When you’re starting a business, there are many things to think about. Yet, bookkeeping should be on top of your list because ignoring the tracking of your finances can lead to big problems later on. Good bookkeeping is key to making informed business decisions and staying on top of your finances, so let us help you get it right.
Here are the seven Amazon seller bookkeeping practices you can replicate in your own business. Even those well-acquainted with bookkeeping can learn from these, so keep reading to improve your business!
Understand the essence of Amazon bookkeeping.
You can keep track of your business finances when you have bookkeeping in place early and even before you launch your Amazon store. As a result, you do not need to cram on backtracking your transactions when tax season comes.
When your books are always up-to-date and organized, you can generate reports quickly and
easily. If the time comes when you want to scale your business and meet with investors, presenting your business's financial health will be easier. When you know this about bookkeeping, you’ll be more encouraged to start it right away and do it right.
Know all Fulfillment by Amazon (FBA) fees.
When you utilize FBA, bookkeeping helps in tracking your income and expenses. You can monitor the sales you make right away, and more importantly, you’ll see the fees Amazon will charge you with. These fees are:
- Per item fee for Individual Selling Plan
- Monthly FBA fee for Professional Selling Plan
- Storage fee
- Storage fee during peak months
- Long-term storage fee
- Repackaging fee
- Label completion fee
- Inventory placement fee
- Returns processing fee
- Order removal fee
You can calculate your net income immediately and check your business’s profitability when you have data on your income and expenses.
Utilize accrual accounting.
Accrual accounting is a method that considers both income and expenses, counts both accounts payable and accounts receivable, and records transactions right away. For instance, you can track inventory costs you are yet to pay or the Amazon sales customers have ordered, even when the money is not yet in the bank.
On the other hand, a cash basis accounting is not sustainable for an Amazon business, especially if you picture your sales growing. This method tracks income only and notes it only when the payment is made.
Accrual accounting gives a more detailed and holistic view of your finances compared with cash basis accounting.
Pick the best accounting and bookkeeping software.
There is plenty of accounting and bookkeeping software you can use, and some of the best are Quickbooks Online and Xero. These accounting tools can handle all these accounting and bookkeeping tasks for you:
- Invoice creation
- Income and expense tracking
- Categorizing income and expenses
- Bank account reconciliation and integration
- Making data available both on a computer and mobile phone
- Tracking inventory
- Billing automation
- Managing stocks
- Time and project tracking
- Generating reports
You can integrate Amazon into the accounting and bookkeeping software, so all transactions on the platform are recorded in the books.
Familiarize yourself with the Marketplace Facilitator (MPF).
As an Amazon seller, you need to familiarize yourself with MPF or Marketplace Tax Collection. Through the MPF law, marketplace facilitators like Amazon must collect sales taxes on the sellers' behalf and remit them to the state or province tax collecting office.
MPF jurisdiction varies per country, but in Canada, it collects sales taxes in all provinces except British Columbia. If you sell in the US, Amazon collects sales taxes in all areas except those states that do not require businesses to pay these dues. Despite Amazon handling sales taxes, you should still include these transactions in your books.
Make sense of data through timely reports.
Put the huge amount of data you have collected to good use by generating timely reports from them. If you use accounting software, doing this is much easier as there are already ready-made templates. In just a few clicks, you can have your report ready. Nevertheless, you can still customize your reports to project your company’s key performance indicators.
When you receive reports regularly, you can see the milestones of your business and replicate the best practices. You can also work on your points for improvement right away. All your decisions will be made objectively and backed by data.
Hire a bookkeeper and an accountant.
Having an accountant and bookkeeper in your team can make the application of these best practices easier. The bookkeeper will ensure that all transactions are recorded and organized, while the accountant can be relied on for reports and financial suggestions.
You can hire either in-house staff or remote employees, but what matters most is that the team members you are hiring have the qualities of the best bookkeeper and accountant. They should be knowledgeable about what they do, have experience in the field, and have integrity. Remember, they will be handling your company’s money.
Partner with Unloop!
As a small business, replicating Amazon's best practices for bookkeeping will help ensure your success. By understanding the essence of Amazon bookkeeping, knowing all FBA fees, and utilizing accrual accounting, you can make sound financial decisions. Additionally, picking the right software and familiarizing yourself with the MPF are essential. You can make sense of your data and grow your business through timely reports.
If you need assistance with these tasks, don't hesitate to reach out! Book a call now with us here at Unloop. We’d love to discuss bookkeeping for Amazon sellers with you!