Amazon Seller Accounting and Bookkeeping Guide

Accounting and bookkeeping are essential components of running a successful Amazon business. Proper financial management helps you understand your profitability, comply with tax regulations, and make data-driven decisions. Here’s a comprehensive guide tailored for Amazon sellers:

1. Understanding the Basics of Amazon Accounting

Key Accounting Concepts:

• Revenue: Sales income generated from Amazon.
• Cost of Goods Sold (COGS): Costs directly associated with the products you sell (e.g., manufacturing, shipping to Amazon warehouses).
• Operating Expenses: Indirect costs such as advertising, software subscriptions, and professional fees.
• Profit Margins: Your earnings after all expenses are deducted.

Importance of Bookkeeping:

• Tracks your cash flow.
• Identifies profitability trends.
• Ensures compliance with tax regulations.
• Provides clear financial insights for scaling your business.

2. Setting Up Accounting Systems

Choose the Right Accounting Method:

• Cash Basis: Revenue and expenses are recorded when money is received or spent.
• Accrual Basis: Revenue and expenses are recorded when earned or incurred, regardless of payment timing. (Preferred for larger or growing businesses.)

Select an Accounting Tool:

Popular software for Amazon sellers:

• QuickBooks Online
• Xero
• Wave Accounting (free for small businesses)
• A2X (integrates with Amazon for reconciling sales and fees)

3. Categorizing Your Transactions

To stay organized, categorize all transactions into these groups:

• Revenue: Sales income.
• COGS: Product costs, inbound shipping to Amazon, and packaging.
• Amazon Fees: Referral fees, FBA fees, storage fees, and refunds.
• Operating Expenses: Marketing, software subscriptions, office supplies, and employee wages.
• Taxes: Sales tax and income tax payments.
• Miscellaneous Income/Expenses: Interest income, currency conversion fees, etc.

4. Reconciling Amazon Transactions

Use tools like A2X or Fetcher to automate transaction reconciliation. Key steps include:

• Match sales and fees from Amazon Seller Central with bank deposits.
• Verify payouts against your Amazon account statement.
• Account for inventory adjustments (damaged, returned, or lost goods).

5. Managing Inventory and COGS

Inventory is a critical aspect of your Amazon business. Proper tracking includes:

• Regular inventory audits.
• Calculating COGS using methods like FIFO (First In, First Out) or Weighted Average Cost.
• Using inventory management tools like Helium 10, Jungle Scout, or RestockPro to streamline inventory replenishment and forecasting.

6. Tracking Amazon Fees

Amazon charges several fees, such as:

• Referral Fees: Percentage of the product price (varies by category).
• Fulfillment Fees: Charged for FBA services.
• Storage Fees: Monthly or long-term storage costs.
• Advertising Costs: For Amazon PPC campaigns.

Regularly review these fees to ensure profitability and optimize your pricing strategy.

7. Handling Taxes

Sales Tax:

• Amazon collects and remits sales tax in most states. Review the states where you are liable for sales tax to ensure compliance.
• Use tools like TaxJar or Avalara for automated sales tax calculations and filings.

Income Tax:

• Maintain accurate records of all income and expenses.
• Work with a tax professional to maximize deductions and credits.

8. Creating Financial Reports

Regular financial reporting helps track your business performance:

• Profit and Loss Statement (P&L): Shows income, expenses, and profit over a specific period.
• Balance Sheet: Highlights assets, liabilities, and equity.
• Cash Flow Statement: Monitors the inflow and outflow of cash.

Run these reports monthly or quarterly to identify trends and areas for improvement.

9. Best Practices for Amazon Bookkeeping

• Separate Business and Personal Finances: Use dedicated business bank accounts and credit cards.
• Automate Where Possible: Leverage tools for data entry, reconciliation, and reporting.
• Keep Receipts and Documentation: Store electronic copies of invoices, receipts, and financial statements.
• Monitor KPIs: Key Performance Indicators like ROI, profit margin, and inventory turnover help assess your business health.

10. Hiring Professional Help

If managing finances becomes overwhelming, consider hiring:

• Bookkeepers: For day-to-day transaction tracking.
• Accountants: For tax planning and financial advice.
• E-commerce Accounting Specialists: Professionals familiar with Amazon-specific challenges.

11. Avoiding Common Mistakes

• Ignoring Amazon fees when setting prices.
• Failing to track inventory shrinkage (lost, damaged, or unsellable items).
• Neglecting tax obligations for multiple states.
• Mixing personal and business finances.
• Delaying bookkeeping until tax season.

Effective accounting and bookkeeping ensure your Amazon business remains profitable and compliant with regulations. Whether you’re just starting or scaling your operations, a structured approach to financial management will help you achieve long-term success. Take advantage of automation tools, maintain accurate records, and consult professionals when needed.