Amazon Bookkeeping Guide for Beginners

For new Amazon sellers, establishing strong financial practices is essential for business growth. However, navigating through the complexities of bookkeeping can seem intimidating. This guide aims to break down Amazon bookkeeping into simple instructions, providing a clear and practical roadmap for beginners.

We’ll delve into the fundamentals of accounting principles specifically relevant to Amazon sellers. By the end of this post, you’ll be equipped with the knowledge and tools to confidently manage your Amazon finances and gain valuable insights into your business performance.

Understanding Your Amazon Finances

Selling on Amazon involves several key financial aspects, including product revenue, Amazon fees, FBA fulfillment costs, and advertising expenses. Each of these elements impacts your overall profitability and must be tracked diligently.

Here’s a breakdown of the key financial aspects you need to consider:

• Product Revenue: This is the lifeblood of your business, representing the total amount customers pay for your products.
  
• Amazon Fees: Amazon takes a chunk of each sale through various fees. These can significantly impact your profitability, so understanding their structure is vital. Here are some common ones:
  
  • Referral Fees: A percentage of the product’s selling price, typically varying by category.
  • Closing Fees: A fixed fee per item sold, regardless of price.
  • Fulfillment Fees (FBA): If you use Amazon’s fulfillment services, you’ll incur fees for storage, picking, packing, and shipping your products. These fees are based on product size, weight, and storage duration. Consider these costs carefully when deciding between FBA and fulfilling orders yourself (Fulfillment by Merchant, FBM).
  • Advertising Fees: Sponsored product ads can significantly boost sales visibility but come with a pay-per-click (PPC) or pay-per-impression (PPI) cost. Optimizing your advertising campaigns is crucial to ensure a healthy return on investment (ROI).

Make sure to take into account the ongoing costs that affect your bottom line as well:

• Product Costs: This includes the cost of acquiring your product, whether manufacturing it yourself, wholesaling, or dropshipping. Understanding your product cost is essential for setting a profitable selling price.
• Shipping Costs (FBM): If you choose not to use FBA, you’ll be responsible for calculating and factoring in shipping costs for each order. This can be complex for sellers with a wide variety of products or those shipping internationally.

Informed decisions based on financial data are key to Amazon bookkeeping and achieving long-term success. Make sure to study these numbers as they will prove important later on.

Essential Bookkeeping Tasks for Amazon Sellers

For beginner Amazon business owners, there are three key tasks you need to focus on when it comes to bookkeeping. These are:

1. Record-keeping

Accurate record-keeping is the foundation of good bookkeeping. Every financial transaction related to your Amazon business, including sales, fees, refunds, and product costs, should be meticulously recorded. This practice ensures that you have a comprehensive view of your financial activities, enabling you to analyze your business performance accurately.

2. Categorization

Properly categorizing transactions is critical for tracking income, expenses, and Cost of Goods Sold (COGS). Categorization helps in understanding where your money is going and how your business is performing in different areas. It also simplifies the process of generating financial reports, which are essential for tax filing and financial analysis.

3. Reconciliation

Regularly reconciling your Amazon Seller Central account with your bank statements is necessary to ensure accuracy in your financial records. Reconciliation helps identify discrepancies between your sales records and bank deposits, allowing you to correct any errors promptly. This practice not only ensures the integrity of your financial data but also helps in detecting any fraudulent activities early.

Choosing the Right Bookkeeping System for Your Amazon Business

Managing your Amazon bookkeeping can be done using various methods, such as spreadsheets or bookkeeping software. While spreadsheets might work for small-scale operations, they can become cumbersome as your business grows. Bookkeeping software, especially those designed for Amazon sellers, offers several advantages.

Bookkeeping software can integrate with Seller Central for automatic data import, saving you time and reducing the risk of manual entry errors. These tools often come with features for tracking inventory, calculating COGS, and generating detailed financial reports. Additionally, many bookkeeping software solutions provide tools for managing sales tax compliance across different states, which is a significant benefit for Amazon sellers who operate in multiple jurisdictions.

Sales Tax for Amazon Sellers

Sales tax compliance is one of the more complex aspects of running an online business. Amazon sellers must understand the concept of sales tax nexus, which determines where they are required to collect sales tax. Economic nexus laws vary by state and can depend on the volume of sales or the number of transactions. Consulting a tax professional is highly recommended to navigate the complexities of sales tax regulations effectively.

Some bookkeeping software can assist with sales tax calculations and compliance, making it easier to manage this aspect of your business. These tools can automatically calculate the appropriate sales tax based on the customer’s location and the applicable laws, ensuring that you remain compliant and avoid potential penalties.

Conclusion

Establishing a solid bookkeeping routine is essential for Amazon sellers. From recording every transaction to categorizing expenses and reconciling accounts, these practices provide a clear picture of your business’s financial health. Choosing the right bookkeeping system, whether it’s a spreadsheet or specialized software, can significantly impact your efficiency and accuracy.

When it comes to Amazon bookkeeping, our team here at CapForge is ready to assist you. With seasoned bookkeepers managing your financial records, you can feel confident in making data-driven decisions to help your Amazon business grow.