Fulfillment by Amazon (FBA) has revolutionized the ecommerce industry by providing a means of fulfillment for small and medium-sized businesses selling on the platform. With the host of benefits that come with FBA—from packing products to storing them in Amazon fulfillment centers, product delivery, and 24/7 customer service—it’s no surprise that more entrepreneurs are taking advantage of this program.
However, managing bookkeeping for Amazon FBA can be a daunting task for FBA sellers as the program constantly evolves. Still, Amazon bookkeeping has several benefits that encourage you to dive into the complexity of the task. Let's take a look at the five benefits here.
Benefit #1: Track Costs and Other Expenses Through Amazon Seller Central
Knowledge is power, even in Amazon bookkeeping. You can control your expenses only when you have visibility on them. You can pinpoint hefty expenses, keep your expenses low, aim for a higher income and profit, and save money. Among the many benefits of Amazon seller bookkeeping, a good thing is giving you the convenience of seeing all the following business costs and expenses.
Product Manufacturing or Acquisition
On Amazon, you can sell as a product manufacturer or as a reseller. A manufacturer creates their products while resellers acquire ready-made products from manufacturers and resell them. Through good bookkeeping, you’ll know the cost of goods sold or the cost of acquiring your products. When this data is subtracted from the total revenue, you’ll get your company profit. You can then decide whether you can still lower this cost to earn more.
Packing for Amazon
With Amazon bookkeeping, you can check the costs of packing your items before sending them to Amazon. If you are sending directly from the factory or from suppliers to fulfillment centers, your products should be packed according to the FBA guidelines. With this, you must prepare for additional packing charges from the manufacturer or supplier. By seeing this cost, you can decide whether it is less costly to pack yourself or delegate the task to manufacturers and suppliers.
Shipping to Fulfillment Centers
After your items are packed, you need to register them for FBA through your Seller Central account. After that, Amazon determines which fulfillment centers you’ll send your products to. Whether your packages come from factories, suppliers, or your warehouse, a shipping expense will be added to the books. You can check how your choice of shipping company affects your finances and think about whether you need to find a cheaper or more efficient company based on your analysis.
FBA Storage Fees
When your products finally reach Amazon, you must keep track of the storage fees. Amazon bases storage fees on the weight and size of each product. These fees may rise from October to December—the peak season. Amazon provides you with these details on Seller Central, and you can integrate this data into your Amazon FBA bookkeeping software. As a result, you can check the rise and fall of storage fees in different months and create strategies to lower this cost.
On top of the storage fees, through bookkeeping for Amazon, you can track the fees for every item fulfilled by Amazon. The rate depends on the size, weight, and type of item you are selling. Many ecommerce sellers cut costs by utilizing box spaces to pack products inside the smallest package possible. When you track how much each item costs, you can create plans to pack wisely.
The fees for FBA do not end, and there are other fees you can still incur. When your package arrives at Amazon not following the packing guidelines, Amazon repackages them and charges you. Wrong and incomplete labels will add costs, too. Meanwhile, if you want to send your inventory to a single fulfillment center instead of several places, you must pay an additional inventory placement fee. Amazon can also handle gift wrapping for a certain fee. You can track all these when your bookkeeping for Amazon is in place.
As you scale your Amazon business and ship internationally, there are new costs you should consider. Taxes and customs duties are among these costs, and you also need to consider the currency rates of the places you send your products to. The right accounting software has multi-currency features to make conversion easier. Through the software, you can track international shipping expenses too.
Returns and Refunds
One advantage of using FBA is the handling of returns and refunds. As Amazon handles it, your bookkeeper keeps track of the costs incurred. As an Amazon business owner, it is your role to check the numbers and, at the same time, pinpoint the root cause of why you're getting returns and refunds. Although they are normal, you still need to keep them to a minimum.
Benefit #2: Stay on Top of Your Assets and Income
Bookkeeping for Amazon helps track your expenses, and you can count on it, too, for monitoring your sales and computing your income. Bookkeeping is also a tool for you to check your total assets and know the worth of your company. Some of the details you can check because of bookkeeping are the following.
When your bookkeeping is in place, you can integrate the data on Seller Central into your bookkeeping and accounting tool. With this, you can monitor your sales and use this detail to run different financial reports. You can determine the cause when sales are low and set game plans to get more buyers. When sales are high, you can determine its cause and duplicate the practice.
Multi-Channel Fulfillment Sales
Amazon allows the fulfillment of orders from outside the platform through Multi-Channel Fulfillment (MCF). You can track your sales on Amazon and other sites with proper bookkeeping. If you sell in multiple ecommerce channels, bookkeeping will categorize the sales accordingly. With data, you can analyze whether MCF is suitable for your small business or if you need a different fulfillment method.
Net profit is the amount you get when you deduct all debts, expenses, and taxes from your gross profit. This value appears in many financial statements, which can be calculated correctly with proper bookkeeping. Investors and creditors check your net profit before investing or allowing you to borrow money. When a positive amount is reflected, it is called net profit, but a negative amount is called a net loss.
Inventory management is essential for your business as it is a part of your assets, and you’ll see details about it on Seller Central. Integrating this data into your bookkeeping and accounting software is best, so you only have one place to look for both finances and your inventory. When you see your inventory, you can replenish fast-moving stocks immediately. You can also keep an eye and work on slow ones.
Benefit #3: Compliance With Sales and Income Tax
Amazon has Marketplace Tax Collection to comply with the Marketplace Facilitator law that compels third-party sellers to collect and remit sales taxes on behalf of sellers. Although Amazon already has the accurate records for you, which makes tax time easier, it pays to monitor the data. Meanwhile, when all the transactions in your Amazon small business are monitored throughout the year, tax time and paying taxes will be more uncomplicated.
Benefit #4: Analyze Different Kinds of Reports
Make the most of the data from Amazon's default reports and different channels to see the financial state of your business through reports. The best accounting software generate the following reports in just a few clicks:
- Balance Sheets
- Income Statements
- Cash Flow Statements
- Statements of Owner’s Equity
- Financial Key Performance Indicators
- Financial Forecasts
Bookkeeping and accounting tools have templates you can readily use, but they are also flexible if you want to generate customized reports.
There are plenty of accounting software options out there, like QuickBooks Online and Xero. These tools give you the choice for cash-basis or double-entry accounting, which you'll find helpful in tracking your finances and generating reports.
Benefit #5: Business Presentation Generation for Your Amazon Business
Investors want to put their money in stable businesses to get a high return on investment. You can use the reports you generate above for investor presentations. Let the numbers talk through your reports.
Meanwhile, to scale your Amazon store, there will be times when you need to apply for loans. Many creditors require seeing some of the reports mentioned above to ensure you can pay for your debts and interest.
Because you have bookkeeping in place, you do not have to worry about the two situations and other business presentations you need to make.
Partner With Unloop for Amazon FBA Bookkeeping Needs
Amazon FBA bookkeeping is crucial for businesses to manage their finances effectively. Business owners can monitor their expenses, track their income, and stay tax compliant through bookkeeping. It also helps analyze reports and prepare for investor presentations, making it easier to scale the business or apply for loans.Don't hesitate to take advantage of the benefits of FBA bookkeeping and delegate the task to experts now! Partner with us here at Unloop so that you can have a reliable bookkeeping service for your FBA business. We also offer solutions for Shopify and DTC, multichannel sales, wholesale, and more. We’d love to discuss our offers with you. Call us now!