Amazon sellers need to keep track of their inventory, sales, and expenses. Bookkeeping is essential for Amazon sellers to know how much money they are making and what they are spending on.
Bookkeeping is a tedious task that may take up a lot of time. It can be difficult to keep track of all the transactions and receipts when you have many different accounts with multiple currencies.
The good news is that there are many different bookkeeping options available for Amazon sellers, so it’s easy to find one that meets your needs perfectly.
Why bookkeeping is required for Amazon Sellers?
- Your net profit matters the most. A business’ net profit is calculated by subtracting the costs of acquiring products sold from total revenue. Once recorded, the net profit is always available on your business’s books..
- Tax Obligations. You need to know your expenses and earnings to file your taxes.
- Financial health monitoring.Have you made any money this month? What did you spend last month? Would your costs be reasonable if they were broken down into categories? The most important part of any business is knowing what’s going on. Bookkeeping will help you stay up to date.
- Finding your tax deductions. Looking for ways to pay less in taxes? Search for deductions! Deductions are business-select expenses you’ve made over the year that you can subtract from your tax bill. There are many deductions specific to ecommerce, but none of them work unless you’re organized.
- Borrowing money. Most businesses will need to borrow money at some point. If you want to make sure that you’re a good investment, you’ll have to present your financial statements. These documents contain all of the information investors need and show that their money is in safe hands. You can avoid expensive mistakes. You’ll never know how much money you’ve lost making accidental mistakes if you never update your books. Updated books can help you keep costly mistakes under control.
Nobody knows your business better than you, and controlling your flow of money is a fundamental part of it. Keeping track in a way that’s beneficial to you and IRS is easy with bookkeeping.
Amazon accounting can often seem tedious. However, there’s a lot more to it than simply raising the P/L.
As an ecommerce seller, there are a few extra responsibilities you have to remember when it comes to bookkeeping. Amazon sellers in particular have a few complicating factors.
Cash basis accounting
Many small business owners use cash accounting, but this is a confusing and challenging system for Amazon FBA sellers. The problems basically come down to cash accounting only recognizing when money changes hands.
For Amazon sellers, cash basis accounting can be misleading: it records income as they come in and expenses as they go out. This methodology can give the impression that a company is earning large amounts of money when in reality it could be losing money. One issue with Amazon is their biweekly payment structure. While this helps you plan in advance, net profits for one month aren’t truly accurate when compared with another because the bigger a company gets, the more those smaller fluctuations average out.
One of the most important factors for selling your Amazon business is proving its ongoing profitability. The problem with cash accounting is that there’s no way to show proof of profit, because cash accounting just measures operating cash flows but doesn’t account for investments in fixed assets or intangible assets.
Accrual basis accounting
Unlike the cash method, accrual accounting records income and costs when they are earned. This way, you can have a better understanding of your total income and expenses over time. Accrual accounting levels out the sometimes unpredictable swings in cash accounting that can complicate things for companies.
Businesses with inventories are almost always required to use accrual accounting (though there are exceptions). Accrual accounting links transactions that happen at different times. For example, if you close a sale in the middle of the first month, but it is paid on the beginning of second month, this could be recorded under accrual accounting.
Running international campaigns can cost substantially and should be factored in to the ROI from a campaign.
Sellers who use FBA should be aware that international sales will also come with additional duties and fees, as well as potential currency exchange rates.
If you’re selling on more than one Amazon channel, you’ll have to analyze your bookkeeping across each individual storefront. As an example, if you sell in the United States and the UK separately, you may want to track income and expenses for each different region..
Your state laws will determine how you comply with sales tax requirements.
When you sell across state lines, it becomes important to make sure your tax obligations are up-to-date. Sales tax requirements vary by state. Accounting software can help you keep your records up to date in order to prepare for this, although an independent explanation of the rules may be necessary. You’ll need to know the basics of sales tax in every state where you do business.
Selling products through Amazon can be an exciting experience. However, as you grow as an Amazon seller there can also be a lot of administrative work and accountancy work too! Find out how we can help keep your books in order with our bookkeeping service.
Ecommerce businesses can be complicated to manage. It’s also important to focus on growing your brand, increasing repeat customers and engaging with new customer segments. With all the different work you invest in growing your ecommerce business, it’s natural that bookkeeping takes some time away from these other areas.
Your bookkeeping team at Overdraw.IO is on top of the numbers, which saves you time and lets you focus on other aspects of your business. We specialize in working with other ecommerce businesses and have a successful track record.
If you need a bit more help, we offer tax and accounting services to give you all the support and guidance that you need. We can file your taxes for you, too!
Running a business can also be challenging, but you don’t need to spend your time doing things like QuickBooks or spreadsheets – leave those tasks to us. We’re here to help with everything else.