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Amazon Seller Accounting Guide


February 23, 2023

Amazon Seller Accounting Guide

As an Amazon Seller, you almost have no choice but to turn to third-party platforms to handle your bookkeeping and accounting needs. Though Amazon does offers a multitude of reports, no single report provides a complete picture of your business finances. In fact, many sellers complain that the data provided in Amazon’s reports seemingly have discrepancies between each other. So, if you’re selling on Amazon, you’ll need to understand the basics of Amazon Seller bookkeeping and accounting to manage your eCommerce finances.

But what does Amazon Seller accounting entail? Is Amazon Seller Central a reliable source for seller’s data? What’s the fastest way to sync Amazon to QuickBooks? Is there an Amazon to Xero integration tool? Finally, what is the best way to manage all of your Amazon bookkeeping and accounting needs all in one place?

In today’s guide, we will answer all of these questions and more, but first, let’s examine what “Amazon Seller accounting” really means:

What Is Amazon Seller Accounting?

Amazon Seller accounting simply refers to tracking and recording the financial transactions of an Amazon Seller account. For accurate reports, this accounting should factor in all types of transactions, including regular sales, purchases, shipping charges, seller fees, and advertising costs (just to name a few). Without comprehensive accounting tools that sync directly with your Amazon Seller account, you won’t be able to calculate profits and determine the long-term viability of your eCommerce business.

How Amazon Bookkeeping Is Unique

You might think that accounting and bookkeeping are the same for an Amazon Seller as they would be for any other eCommerce business. For example, does Amazon FBA accounting differ at all from Shopify accounting? The answer is yes, it does. Contrary to popular belief, you can’t just apply standard accounting practices to a business on Amazon and hope for the best. Here are a few of the most important ways that bookkeeping is different for Amazon Sellers:

Accrual Basis Accounting

Most eCommerce businesses can rely on cash basis accounting with few (if any) problems. In other words, revenue and expenses are calculated at the time that you receive payment. This works pretty well for businesses that depend on drop shipping and do not have to store inventory, but it is not as good for Amazon Sellers. Why? Because you will have certain periods when it seems as though you’re making more or less than you really are.

For example, let’s say that you buy $1,000 worth of merchandise in January and sell all of it before the start of February. However, you don’t actually receive the payments for the sales of the merchandise until February. You also don’t make any new purchases in the month of February. Using cash basis accounting, it will seem as though February was a much better month because you received payments and didn’t purchase any merchandise. This means that cash basis accounting simply doesn’t work well for Amazon Sellers, as you often have weeks between the moment a product is purchased and the time you actually receive payment for it.

Alternatively, accrual basis accounting recognizes revenue and expenses at the moment they are generated. This means that you can get a more accurate picture of how much you’re earning (and spending) on a weekly or monthly basis, even if you don’t have the cash in hand yet.

Landed Cost

Landed cost is an important metric for most eCommerce businesses, but it is particularly crucial for Amazon Sellers. Landed cost represents the total amount you have to spend on each product from the time you produce or acquire a unit until the moment it arrives at its destination. Some selling platforms have very simplified fee and pricing structures, but Amazon is not one of them.

With varying fee structures and shipping costs on each and every sale, you’ll need to accurately calculate landed cost to actually see how much you're earning. Since landed cost can be complex and include dozens of different expenses, it is best to use software like ConnectBooks to automatically calculate the landed cost for you.

Foreign Markets

As an Amazon Seller, you probably already know that Amazon tracks sales from different markets in their own selling channels. For example, you may need to switch from Amazon US to Amazon UK to compare your sales in the United States to your sales in the United Kingdom. Naturally, this complicates the accounting process, which is why it is so important to delineate both sales and expenses by channel. If you only sell in one market, you don’t have to worry about this part, but if you’re like many Amazon Sellers, you have two or more sales channels that have their own respective cost of goods sold (COGS), fees, and shipping costs.

Understanding Amazon Seller Fees & How It Affects Accounting

Once you know what fees to expect from Amazon, you can do a better job of tracking your eCommerce finances. Here are some of the most common fees and charges applied to Amazon Sellers:

  • Referral Fee - The Referral Fee is the primary fee that Amazon charges to all third-party sellers in exchange for using the platform. This fee is charged as a percentage of your sales, with the exact percentage varying based on the type of products you sell.
  • FBA Fee - This fee is charged if you store products in an Amazon warehouse.
  • Closing Fees - Both Variable and Fixed Closing Fees are additional Referral Fees that Amazon charges for media items like video games, books, and movies.
  • Fee Adjustment - If Amazon does not charge you the right amount initially, they will charge a Fee Adjustment to correct the error.
  • Sales Tax Service Fee - When Amazon collects sales tax on your behalf, they will charge you a percentage of the collected amount.
  • FBA Inbound Transportation Fee - This is the fee you must pay to have products shipped to Amazon for fulfillment.
  • FBA Removal Fees - If you have inventory that is not selling and you want to remove it from Amazon’s FBA warehouse, you will be charged a removal fee.

This is not a comprehensive list of every fee that Amazon charges, but the items above are some of the most common fees you will need to pay. Amazon can also complicate fee calculations by charging and then remitting fees (like shipping chargebacks). So, in addition to the fees outlined above, you’ll also need to account for other fees that are refunded to you when handling your Amazon Seller bookkeeping. This is part of the reason why relying on Amazon Seller Central is not enough to manage all of your eCommerce accounting needs.

Using Amazon Seller Accounting Software To Streamline Your Bookkeeping

If you’re looking for all-in-one Amazon Seller accounting services, you should opt for ConnectBooks. ConnectBooks syncs all of your selling channels and greatly simplifies bookkeeping for Amazon Sellers. With ConnectBooks, you can take advantage of all of the following benefits:

  • Amazon QuickBooks integration
  • Amazon to Xero integration
  • Automatic landed cost calculations
  • Comprehensive financial reports
  • Inventory tracking
  • Automatic data syncing between multiple sales channels

Are you in need of comprehensive solutions for Amazon Seller accounting? Do you want to learn more about managing all of your eCommerce channels in one place? If so, reach out to the experts at ConnectBooks for more information!