To succeed as an Amazon seller, controlling your finances is essential, and bookkeeping plays a big part.
Keeping thorough records of your transactions will assist you in monitoring your company’s financial health, making wise financial decisions, and adhering to tax regulations.
Here are the top ten things any Amazon seller needs to know about bookkeeping.
Keep an eye on Amazon’s charges
Amazon’s costs, including referral fees, FBA fees, and storage fees, can significantly impact your company’s profitability. Keeping track of these costs and ensuring your records are appropriately updated is crucial.
For each item sold on their marketplace, Amazon will charge you a referral fee as a percentage of the sale price. In addition to storage fees, FBA fees are paid for keeping and shipping your products from/to Amazon’s warehouses.
Keeping track of these costs is important because they may impact your profit margins. It is crucial to have a system or financial expert in place to monitor these costs and guarantee that they are appropriately reported in your books.
Keep yourself organized and current
Your company’s financial health depends on how tidy and current your bookkeeping is. Organizing your transactions daily or at least once weekly ensures your records are correct and current.
This procedure can be automated using accounting software, simplifying tracking and arranging your transactions. It can also produce reports like profit and loss statements, balance sheets, and cash flow statements that offer an overview of your company’s financial status.
Additionally, keeping tabs on your finances will assist you in making wise choices for the future of your company. You can use it to find areas to cut costs, increase profitability, and invest in expansion prospects.
Maintain correct records
The significance of maintaining correct records should be the first thing you understand about bookkeeping as an Amazon seller. Keeping track of all your financial activities, including sales, expenses, and invoices, is essential. Use an accounting program or spreadsheet to keep track of your financial transactions. Ensure to immediately and accurately document all transactions, including Amazon royalties, book sales, and expenses.
Preparing your tax returns and managing your funds properly would be simpler if you kept correct records. Financial mismanagement and tax issues can result from inaccurate or missing documents. As an Amazon seller, keeping thorough records will enable you to measure your earnings and losses, keep tabs on your financial flow, and spot areas where you may reduce spending.
Keep Personal and business finances separate
Separating your personal and professional finances is another crucial bookkeeping aspect for an Amazon seller. It’s critical to keep your personal and corporate finances in separate bank accounts and on separate credit cards. This will make the bookkeeping process clearer and help you avoid confusion.
It can be challenging to keep track of your business income and expenses when you combine personal and corporate accounts. Additionally, you can find yourself writing off personal expenses as business expenses, which might cause tax issues.
Ensure you only use your company credit card and bank account for business transactions to prevent this. In addition, avoid using your business account for personal purposes by paying yourself a salary or transferring profits via diviends to your personal account.
Employ a qualified bookkeeper or accountant.
You might have little experience with accounting and bookkeeping as an Amazon seller. Consider employing a seasoned accountant or bookkeeper to manage and track your finances. These experts perform specific tasks like;
- managing your financial activities
- setting up your bookkeeping system
- completing your tax returns with the aid of an accountant.
A qualified bookkeeper or accountant can also assist you in finding potential tax credits and deductions you may have overlooked, which could save you money. They may also give you financial reports that will enable you to make wise financial decisions for your company.
Recognize the fundamentals of bookkeeping
Recording all of your company’s financial transactions is part of bookkeeping. Sales, costs, refunds, and other transactions fall under this category. Single-entry and double-entry bookkeeping are the two primary techniques.
The simplest type of bookkeeping is single-entry bookkeeping. Each transaction is only logged once using this method. In other words, if you sell a product, you must record the sale as revenue in your books. When you buy something, you put the cost down as an expense. Small firms with few transactions should use single-entry bookkeeping.
A more complicated bookkeeping technique is double-entry bookkeeping. Each transaction is recorded twice using this method—once as a debit and once as a credit.
As an illustration, if you sell a product, you record the revenue (credit) and the rise in your bank account or cash flow. (debit). Double-entry accounting is appropriate for companies with more transactions since it can produce more detailed financial reports.
Keep a record of your earnings and spending.
Keeping track of your income and costs is one of the most crucial components of bookkeeping for an Amazon seller. You will comprehend your cash flow, profitability, and tax liabilities better. Here are some pointers for keeping tabs on your earnings and spending:
- Use accounting software: To keep track of your revenue and expenses, use programs like QuickBooks, Xero, or Wave. You can also use these software tools to create financial reports and prepare for tax season.
- Keep all receipts and invoices: For your business spending, you should keep all receipts and invoices. This will support your business deductions in the event of an audit and assist you in finding tax-deductible spending.
- Reconcile your accounts: To ensure your records are accurate, you should reconcile your bank and credit card accounts monthly. You must compare your records to your bank and credit card statements to find differences.
Recognize your tax responsibilities
As an Amazon seller, you are liable for paying taxes on your business income. Understanding your tax responsibilities and making sure you are following the law are vital.
Here are some tax-related items you should be aware of:
- Sales tax: You might need to collect and submit sales tax if you sell goods in states with a physical presence. Apply for a sales tax permit in each state where you have a physical presence and must collect sales tax from your customers.
- Income tax: You must pay income tax on the money you make from your business. You should maintain a record of your earnings and spending and include your business revenue in your personal tax return if you’re no incorporated
- Self-employment tax: If you are a self-employed person, you must pay self-employment tax. This tax should be accounted for in your expected tax payments.
- Estimated tax payments: To avoid fines and interest, you should make estimated tax payments throughout the year if you anticipate owing more than $3,000 in taxes annually.
Amazon also deducts the fulfillment, storage, and other fees from your account when a product is sold.
Keep an eye on your FBA stock
Products you ship to Amazon’s warehouses are added to your FBA inventory. Monitoring your inventory levels is crucial to ensure you have enough goods to satisfy customer demand and prevent stockouts. You can monitor your inventory levels and sales with Amazon’s inventory reports.
- Recognize FBA fees.
Fees for fulfillment, storage, and other costs are incurred while using FBA. When Amazon picks, packs, and sends your products, fulfillment fees are levied.
Storage costs are assessed based on how much room your products take up in Amazon’s warehouses. Long-term storage, removal, and disposal fees are possible extra costs.
It’s crucial to comprehend and consider these costs when determining your pricing and profitability. To calculate your estimated FBA fees for various products and scenarios, utilize Amazon’s fee calculators.
- Observe FBA reimbursements.
Due to overpriced fees, lost or damaged products, or other problems, Amazon can owe you money. Make sure you receive the exact amount by keeping track of these reimbursements. You can find inconsistencies and you will need to ask Amazon for a refund.
Keep abreast of changes to the tax code.
To ensure you comply with the law, stay up to speed with any tax rules and regulations changes. To stay up-to-date on changes that affect your company, you can speak with a tax expert or sign up for tax newsletters and publications. Keeping up with changes to tax law can help you avoid fines and ensure you are utilizing all tax deductions and credits available to you.
Final Thoughts
FBA inventory management is a critical bookkeeping component for an Amazon seller. You must ensure that your records are accurate and that you are not being overcharged for fees by keeping track of your FBA inventory, comprehending FBA fees, and reconciling your inventory data.
To avoid overcharging, consider FBA costs when calculating your revenues and maintain track of FBA inventory deletions. Running a successful Amazon business and ensuring that your bookkeeping is correct and current are both possible by using a good bookkeeper that spcializes in eCommerce.