Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
You've just entered the e-commerce waters and saw a pool of options on selling platforms. Then, you spot one marketplace that stands out from the rest, and you think it would be great to make a serious profit there. That place is none other than Amazon, a widely recognized and leading e-commerce platform.
As exciting as it sounds, working on the financial aspect of your business on such a massive platform can be challenging. Amazon accounting has a complex system of fees. If you don't play by the rules, you're in some potential heap of trouble.
That's the last thing you want as a seller, so make time to familiarize yourself with the basics of accounting on Amazon. Look no further because we have outlined an essential guide just for you.
Why Accounting on Amazon Is More Challenging
E-commerce accounting is already a challenging task in itself regardless of the selling platform used. However, Amazon has its own “language” of working things out (other platforms have theirs too). Therefore, once you become part of it, you must understand how it operates and comply with the regulations.
Additionally, Amazon has a complex fee system. You have four primary costs to pay: account fees, sales fees, fulfillment costs, and extra expenses. Under each of them are more specific fees that vary depending on the plan you choose. For example, under account fees, you need to select between an individual or professional account. Each plan has a different set of charges.
If you're not savvy with fees, then you should learn how to be. Know what and why you're paying and how to minimize these costs as much as possible. Ensure that you're paying for marketing tools and opportunities that are useful to achieve your goals.
The Anatomy of Amazon Business Accounting for a Smooth Start
Now that you understand how crucial Amazon accounting is, learn what factors make it complete and ready for a smooth start.
1. Foundation Essentials: Accounting System and Software
Develop a good accounting system right from the start. You might think you should change it only when necessary, but it will be difficult for you in the long run. First, know that manual data entry is a risky option, even if it works for you in the first few months. Second, seek automation so that you can provide enough time for other business aspects.
Meanwhile, you have several options for accounting software. QuickBooks is a highly recommended tool, especially after its integration with Amazon. However, it won't hurt to pick a different one like Hubdoc or A2X. Just ensure that all of its features are helpful and get bookkeeping and accounting tasks done quickly and accurately.
2. Take Accounting Data to the Cloud
The next important factor is data accessibility. Before, people needed updated software and multiple accounts to access accounting information. Today, cloud-based technology allows you to skip this traditional data-saving method.
With cloud technology, you don't have to create many accounts and update or download software. With just one account, you can now access your books anywhere and anytime you want. Additionally, a cloud system has solid security features, so your valuable data is safe. It works best if you're handling massive amounts of data.
3. Create an Organized Business Plan
Before running the cloud-based and automated accounting software, create a plan for what you need and want to achieve. For example, what do you need to monitor in your Amazon accounting? What files do you need in your documentation?
This information can help you find business lapses, measure its progress over time, and plan your next strategies wisely. It gives you a deeper understanding of how Amazon works so that you can adjust to the system and make a smart way through it. Additionally, it keeps you organized to avoid losing sight of the bigger picture, especially when the nitty-gritty details start to demand attention.
4. Inventory, the Accounting Backbone
Inventory houses the items directly associated with profit and charges, making them a necessity in accounting for an online retail business. To maintain the accuracy of your stock, practice proper inventory management. Thanks to the automated software, doing that will be easier than before.
Still, do make a habit of checking the stored data whenever you get the chance. It's better to use the same accounting tool instead of using a different solution for each task, as it can increase the risks of data discrepancies. For example, if you're using QuickBooks, use only QuickBooks for all your bookkeeping and accounting tasks.
5. Tax Compliance
Who would want to be subjected to hefty fines or penalties because of failure in tax compliance? No one.
Since 2018, states have created their own rules for sales tax requirements for businesses. Even Amazon sellers who actively work on tax compliance find it stressful to monitor the different laws and consistently comply. What more if you choose to ignore them?
It's significant to stay updated on state and local tax systems to avoid facing terrible consequences. Seek help from a tax compliance company or an Amazon accounting analyst to help you prepare everything you need for tax season. Familiarize yourself with the different nexuses—economic, FBA, click-through, and physical presence—and analyze your sales tax exposure.
6. Sales Data
On Amazon, deposits usually appear in your bank account biweekly. These include FBA fees, warehouse fees, shipping fees, charge-backs, sales tax, and returns. An assigned person or team records them in your books, including every other activity from your Amazon seller account. As a result, the amount of data can be confusing and overwhelming.
Your automated accounting software can keep track of data pulled from Amazon's back end. Simply ensure that your seller account is connected to the software to automatically update your books as necessary.
7. Collaboration for Productivity
If all this information blows your mind, take a deep breath and know that you're not alone. Naturally, you won't have all the time in the world to do all of those tasks, especially if you're not an expert in the financial department. If you are the business owner, you have other things to do to keep the business running.
In that case, you can always seek the help of Amazon accounting analysis experts like Unloop. We will take the weight off your shoulders and take charge of these tasks. We provide cost-saving and high-quality services to keep the digits up to date, accurate, and helpful in your business growth.
Amazon Accounting Done Right with Unloop
Amazon offers many rewarding opportunities for businesses worth the long days and nights of your hard work. However, getting started with Amazon seller accounting isn't easy, especially if you're not knowledgeable about it yet. Moreover, it's a highly competitive marketplace, so you need to prioritize the most significant factors.
Accounting is one of these, but you don't want it to consume a lot of your time. In that case, let Unloop take care of your books. We offer bookkeeping, income tax, and sales tax services with our partner accounting firms. Additionally, we use QuickBooks Online and A2X Accounting (for inventory and cost of goods sold) in our bookkeeping services to maximize efficiency.
Get started with Unloop today and make it to Amazon from scratch to hatch!