One of the services offered by the eCommerce giant Amazon that can bring many benefits to your business is the Fulfillment by Amazon (FBA), which both sellers and buyers patronize. For sellers, it is a venue for their products to be stored, as well as a way to send orders to customers anytime. For buyers, FBA is a reliable and credible method of getting their orders because they can rely on 24/7 customer service if they have any inquiries.
If you are starting your business and looking into Amazon FBA seller accounting, you are on the right track. Keep on reading below to know the fundamentals of this service.
What is Amazon Seller Accounting?
There are many areas in your business that you need to track once you begin on Amazon, and accounting will be the way for you to track your money. While you are busy checking the performance of your keywords, listing rankings, and ad performance, you also need to monitor the money coming out of your bank and the money coming in from sales.
Accounting, especially automated ones, will give you a quick view and report of your finances. These numbers will then guide you on your future steps and whether your current strategies effectively sustain and make your business profitable.
The Benefits of Accounting on Amazon
Data-filled reports for decision making
Once you begin your business accounting, you can get plenty of reports that will help you create strategies and make decisions.
- Income statement report: This report will straightforwardly show you your business gains and losses.
- Balance Sheet: This one will list your assets and liabilities.
- Trends: A deep dive into the inventory report you will get will show you details, such as the best-selling products, which can help you decide where to invest more to get more sales.
- Inventory monitoring: As your products move from the Amazon warehouse to your customers, you need to decide on replenishing your stocks. Your inventory data will allow you to decide which products to replenish more or discontinue restocking because of low sales.
- Cash Flow Forecast: The excellent characteristic of these reports is that they can be stored, so you’ll have a resource of historical data to see the progress of your business. With the past and present data, you can also simulate financial business moves to see whether a plan will make your business profitable or not.
Address red flags immediately
Your business will only grow and move forward if you manage your money well. Part of proper financial management is knowing the factors that hurt your business right away and enacting ways to stop the issues to avoid further damage. It is even better to inhibit these problems from happening by planning proactively.
- Cash flow: A typical cash flow mismanagement is not monitoring the money from sales and comes out to pay suppliers and other dues. This challenging situation can snowball into more challenges in your finances.
- Payment to supplier and loans: Late or non-payment of your dues results from cash flow mismanagement. If you fail to do this, authorities can halt your business operations, and stocks won’t come in. Interests from loans may also pile up.
- Payroll: If you have employees relying on you, the inability to do accounting properly can also affect their timely acquisition of salaries.
- Taxes: You’ll be in massive trouble if you do not pay your taxes. Taxation is among the first costs you should be considering. Still, if you cram only weeks before tax-paying day, it can mess up your financial status, or you could be late in paying your taxes, which can also result in penalties.
Your business moves are tied with your financial capability
Now that you have in-house accountants or a third-party agency offering Amazon seller accounting services, you can be at peace. You know your business finances are monitored. There will be individuals who can give you valuable insights about your business’ current status and manage your growth.
With that, you’ll have plenty of time for the different areas in managing your Amazon store and other online stores. You can also focus on developing your products to assure their quality and increase sales. All these steps are done with coherence to the financial status of your business.
Some strategies that company executives and accountants use are the Profit First Framework and the Traditional Accounting.
- Profit First Framework: This formula goes like this: sales minus the profit equals the expenses. If you are increasing your profit, you should always prioritize putting it aside and spending what is left for your expenses.
- Traditional Accounting: On the other hand, you can also go traditional and use this formula: sales minus the expenses equals the profit.
Your business financial strategy is like a map. Like any other plans you have for your business, it will serve as a guide to take you to a successful end.
5 Sure Steps To Begin Amazon Accounting
- Begin accounting early
When is an early time? Honestly, it would be best if you start accounting the moment you start your business. Typical mistake sellers make is minding accounting only during tax season. Monitoring your assets and liabilities should be done immediately.
The tasks you’ll need to accomplish initially never ends, but fulfill first what ensures your business survival and success-- accounting.
Attending webinars and taking courses about accounting will help, especially when you get reports from accountants. Still, it would be best if you delegate this task to specialists. All these details are best accomplished and planned together with your store and product launch planning.
- Register for business taxation right away
Whether it’s an online or physical store, when you open a business, you should register your business for necessary permits and, most especially, for taxation. Some sellers get too busy with other tasks to launch their stores that they forget to register for taxation, while some intentionally do not register. Doing this is just delaying and increasing the hassle. Your business will be at risk of getting fines for not paying on time or at all.
Defining how much tax you need to pay also ensures that you know exactly how much money will come from your account. This practice will make your Profit First Framework easier to enact if you are using this.
- Delegate the accounting tasks to experts
If you are a trained accountant with experience in handling Amazon Seller Central accounting, then you can handle the accounting of your business. However, if you do not have a background in this area, it is better to delegate it to experts.
- Hire in-house accountants: The advantage of having your accountant in your team is that these accountants know the details about your business as they experience it firsthand. Their insights will be more in-depth as well.
- Partner with an agency: There are already agencies offering Amazon and eCommerce accounting. Delegating it to a third-party agency lifts the load of managing another team in your company. However, you need to explain in detail how your business works so these accountants know what they are dealing with.
- Have regular accounting reports
Your weekly, monthly, quarterly, and year-end reviews should always have accounting reports. As the business owner, you will decide how you want the accounting reports to look like, what reports you want to get, and how often you’ll get the reports. Here are some samples:
|Report||Details You Can include|
|Cash Flow Management Report||quick ratio, current ratio, cash balance, days sales outstanding, days payable outstanding|
|Profit and Loss Report||gross profit margin, opex ratio, operating profit margin, net profit margin, earnings before interest and tax, income statement, net profit|
|Financial Performance Report||balance sheet, assets return, working capital ratio, equity return, debt-equity ratio|
|Financial Key Performance Indicators Report||current working capital, current liabilities, cash conversion cycle, vendor payment error rate, working capital|
|Financial statement||revenue, gross profit, Earning Before Interest and tax (EBIT), operating expenses, net income, Economic Value Added (EVA), berry ratio, employee satisfaction, customer satisfaction|
All these reports will be more pleasing to the eyes and easy to understand if you establish a template and maximize the usage of graphs. In addition, these reports’ inclusions are not fixed, which means they can change depending on what value your company prioritizes. Hence, it is important to see those details in the report.
- Automate everything
If you have an automated system, all these reports can be checked anytime— and even daily— to acquire the data. Excel works and automation can also be acquired using this system. Still, the most advanced and convenient way to do accounting, especially on Amazon, is through software.
Here are the benefits of using a software:
- Reports on Amazon KPIs
- Reports are available even on mobile
- Allows integration not only on Amazon but in other eCommerce platforms
Many software allow a free trial, but most work on paid plans. Your investment is worth it with the insights you’ll get automatically.
Top Accounting Softwares To Use
You can choose numerous software to assist you with Amazon accounting, but here are the top five we can recommend.
If you are only looking into accounting for Amazon FBA, you’ll get more than that with Fetcher. This software will generate reports related to your PPC campaigns, refund tracking, and more reports that could give you visuals and an idea of your business’s status. The order coverage it offers depends on the plan you will avail of.
Another popular choice of accountants and small business owners is the software Xero. You can enjoy the functions of this tool at zero cost. It also provides basic reports like cash flow, inventory, expense claims, and more.
As the name of this software suggests, it will be the tool that can assist you with all your tax reports. It would be best if you use it hand-in-hand with the software QuickBooks or Xero. Whether you use FBA or FBM or sell in other marketplaces, your tax report will automatically generate.
GoDaddy is the tool to use if you are an accounting beginner or would like to give it a try in handling your business accounting while looking for specialists to partner with. You can check your sales, balances, profit, and loss, and create invoices for your Amazon, Etsy, eBay, and PayPal accounts through this software.
Another software you’ll often hear in the Amazon accounting world is A2X, which should be combined with QuickBooks, Amazon, Shopify, or Zero to maximize its accounting capabilities. Everything you need to know about your FBA expenses can be tracked and turned into easy-to-understand reports through A2X.
Now that you know all these nitty-gritty details about Amazon accounting, it is time to take action. Begin your business if you haven’t started one. Suppose you are still relying on excel sheets. In that case, this is the time to level your processes and reporting by moving to automated reports from software.
You have invested so much effort, time, and money to grow your business, so secure the ascension of your sales and growth of your store by ensuring your financial stability. We’d love to discuss how we can help you with Amazon accounting. Contact Unloop now.