7 Things to Know About Bookkeeping For an Amazon Seller

If you are an Amazon seller, you know how exciting and rewarding it can be to run your own e-commerce business. You also know how challenging and complex it can be to manage your finances and keep track of your income and expenses.

Bookkeeping is an essential skill for any Amazon seller who wants to succeed in the long term. It helps you monitor your cash flow, measure your profitability, and comply with your tax obligations. It also helps you make informed decisions and plan for the future.

However, bookkeeping for an Amazon seller is not as simple as it may seem. Amazon’s global marketplace and diverse income streams create many complexities and nuances that require careful attention and expertise. You need to understand Amazon’s fee structure, separate your business and personal accounts, utilise Amazon seller reports, manage your inventory and cost of goods sold, choose the right accounting software, reconcile your accounts regularly, and understand your tax obligations.

In this blog post, we will cover the 7 things you need to know about bookkeeping for an Amazon seller. We will explain each topic in detail and provide some tips and best practices to help you improve your bookkeeping skills and grow your Amazon business.

1. Understanding Amazon’s Fee Structure

One of the first things you need to know about bookkeeping for an Amazon seller is how Amazon’s fee structure works. Amazon charges various fees to sellers depending on the type of product, the selling plan, and the fulfilment method.

Some of the common fees that Amazon charges are:

Listing fees: These are the fees that Amazon charges for listing your products on its platform. They vary depending on the category and the selling plan. For example, if you are an individual seller, you pay $0.99 per item sold, while if you are a professional seller, you pay $39.99 per month regardless of the number of items sold.
Referral fees: These are the fees that Amazon charges for referring customers to your products. They are calculated as a percentage of the total sales price (including shipping and gift wrap) and range from 6% to 45% depending on the category.
FBA fees: These are the fees that Amazon charges for fulfilling your orders through its Fulfilment by Amazon (FBA) service. They include the fees for picking, packing, shipping, handling, customer service, and returns. They are based on the size and weight of the product and the shipping destination.
Storage fees: These are the fees that Amazon charges for storing your inventory in its warehouses. They are based on the volume of space your inventory occupies and the time of the year. They are higher during the peak season (October to December) and lower during the rest of the year.
Other fees: These are the fees that Amazon charges for other services or features, such as advertising, subscription, closing, removal, disposal, long-term storage, etc.

These fees can have a significant impact on your overall profitability and the importance of tracking them accurately.

2. The Importance of Separate Business Accounts

Another thing you need to know about bookkeeping for an Amazon seller is the importance of keeping your business and personal finances separate. This is a basic but crucial rule that many new or inexperienced sellers tend to overlook or ignore.

Mixing your business and personal accounts can create many problems and risks for your Amazon business. It can make your bookkeeping more complicated and time-consuming, as you will have to sort out and categorise every transaction. It can also make your tax filing more difficult and error-prone, as you will have to separate your business and personal income and expenses.

It can also expose you to legal and financial liabilities, as you will not have a clear distinction between your personal and business assets and debts.

To avoid these issues, you need to set up a separate business bank account and credit card for your Amazon transactions. You need to use these accounts exclusively for your business income and expenses and avoid using them for any personal purposes. You also need to transfer your personal funds to your business account only as a capital contribution and record it as equity in your bookkeeping system.

By having separate business accounts, you will be able to simplify your bookkeeping, streamline your tax filing, and protect your personal and business finances.

3. Utilising Amazon Seller Reports

A third thing you need to know about bookkeeping for an Amazon seller is how to utilise Amazon seller reports. Amazon provides a variety of reports to sellers that contain valuable information and data about their sales, returns, inventory, fees, payments, and more.

Some of the reports that Amazon provides are:

Sales reports: These are the reports that show your sales performance and revenue. They include the sales summary, sales by category, sales by product, sales by date, sales by order, etc.
Returns reports: These are the reports that show your returns performance and refund. They include the returns summary, returns by category, returns by product, returns by date, returns by order, etc.
Inventory reports: These are the reports that show your inventory status and movement. They include the inventory summary, inventory by category, inventory by product, inventory by date, inventory by order, etc.
Fees reports: These are the reports that show your fees breakdown and charges. They include the fees summary, fees by category, fees by product, fees by date, fees by order, etc.
Payments reports: These are the reports that show your payments history and balance. They include the payments summary, payments by date, payments by order, etc.

These reports can help you with your bookkeeping in many ways. You can use them to verify your income and expenses, reconcile your accounts, analyse your profitability, identify your best-selling and worst-performing products, monitor your inventory levels, optimise your pricing and fees, and more.

You can access these reports from your Amazon seller account dashboard or download them as CSV files. You can also customise them according to your preferences and needs.

4. Managing Inventory and Cost of Goods Sold (COGS)

Inventory and COGS are two of the most important and complex aspects of bookkeeping for an Amazon seller, as they directly affect your profitability and tax obligations.

Inventory is the stock of products that you have on hand or in transit for sale. COGS is the cost of acquiring or producing the products that you sell. Both inventory and COGS need to be tracked and valued accurately in your bookkeeping system.

There are different methods and strategies for tracking and valuing inventory and COGS, such as:

First-in, first-out (FIFO): This is the method that assumes that the first products you buy or make are the first products you sell. It results in a higher COGS and a lower inventory value, as you assign the older and cheaper costs to the products you sell.
Last-in, first-out (LIFO): This is the method that assumes that the last products you buy or make are the first products you sell. It results in a lower COGS and a higher inventory value, as you assign the newer and more expensive costs to the products you sell.
Average cost: This is the method that calculates the average cost of all the products you buy or make and assigns it to the products you sell. It results in a moderate COGS and inventory value, as you assign the average cost to the products you sell.
Specific identification: This is the method that identifies the specific cost of each product you buy or make and assigns it to the product you sell. It results in the most accurate COGS and inventory value, as you assign the exact cost to the product you sell.

The method you choose depends on your preferences, needs, and tax implications. You need to be consistent and follow the same method throughout the year. You also need to update your inventory and COGS records regularly and adjust them for any changes, such as returns, damages, discounts, etc.

By managing your inventory and COGS effectively, you will be able to measure your profitability and comply with your tax obligations.

5. Accounting Software Solutions for Amazon Sellers

Accounting software is a tool that helps you automate and streamline your bookkeeping tasks and processes. It can save you time, money, and hassle, as well as improve your accuracy, efficiency, and compliance.

There are many accounting software solutions in the market, but not all of them are suitable or compatible for Amazon sellers. You need to choose an accounting software that is tailored for Amazon sellers and that can integrate with your Amazon seller account.

Some of the popular accounting software solutions for Amazon sellers are:

QuickBooks: This is one of the most widely used and trusted accounting software solutions in the world. It offers a variety of features and functions, such as invoicing, billing, reporting, budgeting, tax preparation, etc. QuickBooks also has a dedicated version for Amazon sellers, called QuickBooks for Amazon Sellers, that can connect with your Amazon seller account and import your sales, fees, inventory, and payments data automatically.
Xero: This is another leading accounting software solution that is known for its simplicity and user-friendliness. It offers similar features and functions as QuickBooks, such as invoicing, billing, reporting, budgeting, tax preparation, etc. It also has a seamless integration with Amazon, called A2X for Amazon, that can sync your Amazon sales, fees, inventory, and payments data with Xero automatically.
Zoho Books: This is a cloud-based accounting software solution that is designed for small and medium-sized businesses. It offers a range of features and functions, such as invoicing, billing, reporting, budgeting, tax preparation, etc. It also has a direct integration with Amazon, called Zoho Books for Amazon, that can import your Amazon sales, fees, inventory, and payments data into Zoho Books automatically.

By choosing the right accounting software solution for your Amazon business, you will be able to automate and streamline your bookkeeping tasks and processes, and focus more on growing your sales and profits.

Worth Reading: Best accounting software for small business

6. Regular Reconciliation is Key

The next thing you need to know about bookkeeping for an Amazon seller is the importance of regular reconciliation. Reconciliation is the process of comparing and verifying your Amazon seller account data with your bank account data and ensuring that they match and are accurate.

Reconciliation is a key bookkeeping task for an Amazon seller, as it helps you identify and resolve any discrepancies or errors that may occur in your transactions, such as missing or duplicate sales, incorrect or delayed payments, unaccounted or excessive fees, etc.

Reconciliation also helps you prevent any financial misstatements or frauds, as it enables you to detect and report any suspicious or unauthorized activities, such as hacking, phishing, identity theft, etc.

Reconciliation also helps you prepare for your tax filing, as it ensures that you have a complete and accurate record of your income and expenses, and that you pay the right amount of tax.

To perform reconciliation effectively, you need to do it regularly and systematically. You need to set a schedule and frequency for your reconciliation, such as weekly, monthly, quarterly, etc. You also need to follow a step-by-step procedure for your reconciliation, such as:

Download your Amazon seller account data and your bank account data for the same period.
Compare and match your sales, fees, inventory, and payments data between the two sources.
Identify and investigate any differences or discrepancies between the two sources.
Correct and adjust any errors or mistakes in your bookkeeping system or your Amazon seller account.
Document and report any findings or issues to the relevant parties, such as your accountant, your bank, or Amazon.

By doing regular reconciliation, you will be able to maintain the accuracy and integrity of your bookkeeping data and avoid any potential problems or penalties.

7. Understanding Tax Obligations

The seventh and final thing you need to know about bookkeeping for an Amazon seller is your tax obligations. Tax is one of the most important and complex aspects of bookkeeping for an Amazon seller, as it involves many rules and regulations that vary depending on your location, your business structure, your income level, and your product category.

Tax is also one of the most challenging and risky aspects of bookkeeping for an Amazon seller, as it requires a lot of knowledge and expertise, and can result in severe consequences if done incorrectly or incompletely, such as fines, penalties, audits, or legal actions.

Some of the common tax obligations for Amazon sellers are:

VAT: This is the value-added tax that is applied to the sale of goods and services in many countries, especially in Europe. It is calculated as a percentage of the sales price and is collected and paid by the seller to the tax authorities. Amazon sellers need to register for VAT in the countries where they sell their products, collect and remit VAT to the relevant tax authorities, and file VAT returns periodically.
Income tax: This is the tax that is applied to the net income or profit of the seller. It is calculated as a percentage of the net income and is paid by the seller to the tax authorities. Amazon sellers need to report their income and expenses to the tax authorities, calculate and pay their income tax, and file income tax returns annually.
Other taxes: These are the taxes that may apply to specific products or situations, such as customs duties, import taxes, sales taxes, etc. Amazon sellers need to be aware of these taxes and comply with them accordingly.

To fulfil your tax obligations effectively, you need to keep abreast with the tax laws and regulations in the different jurisdictions where you sell your products. You also need to keep accurate and complete records of your income and expenses, and retain them for the required period. You also need to consult with a professional accountant or bookkeeper specialised in e-commerce, who can help you with your tax planning, preparation, and filing.

By understanding and complying with your tax obligations, you will be able to avoid any tax-related issues or troubles, and maximise your tax savings and benefits.

Conclusion

Bookkeeping is a vital skill for any Amazon seller who wants to succeed in the long term. It helps you monitor your cash flow, measure your profitability, and comply with your tax obligations. It also helps you make informed decisions and plan for the future.

However, bookkeeping for an Amazon seller is not as simple as it may seem. It requires a lot of attention and expertise, as it involves many complexities and nuances that are unique to Amazon’s global marketplace and diverse income streams.

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