If you're an Amazon seller, you know that keeping tabs on your finances is essential to running a successful business. Thankfully, bookkeeping is an easy task that even the most novice businessperson can handle. In this article, we'll outline the basics of Amazon seller bookkeeping and explain how to use the software provided in the Amazon Seller Central account to track sales tax, income, and expenses.
The Importance of Using Bookkeeping in Amazon
Bookkeeping is a great strategy for small businesses, and it’s even more important to keep track of cash inflows and outflows while still being a startup. Tracking finances will help you better understand your business.
One of the reasons why an accurate and efficient bookkeeping method is crucial for your Amazon business is to help you file your taxes accordingly. Obviously, you can't compute your taxes when your accounts and transactions are all over the place. And worse, you can even lose money if you continue that practice.
With proper bookkeeping, you'll be able to monitor the financial health of your business from time to time. The net profit predicts whether your business is earning or failing, so you must update your books regularly.
Basic Terms in Accounting for Amazon Sellers
Sales, in business terms, are transactions wherein an exchange of goods or services for a specific amount of money or asset has occurred.
From the perspective of the business owner, it is the number of goods or products that the business has successfully sold.
When you sell a product and the payment wasn’t made during the transaction and instead promised to be made on a later date, this falls under accounts receivable. You need to proactively monitor that the payment will be sent on the agreed date and time.
Accounts payable are the money you owe to other people. It can be the supplies from suppliers that aren't paid yet or payroll to the employees that you promise to release at a later date.
Only short-term liabilities, or debts that do not exceed a year before getting settled, fall under accounts payable. Make sure to pay them on time to keep your business liquid.
Loans that you acquire fall under a separate account called Loans Payable. It is not included in the Accounts Payable title since this only caters to short-term debts, which do not cover loans that take more than a year to be paid.
If you're an Amazon seller, which is a type of merchandise business, inventory is a very important aspect. It is the number of products and raw materials that you have in store.
Being aware of external factors such as the environment and industry you're in can help you decide how much you should keep or sell to maintain balance in your inventory.
Purchases are basically business-related expenses like office supplies, merchandise, raw materials, and more. As long as you pay it upfront, it will fall under this account.
Cash Accounting and Accrual Accounting
Cash accounting or cash basis accounting is a method wherein the revenue is only recorded when the monetary payment is received.
Accrual accounting, on the other hand, records the revenue in the book as soon as the transaction happens, even before the payment is actually received.
The Best Bookkeeping Software for Amazon Sellers
GoDaddy Online Bookkeeping
Have you seen GoDaddy somewhere on Facebook or another social media platform? If yes, then you might be aware that GoDaddy is a web hosting company. One of their services is GoDaddy Online Bookkeeping, which we'll be tackling in this section.
This software has all the essential basic tools that every Amazon business needs. It is directly connected to your Amazon Seller Central account—that's why you don't need to integrate it yourself.
GoDaddy's services are basic yet useful. It includes creating invoices, tracking profit and loss, and establishing financial reports. This is why it's recommended for small Amazon sellers who don't need that many functions yet.
A noteworthy trait of this software is the variety of reports that enable the user to visualize sales, inventory, and other data.
GoDaddy's forte is to provide easy-to-use and stress-free accounting software. It is also more affordable than other software. The only thing you should reconsider is their lack of double-entry accounting.
All in all, GoDaddy is a good app that you can use while you're still building your business.
AccountEdge Pro is a mixture of GoDaddy and a bit of QuickBooks. It aims to cater to the needs of small Amazon sellers, and it also has a wide variety of functions to offer.
Just like QuickBooks, it uses a double-entry accounting system to ensure the accuracy of accounts. Its banking system is outstanding since it allows almost every bank transaction—like receiving and sending money and making e-payments—to occur in the software itself.
Their inventory management system is also notable since it helps the seller to prevent oversupply or undersupply. This matters a lot since Amazon sellers are charged whenever there are excess stocks that stay for more than a year.
The software, in general, is impressive because of its banking, inventory management, and time-tracking features. It is also affordable, which is beneficial for those who are still starting out.
Developers of Kashoo label their innovation as the simplest accounting software. The accessibility of their software is their edge against other software in the market. Its target market is, though is not limited to, small Amazon sellers since the software can also cater even the needs of growing Amazon businesses.
This accounting software covers several functions, such as tracking expenses, creating invoices, and providing updated bank statements.
Their tracking expense feature is very efficient. With Kashoo, users can conveniently upload their receipts and plan their own payment schedule, whether it’s monthly or weekly. What's more commendable is that all these features are available on iPhone or iPad.
Moreover, Kashoo also allows integrations with third-party banking applications such as PayPal, Stripe, and Square. The software provides updated bank feeds to you for easier access.
Overall, Kashoo proves to its customers that it really is easy to use. Considering all the integration involved, Kashoo won't let you down with its amazing technical support.
Similar to Kashoo, Fetcher targets small to medium-sized businesses as their potential customers. It offers a good set of features for sellers who are new to the business, yet it also comes at a reasonable price.
Its way of analyzing profit and loss is unique. It already deducts sales and all other expenses from the total revenue, leaving the net profit. This makes it more understandable for the user, especially when they are not familiar with accounting terms.
Also, Fetcher closely monitors all expenses and leaves nothing out of the list: sales tax, shipping costs, cost of inventory, subscription costs, and even Amazon fees. Everything's recorded to ensure that no charges remain hidden. It also provides reports for better visualization of figures.
However, Fetcher has its own share of disadvantages. It lacks an inventory management feature which is especially important for an Amazon business. It also doesn't follow the double-entry practice.
QuickBooks Online always makes it to the list whenever we're talking about the best cloud-based accounting software in the market. Their target market is large Amazon sellers or enterprises that are eyeing to increase profits, although it also provides a complete solution for all the accounting needs of small businesses. That’s why it is a more practical option than hiring a whole accounting team.
First of all, QuickBooks follows the double-entry accounting method, resulting in highly accurate reports.
Their inventory management feature also changes the game with its excellent product tracking. You can even create a master inventory list to assure you that everything's included.
Having problems with sales tax tracking? Worry no more! QuickBooks automatically computes your sales taxes according to the tax laws of the city you're residing in, or you can also manually input the custom rate if needed. Just make sure you apply for a sales tax permit first!
This software also produces impressively detailed reports, may it be profit and loss statements, cash flow statements, or even sales reports.
Should You Do Your Own Bookkeeping to Save Money?
If you do your own bookkeeping, you can definitely cut expenses. But there are a few things to remember before you get started.
Make sure you have the right tools on hand before starting your bookkeeping tasks. Second, be sure to track your expenses carefully so that you can accurately reflect them in your reports. Finally, make sure you’re knowledgeable and up-to-date with the latest bookkeeping practices.
If you really can't do your own bookkeeping, consider hiring a bookkeeper to help you stay organized.
Unloop Can Guide You with Your Amazon Accounting
Bookkeeping plays an essential part in the success of your Amazon business. By keeping accurate records of sales and expenses, you can ensure that your business is on track and making the most profit.With the help of a good bookkeeper, you can build the foundations of a successful Amazon business. And this is where Unloop comes in. Get assistance in your bookkeeping and other accounting struggles with the help of professionals in the field. Book a call with us today!