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The Seller Guide To Proper Amazon Bookkeeping

Why do you need proper bookkeeping as an Amazon seller? There's many reasons - we've unpacked a few of the essentials in this article!

The Seller Guide To Proper Amazon Bookkeeping
Julia Grant

March 31, 2022

E-commerce is all fun and games until you have to deal with taxes. That’s how the expression goes, right? Especially because there is so much potential for income with Amazon FBA, it’s important to make sure you have the proper bookkeeping and accounting practices in place as soon as possible. 

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The Importance of Accounting and Bookkeeping for Amazon Seller Businesses

Just like any business, Amazon seller bookkeeping and accounting are vital. But why? If you’re not an accountant yourself, it’s likely this isn’t a big passion of yours or something that you think about routinely.

There are a few key reasons why you should have plans for quality accounting and bookkeeping for your e-commerce business. 

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  1. Keep Track of Financial Health

It should go without saying, that professional accounting and bookkeeping help you properly track your financial activities and see how healthy your business is. 

Most Amazon sellers know how much they have generated in sales from their Amazon seller central account - very few can name off the top of their head what their monthly profit or profit margin is. Confused about these terms? That’s the point! Without bookkeeping and accounting, these are difficult to pin down.

Profit is what you’ve earned after you’ve taken all expenses out. Your profit margin is essentially how much profit you routinely generate above and beyond expenses. These are difficult to discern without the kind of financial reporting that an accountant can provide you with (like a Profit and Loss Statement).

Proper bookkeeping can also ensure that you stay on top of errors, overcharges, double payments, or other discrepancies that might arise during the course of business. If you aren’t having your financial transactions regularly tracked and organized, you won’t be able to see these things early enough to address them.

  1. Stay on Top of Taxes 

Possibly the most important reason to start properly handling your bookkeeping is for tracking sales tax. Filing taxes and sales tax tracking as a business is complicated - and it becomes more complicated when you don’t have your finances in order or your sales tax permit. Doing so requires you to have accurate and comprehensive reporting of your expenses and income, all organized appropriately. To avoid penalties and to ensure maximum tax credits, you want to have these properly organized. This will also come in handy should you ever be audited.

Additionally, selling on Amazon means that you have to remit sales tax to any state in which you have a sales tax nexus. This is a complicated endeavor and requires regular maintenance and filing - even if Amazon is technically collecting and remitting the tax for you. Proper bookkeeping and accounting will make this easier!

  1. Avoid Debt and Fees

The best way to avoid undesired debt, fees, subscriptions, overcharges, and even credit card fraud is to have eyes on your books at all times. Proper bookkeeping will ensure that you aren’t late on payments or being charged for services that you aren’t using/didn’t purchase. This is also the best way to handle debt in your business, by ensuring that you’re not missing payments.

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Is Amazon Bookkeeping Different?

Bookkeeping for an Amazon store is slightly different than other businesses. Here are a few things that are important to keep in mind for your Amazon accounting purposes!

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  • Separate your expenses correctly. Especially if you’re considering selling your Amazon store in the future, it’s essential to separate your expenses well. Obviously, all expenses directly related to product acquisition should be in their own category. You should also separate operating expenses in your business bank account, which are necessary for business operations, from overhead, which is valid expenses but not critical to business operations.
  • Properly evaluate your cost of goods sold. In order to do this, you have to take into account not only the cost of your inventory, but also the cost of shipping, warehouse storage fees, taxes, and any other costs involved in getting your product from the original destination to the customer. Not only will this assist you in your bookkeeping, but it will help you set more accurate prices to cover the entire cost of goods.
  • Separate income from different platforms. Many Amazon sellers also sell via platforms like Shopify, Walmart, Etsy, or other e-commerce websites. Each one of these platforms requires its own separate category of bookkeeping and accounting. Think of them as different branches of your business.
  • Don’t forget contracted expenses. It’s easy to lose sight of the expenses that aren’t directly visible on your Amazon storefront. You likely have spent money on marketing assistance, independent contractors, and other help from your beginning cash flow balance to get your business where it needs to be. Don’t forget to log these expenses accordingly. If you have employees, have your accountant help you figure out salary and taxes correctly.
  • Use accrual accounting and bookkeeping, not cash basis accounting. Because you will have to pay for inventory, and inventory management and incur most of the expense for this business upfront, it’s easy to get an incorrect evaluation of profit/loss on a monthly basis when using the cash basis form of accounting. An accrual form of bookkeeping will help you to see all your income and expenses relating to each other properly, spread out over time.

Can I Do My Own Amazon Accounting and Bookkeeping?

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This is a very short answer: no. You cannot do your own Amazon accounting and bookkeeping - if you want it to be done professionally and properly, that is. Basically, you as the business owner can not use the best accounting software out there or any custom or cloud accounting software. The skills necessary for proper accounting and bookkeeping are not DIY skills. They require real schooling and practical experience in the field. 

You want to find a firm with a licensed CPA on board (or an individual who is a CPA) and who has experience working with e-commerce - preferably who has experience working with Amazon sellers in particular. The stakes are high when it comes to your financial books. Don’t leave it to chance by attempting to do it on your own! 

At EcomHub, we offer comprehensive accounting and bookkeeping solutions for Amazon sellers just like you. If you choose to work with us, you can do so with full confidence as our team includes licensed CPAs and accountants with experience handling Amazon businesses. 

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Conclusion

If you don’t have a system in place for proper accounting and bookkeeping for your Amazon business, now is the time to get things organized. The health of any business is largely dependent on your financial health. Don’t leave things to chance, and get your books organized now to avoid problems later. We’re happy to help you do just that with professional Amazon accounting and bookkeeping services you can trust!

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The Seller Guide To Proper Amazon Bookkeeping

Julia Grant

Julia Grant is a copywriter specializing in e-commerce and small business, helping businesses expand their reach with copy that clearly communicates their message and converts. She is a certified translator and interpreter and prides herself on providing culturally relevant content in both English and Spanish.

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