Bookkeeping for Amazon Sellers

As an Amazon seller, dealing with your finances is just as essential as selling your products. Precise bookkeeping is necessary for understanding your business’s financial health, making informed decisions, and complying with tax regulations. This guide will walk you through the key aspects of bookkeeping for Amazon sellers, providing valuable insights and tips.

What is the Importance of Bookkeeping for Amazon Sellers?

Bookkeeping is as necessary as selling products for Amazon sellers because it:

• Provides financial visibility: It helps you understand your business’s financial performance more precisely and identify areas for improvement.
• Facilitates decision-making: By analyzing your financial data, you can make informed decisions about product sourcing, pricing, marketing, and inventory management.
• Ensures tax compliance: Accurate bookkeeping helps you prepare for tax season and avoid fines & penalties.
• Manages cash flow: It allows you to track your income and expenses so you can balance them, ensuring you have sufficient cash to meet your operational needs.
• Attracts investors: If you’re seeking funding, investors will want to see your financial records to assess the sustainability of your business.

Specific Considerations for Amazon Accounting

• Inventory management: Since many Amazon sellers have a fairly large inventory, it requires proper tracking and valuation.
• Inventory valuation methods: Adopt methodologies like FIFO or LIFO to ascertain at which value your stock should be recorded.
• Inventory adjustments: Make provisions for reductions relating to inventory losses, obsolescence, and in some cases returns.

Sales tax: If you have an obligation to charge sales tax, you must track it and remit it to the appropriate tax authority.

• Sales tax nexus: Find out if you have a sales tax nexus in various jurisdictions.
• Sales tax rates: Learn the sales tax rates where you are supposed to pay sales taxes on your products.
• Tax compliance: Ensure that you collect and remit sales taxes properly in any state where you have nexus.

Amazon Fees: You should understand the different charges that Amazon applies—for example, referral fees, fulfillment fees, and advertising costs.

• Referral fees: Consider whether the rate of referral fees that you pay is proportionate to your sales volume and the product category.
• Fulfillment fees: Think about whether fulfillment fees are appropriate for the size and weight of your products.
• Advertising Costs: Keep a practical check on what you spend on Amazon advertising campaigns.

International sales: If you make sales to customers outside your country, you would surely have to meet several other obligations, including those imposed by the tax and customs authorities.

• Import and export duties: Know the import and export duties that are applicable to your products.
• VAT (Value-Added Tax): If you sell to customers within the European Union, you may be required to register for VAT and charge this on your sales.
• Currency exposures: An aspect with the utmost requisite in managing your financial statements will involve the sensitivity of your various monetary exposures.
• Foreign exchange gains and losses: Recognize any gains or losses from changes in exchange rates.
• Cover using hedging: Only now introduce hedging to cover or minimize risks associated with currency fluctuations.

Getting Started with Accounting for Amazon Customers

Choose an accounting method: Decide if you want to use accounting software, spreadsheets, or a combination of the two.

• • Accounting software options: Consider options like QuickBooks, FreshBooks, or Xero.
  • Spreadsheet Templates: Use pre-made spreadsheet templates to track income and expenses.

Set up your own accounting system: Create a chart of accounts to categorize income and expenses.

• • Revenue accounts: Create an account for sales revenue, other income and sales tax collected.
  • Expense Accounts: Create accounts for product costs, sales commissions, administrative costs, and shipping costs.

Track your income and expenses: Record all purchases, sales and other financial transactions.

• • Source documents: Keep accurate records of all transactions, such as invoices, receipts and bank statements.
  • Recording transactions: Accurately record all transactions in your accounting system.
  • Manage your inventory: Track inventory levels, purchases and sales.
  • Methods for value inventory: Find the right method to select the inventory value, such as FIFO and LIFO
  • Inventory Management: Regularly check your inventory records and make changes for loss, damage, or returns.

Prepare Financial Statements: Prepare an income statement, balance sheet and cash flow statement to analyze the financial performance of your business.

• • Income statement: It shows the company’s income and expenses in a specific period.
  • Balance sheet: It shows the company’s assets, liabilities and equity at a specific time in Titanium.
  • Cash Flow Statement: It shows the inflows and outflows of money from your business.

Seek professional advice: Consult an accountant or tax advisor for guidance on accounting and tax matters.

• • Accounting Services: Consider hiring a professional accountant to handle your bookkeeping and tax preparation.
  • Tax advice: Seek advice from a tax advisor to ensure compliance with tax laws.

Other Tips

• Stay Organized: Maintain a system for keeping track of your financial records.
• Regularly reconcile your accounts: Compare your financial information with your account records to ensure accuracy.
• Consider using accounting software: There are many software options that can automate accounting tasks and provide valuable insights.
• Stay up to date with tax laws: Make sure you are aware of any changes in tax laws that may affect your business.
• Seek professional help if necessary: ​​If you are in the business of accounting, hire a professional accountant or bookkeeper. 

Additional Concerns for Amazon FBA Sellers

FBA fees: Understand the various fees associated with Amazon Fulfillment Services (FBA), such as storage fees, fulfillment fees, and removal fees.

Inventory storage: Track your inventory stored in Amazon fulfillment centers to ensure you are not incurring excessive storage fees.

FBA reimbursements: Claim reimbursements for any damaged or lost inventory through Amazon’s FBA reimbursement process.

By following these guidelines and implementing effective bookkeeping practices, one can gain valuable insights into his/her Amazon seller business, make data-driven decisions, and ensure compliance with tax regulations. A well-organized financial system will contribute to the long-term success and growth of your online selling project.