As an Amazon Seller, you almost have no choicebut to turn to third-party platforms to handle your bookkeeping and accountingneeds. Though Amazon does offers a multitude of reports, no single report providesa complete picture of your business finances. In fact, many sellers complainthat the data provided in Amazon’s reports seemingly have discrepancies betweeneach other. So, if you’re selling on Amazon, you’ll need to understand thebasics of Amazon Seller bookkeeping and accounting to manage your eCommercefinances.
But what does Amazon Seller accounting entail?Is Amazon Seller Central a reliable source for seller’s data? What’s thefastest way to sync Amazon to QuickBooks? Is there an Amazon to QuickBooksintegration tool? Finally, what is the best way to manage all of your Amazonbookkeeping and accounting needs all in one place?
In today’s guide, we will answer all of thesequestions and more, but first, let’s examine what “Amazon Seller accounting”really means:
Amazon Seller accounting simply refers to trackingand recording the financial transactions of an Amazon Seller account. Foraccurate reports, this accounting should factor in all types of transactions,including regular sales, purchases, shipping charges, seller fees, andadvertising costs (just to name a few). Without comprehensive accounting toolsthat sync directly with your Amazon Seller account, you won’t be able tocalculate profits and determine the long-term viability of your eCommercebusiness.
You might think that accounting andbookkeeping are the same for an Amazon Seller as they would be for any othereCommerce business. For example, does Amazon FBA accounting differ at all fromShopify accounting? The answer is yes, it does. Contrary to popular belief, youcan’t just apply standard accounting practices to a business on Amazon and hopefor the best. Here are a few of the most important ways that bookkeeping isdifferent for Amazon Sellers:
Most eCommerce businesses can rely on cashbasis accounting with few (if any) problems. In other words, revenue andexpenses are calculated at the time that you receive payment. This works prettywell for businesses that depend on drop shipping and do not have to storeinventory, but it is not as good for Amazon Sellers. Why? Because you will havecertain periods when it seems as though you’re making more or less than youreally are.
For example, let’s say that you buy $1,000worth of merchandise in January and sell all of it before the start ofFebruary. However, you don’t actually receive the payments for the sales of themerchandise until February. You also don’t make any new purchases in the monthof February. Using cash basis accounting, it will seem as though February was amuch better month because you received payments and didn’t purchase anymerchandise. This means that cash basis accounting simply doesn’t work well forAmazon Sellers, as you often have weeks between the moment a product ispurchased and the time you actually receive payment for it.
Alternatively, accrual basis accountingrecognizes revenue and expenses at the moment they are generated. This meansthat you can get a more accurate picture of how much you’re earning (andspending) on a weekly or monthly basis, even if you don’t have the cash in handyet.
Landed cost is an important metric for mosteCommerce businesses, but it is particularly crucial for Amazon Sellers. Landedcost represents the total amount you have to spend on each product from thetime you produce or acquire a unit until the moment it arrives at itsdestination. Some selling platforms have very simplified fee and pricingstructures, but Amazon is not one of them.
With varying fee structures and shipping costson each and every sale, you’ll need to accurately calculate landed cost toactually see how much you're earning. Since landed cost can be complex andinclude dozens of different expenses, it is best to use software like ConnectBooksto automatically calculate the landed cost for you.
As an Amazon Seller, you probably already knowthat 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 yoursales in the United States to your sales in the United Kingdom. Naturally, thiscomplicates the accounting process, which is why it is so important todelineate 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 AmazonSellers, you have two or more sales channels that have their own respectivecost of goods sold (COGS), fees, and shipping costs.
Once you know what fees to expect from Amazon,you can do a better job of tracking your eCommerce finances. Here are some ofthe most common fees and charges applied to Amazon Sellers:
● Referral Fee - The Referral Fee is the primaryfee that Amazon charges to all third-party sellers in exchange for using theplatform. This fee is charged as a percentage of your sales, with the exactpercentage varying based on the type of products you sell.
● FBA Fee - This fee is charged if you storeproducts in an Amazon warehouse.
● Closing Fees - Both Variable and Fixed ClosingFees are additional Referral Fees that Amazon charges for media items likevideo games, books, and movies.
● Fee Adjustment - If Amazon does not charge youthe right amount initially, they will charge a Fee Adjustment to correct theerror.
● Sales Tax Service Fee - When Amazon collectssales tax on your behalf, they will charge you a percentage of the collectedamount.
● FBA Inbound Transportation Fee - This is thefee you must pay to have products shipped to Amazon for fulfillment.
● FBA Removal Fees - If you have inventory thatis not selling and you want to remove it from Amazon’s FBA warehouse, you willbe charged a removal fee.
This is not a comprehensive list of every feethat Amazon charges, but the items above are some of the most common fees youwill need to pay. Amazon can also complicate fee calculations by charging andthen remitting fees (like shipping chargebacks). So, in addition to the feesoutlined above, you’ll also need to account for other fees that are refunded toyou when handling your Amazon Seller bookkeeping. This is part of the reason whyrelying on Amazon Seller Central is not enough to manage all of your eCommerceaccounting needs.
If you’re looking for all-in-one Amazon Selleraccounting services, you should opt for ConnectBooks. ConnectBooks syncs all of yourselling channels and greatly simplifies bookkeeping for Amazon Sellers. WithConnectBooks, you can take advantage of all of the following benefits:
● Amazon QuickBooks integration
● Automatic landed cost calculations
● Comprehensive financial reports
● Inventory tracking
● Automatic data syncing betweenmultiple sales channels
Are youin need of comprehensive solutions for Amazon Seller accounting? Do you want tolearn more about managing all of your eCommerce channels in one place? If so,reach out to the experts at ConnectBooks for more information!
