to scratch through drawers and boxes to find the relevant documentation. If the receiver chooses to audit your books, you’ll need detailed records of your transaction.
Your Amazon bookkeeping system will ensure that you’re ready for the tax man.
3. For Financial Standing of the Business
You can only know how your business is doing financially if you’re keeping records. Keeping things current also means that you can deal with problems and discrepancies as they occur. You also need to fully understand the cost of goods sold for each product and track its profitability.
Unless you do, you could find yourself with a lot of slow-moving stock. Slow-moving stock ties up money that you could spend more profitably. Use your accounting for Amazon FBA to manage your inventory and improve the financial standing of your business.
4. Cash Flow Forecast Creation
Many good businesses go under because they lack the cash to grow their business.
There will be a time when you need to stock up on inventory to make the best of seasonal sales. If you can plan ahead, and see the cash flow problems before they arise, you can make a plan. You could make a loan, ask your suppliers for extended terms or delay a big investment.
Your Amazon bookkeeping system will provide you with the information that you need to make decisions ahead of time.
5. To Deal with Financial Institutions
Most businesses need a loan sometime. If you have to approach a financial institution for assistance at any time, they’ll want assurance that you can meet your repayment obligations. They will want a current balance sheet, income statement, and cash flow projection.
They may also ask for a forecast of future income and expenditure. Unless you have kept track of current income and expenditure, this will be very difficult to do.
With Amazon FBA bookkeeping software you can quickly provide the financial institutions with all the financial reports they need, making it easier for you to qualify for a loan when you need it.
6. Compliance With Tax and other Deduction Laws
Depending on where you sell, at the very least, you’ll have to make monthly VAT or GST payments. You need detailed records to submit these payments.
Customs duties may also apply and if you qualify for any rebates, you’ll have to supply evidence of this.
Amazon FBA Bookkeeping Tips & Tricks
Even if you already use Amazon FBA bookkeeping to manage your accounts, here are some tips on how to run the accounts.
1. Just Have Bookkeeping
Many sellers don’t have a bookkeeping system at all.
This means that they have no factual basis for their day-to-day and long-term business decisions. Until you understand your income flows and costs, you can’t make sound business decisions on what products you should include and what you should discontinue.
A full understanding of your expenses also means that you will know where you can gain the most from cost-cutting exercises.
Unless you keep track of your expenses, you’re probably paying too much tax. Bookkeeping for Amazon sellers is an indispensable tool to optimize and grow your Amazon selling business.
2. Best Done on Accrual Basis
Every good accountant knows the rule of accrual. You should account for your costs in the same month that you make the sale. Some sellers record money in and out of the bank, thinking that’s good enough.
What about the inventory that you have just bought and paid for?
Most of it is still in your warehouse. Since it hasn’t been sold, it’s an asset and should appear on your balance sheet.
Your books should show the cost of goods sold released from inventory in the month that you sell the product, along with the Amazon fees. If Amazon only pays you the month after you have sold the goods, the owed amount will also appear as an asset on your balance sheet, because the money has already been earned.
The accrual system is the only way to accurately trace your profits and expenses and differentiate the good months from the bad.
3. Run Your Ad Spends Through Your Credit Card
If you’re running your ads through Amazon as a large number of sellers do, you can choose to pay for ads in one of two ways. Amazon can take the money from your deposit, or you could pay it with your credit card. We recommend that you use the latter option. If you don’t already have a credit card, apply for one with a good rewards program.
The ad expense remains unchanged. When you receive your deposit back, you pay your credit card, and you earn the rewards or cashback.
4. Use Automated Accounting Solutions
When you automate your accounting systems, you’ll have more time to run your business. Accounts automation reduces the time taken to update your financials. It also takes out the human element, along with the possibility of delays and mistakes.
This means that you can settle your accounts on time and keep track of what you’re owed.
5. Create Up to Date Charts of Accounts
If you’re serious about your business, you’ll want regular updates on business performance. With a formalized accounting system, you can run an up-to-date chart of accounts whenever you need it.
This will allow you to track expenses so that you can take action to cut costs, if necessary. With Amazon FBA bookkeeping you can check your charts of accounts at any time through the month.
6. Track Cost of Goods Sold (COGS)
As a seller, you need a way to track the costs of all your products. The cost of goods sold defines all direct costs related to the product or service you sell.
COGS includes direct materials and supplies, production costs like utilities, and direct labor. These costs inform pricing decisions, so it is crucial that you keep an accurate record of your current COGS.
Amazon FBA accounting will ensure that your COGS remains relevant.
7. Maintain Separate Personal & Business Accounts
You and your business are separate entities, and you should have separate bank accounts. If you’re taking a salary from your business, it should be paid into your personal account.
Unless you keep a separate business account, it may be hard to distinguish between what you can spend on yourself and what funds are available for growing your business. It is also more professional to run a business account, which may offer you tools and services not available on personal banking accounts.
You’ll also find it much easier to submit your tax return if your accounts are kept separate.
8. Small but Regular Checks of Financial Statements
Small regular checks of your financial statements ensure that you’re in touch with your business financials. It allows you to make early interventions when things start to go astray.
When your business is still small and growing, this may seem unnecessary. Still, as the number of transactions starts to grow, you don’t want to lose track of your income and expenditure.
9. Maintain Inventory Event Detail Report
Amazon’s inventory event detail report is an invaluable tool. It shows all the inventory movements by SKU and fulfillment center, essential information for forward planning of inventory.
If you run out of stock on Amazon, there is no way to recover the lost sales. Your customers will find a similar product with one of your competitors.
Understand your stock movements and you can prevent stock shortages and expensive excess inventory.
10. Use Cloud Accounting Platform
The future lies in cloud software. When you run your books on a Cloud accounting platform, you can access your data, wherever you are, at any time of the day or night.
When you’re in the cloud you don’t have to worry about whether your records have been backed up. You can rest assured that your key financial data is securely managed.
As if that’s not enough…
Our partner Margin Business is helping Amazon sellers in the UK, Europe, UAE, and globally to supercharge their e-commerce business with the powerful Amazon Listing Optimization & Localization Services.
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
After reading this article, you may wonder how you have managed to run your business without accounting for Amazon FBA.
Amazon FBA bookkeeping is a vital tool. It allows you to manage your costs, price products appropriately, ensure adequate cash flow, and grow your business.
Get your business in order and transaction online with bookkeeping for Amazon sellers.