Amazon Seller Accounting: Account for Every Penny

by Tomer

June 10, 2022

Most people hate dealing with numbers. But if you are an Amazon seller, you need to know your numbers to run and manage your business well. One of the important things they should learn is the Amazon seller accounting to make sure their efforts won’t go to waste.

In this blog post, I will define what Amazon seller accounting and bookkeeping is, why they are important for your business, and tips on how to manage bookkeeping with ease.

Read until the end to find out some of the best accounting softwares for Amazon sellers so you can efficiently manage your financial transactions. 

What is Amazon Seller Accounting and Bookkeeping?

Amazon seller accounting

Accounting is an integral part of any kind of business and not just on Amazon. It is the process of recording all financial transactions related to the business. It can be handled by an accountant or a bookkeeper. Depending on how big the company is, there can be more than one person who handles the accounting process. 

The goal and purpose of bookkeeping are to ensure there’s a clear record of all financial transactions for different uses. Some of the usual financial transactions of an Amazon seller include sales, advertising spend, payments to suppliers, shipping costs, Amazon fees, and loan payments. 

Here are the basic accounting and bookkeeping principles that every Fulfillment By Amazon (FBA) seller should know.

Accounts Payable

These are what the sellers owe or payments that need to be settled, such as payments to their suppliers. If you practice regular bookkeeping, it is easier for you to know when the payments are due.

Accounts Receivable

This is money that Amazon sellers are expected to receive, such as payments due to the seller for products sold. It is important for sellers that they monitor accounts receivable to ensure a healthy cash flow as well as to keep track of all the payments and money coming in their account.

Purchases

These are all the regular supplies that the sellers need to maintain, such as workplace supplies, equipment, and professional subscriptions to name a few. To find out how much profit you have, you need to list down all your purchases and subtract them from the sales. 

Sales

These are the prices of the items sold. This gives the seller an idea of how much money has entered his account and paints a clear picture of how the business is and if it is heading in the right direction or not.

Inventory

Inventory is an important part of bookkeeping for every Amazon seller. It allows the seller to plan when and how much to order new stocks from their suppliers. It would also be easier to track seasonal sales when a seller practices regular bookkeeping.

Loans Payable

As the name suggests, these are loans or money that the seller borrowed and needed to pay. This can be the cost of your products or the price of equipment, etc. Loans payable allow the seller to know how much money he owes, who he owes it, and when to pay the loan.

Owner’s Equity

This is the amount of money that the seller has invested or put into his Amazon business. 

Payroll

Sellers that manage a big brand would most likely have employees working for them. Having a record of all payrolls makes it easier for the seller to manage their money and meet the tax requirements.

Why is Bookkeeping and Accounting Important For an FBA Business?

One common mistake of some Amazon FBA sellers is putting their accounting and bookkeeping activities aside and only working on them when the tax deadline is near. That’s not how proper accounting and bookkeeping works, especially if you are managing a large Amazon business. 

It would be difficult to get an accurate bookkeeping and accounting record if you’ll only record your sales, accounts payables, receivables, and inventory every once in a while.

Business transactions are supposed to be recorded swiftly and regularly.

Having accurate and detailed accounting can help you make better business decisions and manage your finances wisely. To better understand the importance of Amazon seller accounting and bookkeeping, here are some of their benefits.

Better Understanding of Business Finances

If your financial records are not in order, it would be hard for you to see the bigger picture about your business. You won’t be able to easily analyze which products are profitable, if you have enough money to pay for your business expenses, or if you are even earning or not.

But if you have a clear record of your business financial transactions, you’ll have a better understanding of your business finances. It would be easy for you to see and analyze the movement of your money. You can decide where to invest your money and know whether or not your business is earning or not.

Cash Flow Forecasting

With regular bookkeeping, you can do cash flow forecasting more efficiently. You can plan when and how much inventory you need to purchase, decide on how much you want to invest in your ads such as Amazon PPC, if and when you need to hire additional people, and more.

Knowing that you have a healthy cash flow will help you earn more money by investing in other things, such as building a new brand, selling outside of Amazon, and even investing in yourself by learning a new skill.

It is easy to spend money as long as you see that your bank account has money in it. The challenging part is planning and making sure that when credit card bills are due or other debts you need to settle you still have enough money set aside for those bills and other expenses.

Without regular bookkeeping, it will be hard to remember and manage all expenses and your income.

Avoid Tax Fines

Whatever you do, you just can’t avoid paying the taxes. Regular bookkeeping will help avoid paying fines for your taxes because your records are up to date and you can guarantee that you have enough money to pay for them. My article on Amazon FBA taxes will show you how to file it and tips on how you can save money from your taxes. 

Benefits of Hiring an Accountant

Amazon seller accounting

If you are starting with only a few Amazon products, you might not necessarily need an accountant immediately. However, as your business grows, you need to have a clear record of everything that involves your business and take your finances more seriously.

More Time to Grow Your Business

When you hire an accountant, you’ll have more free time on your hands. You don’t need to spend time recording all your financial transactions on a daily basis. You can focus on other important tasks that will help in the growth of your business. 

Handle Financial Transactions More Efficiently

No matter how big or small your business is, it pays to have someone who can help you manage your records as it can be very time-consuming. Accountants and bookkeepers are experts in the field and they have their own way of analyzing numbers in a more efficient way. Doing this on your own will probably take you hours just staring at the numbers. 

Aside from that, if you have no idea how accounting or bookkeeping works, it pays to have someone who can give you advice and for you to better understand your numbers. 

Less Chance of Mistakes

Another reason to hire an accountant is to prevent mistakes in your finances. If you have zero knowledge about accounting and managing your finances, then it would be wise to hire an accountant. An accountant can see if the records are not tallied and easily spot where the error is and resolve the issue faster. 

As much as possible, Amazon sellers should not do their own accounting and bookkeeping. Well, if you have experience with bookkeeping or accounting in the past, then maybe you can survive in the first few months. However, hiring an accountant may still be the best decision you can make for your Amazon business. 

What to Look for in an Accountant?

Amazon seller accounting

Hiring the right accountant is crucial to any type of business. However, you can’t just hire the first accountant or bookkeeper that applied and showed interest in your business. If you are planning to hire an accountant for your Amazon FBA business, here are some important factors to consider.

Qualifications and Certifications

One of the things you need to consider is their education. It would be good to ask about their educational background. Ask them how they learned about bookkeeping and accounting and if they have certifications. 

Experience and Expertise

It is also good to learn about their experience. Ask about the companies they’ve worked for or if they have experience working in the e-commerce industry.

More and more accountants are knowledgeable or have learned the ins and outs of e-commerce businesses, and it would be best to choose someone who had worked for Amazon sellers before. 

This way they know exactly how Amazon seller accounting works. There are accountants who are only experts when it comes to accounts payable or accounts receivable. Best to consider those who are experts in the basic accounting and bookkeeping principles of Amazon. 

Technological Skills

Another thing to consider is the technologies used in accounting. Are they familiar with the different apps and automation that you use? What are the apps that they have experience using? Are they familiar with the sales tax liabilities of the different states where you send your goods? 

Costs

Lastly, you should also consider their salary expectations. Ask if they prefer an hourly rate or if they are okay with a subscription service wherein they are paid monthly. 

These are some of the information you need to gather before finally deciding on the accountant or bookkeeper that you will hire. 

Amazon Seller Accounting Tips

Here are some tips for Amazon sellers on how to do their accounting right.

Setup Your Accounting Process Early

As mentioned earlier, it is best to have a proper accounting process at the early stage of your business. Whether you plan on hiring an accountant right away or wait for a few months before hiring one, you should set up an accounting process. 

You can use Excel or accounting software to help you manage your financial transactions easily. So, when the time comes that you need to hire an accountant, all your records are readily available.

Understand the Selling Fees

When you sell on Amazon, there will be selling fees involved especially if you are an FBA seller. You need to consider the different selling fees such as the subscription fees, percentage fees, and a lot more. Understanding these selling fees will help you better understand how much you are actually earning and would make tax reporting easier.

Manage Your Refunds Separately

Refunds are inevitable in any e-commerce business or platform. These refunds can be for damaged items or returned products. For the purposes of tax and bookkeeping, it is better if you book your sales right away when you fulfill an order.

Ideally, it is best to book for returns and refunds on a separate account as this will affect your gross profit. 

What is the Best Accounting Software Available for Amazon Sellers?

There are many e-commerce tools that sellers use to make their business run smoother. Using specific accounting software on the other hand can help you keep track of transactions.

It pays to have a good and dependable accounting software to help you manage your Amazon business better. To help you out, here are some of the best accounting software you can try.

Taxomate

I personally use Taxomate and I like how it automatically posts transactions from my Amazon Seller Marketplace to my accounting software. Another thing that I like about Taxomate is it can track the cost of goods and inventory valuation. 

QuickBooks Online

QuickBooks Online is ideal for sellers who are managing a large Amazon business or multi-site sellers. The core accounting functions of QuickBooks Online are general ledger, accounts payable and accounts receivable, sales tax calculation, and the inventory module which is available for Plus and Advanced plans. 

Xero

Amazon sellers who prefer an application that is easy to use and has the capability of handling billing, banking, and analysis of cash flow will find Xero the best partner for their accounting needs. 

It is web-based accounting software that will allow sellers to manage sales wherever they are. Xero offers a 30-day free trial so sellers can decide whether or not it is exactly what they need before subscribing.

FreshBooks

FreshBooks is another web-based application suitable for small to medium-sized Amazon sellers. One of the top features of this application is business expense tracking, invoicing features, and financial reporting. 

Its dashboard is extremely easy to use and understand. FreshBooks is also one of the most affordable accounting applications available for Amazon Sellers.

Kashoo

Kashoo is suitable for both small and large Amazon sellers. It is a cloud-based application that can be used with any web browser. Some of the best features of Kashoo are tracking expenses and invoicing modules.

Sellers can upload their receipts using their iPad or iPhone with ease, manage unpaid bills, set up recurring payments, and even print checks. 

Compared to other accounting software that has different subscription fees depending on the services they provide, Kashoo offers one price to access all of its features.

AccountingSuite

This cloud-based accounting software can be used by all kinds of Amazon sellers no matter how big or small their business is. AccountingSuite includes all the necessary accounting features that Amazon sellers need including, invoicing, managing inventory, and reporting module. The price is reasonable enough with all the features that come with it.

Conclusion

Accounting is something that Amazon sellers should never take for granted. No matter what the size of your business is, it is important to have a good accounting process in place. This can be done by hiring an accountant and using accounting software so that sellers can focus more on growing their business. 

Which Amazon seller accounting software are you using? Share your experience in the comments section below, I would love to hear them so we can learn from each other.

About the author

My name is Tomer, and I founded Sourcing Monster to share proven tips and methods that I use every day for my Amazon business to provide value and growth for you as well as you journey through your own business!

Feel free to comment or share any feedback down below!

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