The Difference Between Amazon Seller Bookkeeping and Traditional Bookkeeping

Running a business comes with its own set of financial responsibilities, but Amazon sellers often face a unique set of challenges. While traditional bookkeeping methods work well for brick-and-mortar stores or service providers, Amazon seller bookkeeping operates in a more complex and fast-paced environment.

This article explores the key differences between Amazon seller bookkeeping and traditional bookkeeping, helping you understand why specialized methods are often necessary for success.

Understanding Traditional Bookkeeping

Traditional bookkeeping revolves around maintaining accurate records of a business’s financial transactions. For small businesses, this process often includes recording sales, expenses, payroll, and taxes in a structured format. Many businesses rely on spreadsheets or general-purpose accounting software, like QuickBooks or Xero, to handle their finances.

The simplicity of traditional bookkeeping is one of its main appeals. Transactions are straightforward, tied to tangible events like a sale in-store or a client payment for services rendered.

Income is deposited directly into a business bank account, and expenses are withdrawn or paid via checks or credit cards. The predictable nature of these transactions makes it easier to reconcile accounts at the end of each month.

For traditional businesses, reporting often focuses on profit and loss (P&L) statements, balance sheets, and tax compliance. Inventory management, if applicable, is usually straightforward and doesn’t require advanced software or real-time monitoring.

How Amazon Seller Bookkeeping Differs from Traditional Bookkeeping

Amazon sellers, however, operate in an ecosystem with nuances that make bookkeeping more complex. Amazon itself acts as an intermediary between the seller and the customer, handling payments, shipping, and sometimes inventory management.

This setup introduces several layers of complexity that traditional bookkeeping doesn’t typically address.

1. Payment Delays and Fee Structures

Amazon disperses payments to sellers on a biweekly basis, not immediately after a sale. During this delay, Amazon deducts various fees, including referral fees, FBA (Fulfillment by Amazon) fees, and storage fees, among others. This setup means sellers can’t simply track income as they would in traditional businesses. Instead, they need to account for gross sales, fees, and the net amount received.

Recording these details manually can become overwhelming, especially for sellers processing hundreds or thousands of transactions monthly. Specialized software or detailed reports from Amazon’s Seller Central are often necessary to reconcile these figures.

2. Inventory Management

For Amazon sellers, inventory is a moving target. If you use Fulfillment by Amazon (FBA), your products are stored in Amazon’s warehouses, and you may never see them after they leave your supplier. Tracking inventory levels, accounting for cost of goods sold (COGS), and handling inventory shrinkage (e.g., lost or damaged items) require precise recordkeeping.

Unlike traditional businesses that might manually count inventory or rely on simpler tracking systems, Amazon sellers need to integrate inventory management tools with bookkeeping software. These tools ensure accurate financial reporting while monitoring stock levels to avoid costly overselling or stockouts.

3. Sales Tax Compliance

Sales tax is a tricky area for Amazon sellers due to the varying tax rules across states and countries. With Amazon operating in multiple jurisdictions, sellers often have nexus in several states. Traditional bookkeeping rarely involves such complexity unless the business operates in multiple locations.

Amazon’s marketplace facilitator laws mean the platform collects and remits sales tax on behalf of sellers in some states. However, sellers are still responsible for tracking tax obligations in states where Amazon doesn’t provide this service. Dedicated tools like TaxJar or Avalara often integrate with bookkeeping software to manage this aspect of compliance.

4. Currency Conversion for International Sales

Many Amazon sellers operate globally, selling products in different countries. This introduces currency conversion into the bookkeeping process, which is another layer of complexity. Traditional businesses typically deal in a single currency, so exchange rate fluctuations and cross-border fees aren’t common concerns.

Amazon sellers must account for exchange rate differences, fees for international transactions, and potential tax implications when selling across borders. This often requires integrating specialized software that tracks foreign sales and handles multi-currency accounting.

5. Refunds and Returns

Refunds and returns are more frequent in e-commerce than in traditional retail, and Amazon sellers must account for them meticulously. When a return is processed, Amazon deducts the refunded amount, restocking fees, and sometimes additional penalties from the seller’s account.

These transactions complicate revenue tracking. Unlike traditional businesses where returns might involve a simple reversal, Amazon bookkeeping requires tracking the refund, related fees, and adjustments to inventory or COGS

Why Amazon Sellers Need Specialized Bookkeeping

The unique demands of Amazon selling mean traditional bookkeeping methods often fall short. Without a system tailored to their needs, sellers risk inaccurate financial records, tax compliance issues, and poor business insights.

Specialized bookkeeping ensures that Amazon sellers:

• Accurately account for Amazon’s fee structures and payouts.
• Maintain proper inventory records, even for FBA stock.
• Stay compliant with sales tax rules across multiple jurisdictions.
• Track and reconcile refunds and returns effectively.
• Manage multi-currency transactions for international sales.

Investing in the right tools and practices allows Amazon sellers to streamline their bookkeeping processes, reduce errors, and focus on growing their businesses.

The Value of Professional Help

While many Amazon sellers manage their bookkeeping themselves, there’s a growing recognition of the value of professional help. CapForge’s accountants and bookkeepers specializing in e-commerce understand the intricacies of the Amazon ecosystem and can provide invaluable insights.

Our professionals can help sellers set up efficient systems, ensure tax compliance, and generate accurate financial reports that aid in decision-making. We can also free up sellers’ time to focus on what they do best—sourcing products, marketing, and driving sales.

Hiring an expert doesn’t mean losing control of your finances; instead, it ensures that the financial backbone of your business is solid, allowing you to scale confidently.

Get Started Today With CapForge’s Bookkeeping & Tax Services

Take control of your business finances with CapForge. Our expert team makes managing your payroll simple so you can focus on what really matters—growing your business.

Partner with us today and discover the peace of mind that comes from knowing your financials are in good hands.

Send an email to info@capforge.com or contact us at 1-858-633-3573 to get started. Additionally, you can fill out the form below and we’ll be happy to attend to your needs!