Many ecommerce businesses start by selling on Amazon, which offers a user-friendly platform and nearly instant gratification. But once they’re in, it’s easy to favor sales over back-office management and accounting.
So when it comes to accounting for Amazon sellers, success is all about building a solid foundation that ensures accuracy and tax compliance with state and local regulations. Luckily, getting started is easy, especially when you have tools that connect Amazon and QuickBooks or another bookkeeping software.
Explore this quick guide to accounting for Amazon sellers, and discover more about what it means to build a foundation, stay accurate, and maintain tax compliance.
1. Build a foundation for Amazon seller accounting
Establish good habits by developing an accounting system that can scale with your business. For example, many Amazon sellers prefer summary or journal entry accounting over more detailed methods like transactional accounting.
Excel and manual data entry may work if you’re just starting. But soon, you’ll have to trade spreadsheets for accounting software.
You have options if you’re looking for an Amazon seller accounting software that can track sales, fees, and more from your Amazon store. For example, QuickBooks can help you manage income, expenses, invoices, payments, and cash flow from your Amazon store.
2. Stay tax compliant as an Amazon seller
South Dakota v. Wayfair changed ecommerce forever by allowing states to impose sales tax on companies selling to their residents. Businesses that don’t comply, even unknowingly, are subject to hefty fines and other penalties.
So ecommerce sales tax compliance is a key pillar of success for Amazon seller accounting. Connecting your accounting software to a tool like Avalara Avatax can help your business stay up to date on state and local tax regulations, so you never have to worry about penalties.
3. Ensure accuracy by automating Amazon accounting
As your business grows, you may need to add more sales channels or dive deeper into your sales data. In that case, consider connecting Amazon — and all your sales channels — to your accounting platform via accounting automation software.
Among other benefits, connecting your ecommerce and accounting solutions can help ensure the accuracy of your sales data and inventory. For example, Amazon makes deposits every two weeks and only supplies your net total at the end of that period. So it’s hard to get a more granular look at which items are selling, what’s generating the greatest profit, and how much in fees you pay to Amazon.
You can track this and other sales data manually through your store’s back-end and analyze it via spreadsheet. Or you can integrate Amazon and QuickBooks, ensuring to-the-cent breakdown of sales data.
You can further ensure accuracy with inventory management. The right automation solution uses an automatic multichannel inventory sync that updates on a customizable schedule. As a result, you can instantly track and sync orders, inventory quantities, and prices across stores. And you can easily list new products from QuickBooks to stores and marketplaces.
Bookkeeping for Amazon sellers: 5 signs it’s time to trade spreadsheets for automation
Remember when you became an Amazon seller and didn’t know the difference between a balance sheet and a P&L statement? Or when you finally started doing your own Amazon bookkeeping?
As time went on, you added new sales channels, increased the number of products on Amazon FBA, and built your own ecommerce website. But now, your day-to-day processes are riddled with errors, bottlenecks, and roadblocks that cause chaos and lead to missed orders.
Just because you’re using an Amazon accounting software doesn’t mean you’re engaging in the most efficient processes. Automation can make your software and systems work for you — not against you. If you’re experiencing any of the following five issues, it may be time to automate.
1. Returns have hurt cash flow
Thanks to Amazon’s flexible return policy, you’ve probably received returns in any condition. But Amazon seller bookkeeping requires you to decide when to write off the damaged inventory while ensuring you didn’t expense the inventory twice. If time is limited, it can be easy to mismanage or ignore returns, which has hurt cash flow and inventory accuracy.
2. Your current inventory strategy can’t keep up
Amazon seller bookkeeping gets all the more complicated, the more you have to manage multiple sales channels, purchasing, 3PL, and returns. Complications pile up as you increase your number of SKUs, marketplaces, and transactions.
Automated or cloud-based bookkeeping for Amazon sellers can prevent you from losing thousands in tied-up inventory. Adding automation can support better inventory management strategies and positive cash flow.
Automated Amazon seller bookkeeping can automate inventory, so you know exactly what you have and where it is. Plus, it can provide an instant snapshot of your financial health, which is critical for forward-thinking financial decisions.
3. You’ve seen a surge in transaction data
As your business grew, so did the volume of transactions. And higher transactIon volumes came with data that slowed down your manual system.
If you’re drowning in transaction data that you don’t have time to manage manually, automated bookkeeping for Amazon sellers can help.
For example, instead of manually enter individual transaction details, automation can eliminate manual data entry — and simplify reconciliation — for sellers who practice journal entry accounting by automatically downloading Amazon settlements as summarized journal entries.
4. You’ve lost track of Amazon fees
It’s a cruel tradeoff, but the more complicated your Amazon business becomes, the more marketplace fees you’ll incur. At a minimum, you’re probably subject to monthly subscription fees, per-item fees, referral fees, closing fees, high-volume listing fees, and refund administration fees.
Adopting automated Amazon seller bookkeeping can help you track and manage costs so that you never lose more in fees than you make in profits.
5. You need to spend less time managing sales tax liabilities
The complexities of sales tax liabilities stopped most Amazon sellers in their tracks. If you need to figure out how many states, cities, and jurisdictions you have a sales tax nexus, you might overlook a sales tax liability.
Automated bookkeeping for Amazon sellers can reduce time spent on sales tax and give you more time to spend on revenue-generating tasks.
Webgility automation for worry-free Amazon seller accounting
Regardless of where you are in the accounting process, automation is the backbone of your success. Adopting automation can take you out of reaction mode: putting out fires, trying to locate that one error, or hoping to save a sale that somehow fell through the cracks.
Accounting may not be your favorite part of running an ecommerce business, but you don’t have to dread it. Building good habits can ensure accuracy and compliance even as your business grows.
Webgility for Amazon sellers is a top-rated QuickBooks Online, Amazon integration solution that makes accounting and inventory management workflows a breeze. Eliminate manual data entry, improve customer experiences, and make data-driven decisions about your business.