How Bookkeeping Optimizes Your Amazon FBA Business?

 

Running an Amazon FBA business can be exciting, but keeping track of your money is important too! Knowing your income helps you buy the right amount of stock, make smart choices based on real numbers, and boost your profits. This blog will show you how to easily track your Amazon FBA income and expenses, so you can see what's coming in and going out and find ways to save money. 

Why bookkeeping is essential for amazon sellers? 

Imagine running your Amazon business without a compass. You might have a general sense of direction, but crucial details like inventory levels, true profit margins, and Amazon fees remain hazy. This is where bookkeeping steps in, acting as your financial GPS for success on the Amazon marketplace. 

Here's why bookkeeping is an absolute must-have for any serious Amazon seller: 

• Numbers tell the story: sales figures are important, but Amazon seller bookkeeping goes beyond that. It helps you understand your true profit by tracking all your expenses – from Amazon fees to product costs and shipping. This clear financial picture allows you to identify areas for improvement and optimize your pricing strategy. 

• Informed inventory decisions: Ever run out of stock at a peak sales moment? Bookkeeping helps you track inventory levels and spending on new products. This empowers you to make informed decisions about restocking and avoid costly stockouts or overstocking. 

• Amazon fee transparency: Amazon fees can be complex. Bookkeeping ensures you understand exactly how much you're paying Amazon in various fees, allowing you to factor them into your pricing and overall profitability calculations. 

• Financial health check: Think of bookkeeping as a regular checkup for your business. By tracking income and expenses over time, you can identify trends, assess your financial health, and make strategic adjustments as needed. 

• Peace of mind & tax time ease: Knowing your numbers brings peace of mind. Bookkeeping ensures you're prepared for tax season, as you'll have a clear record of all your income and expenses for easy filing. 

 

How to set up your bookkeeping system for your amazon FBA business? 

Cash or accrual accounting: A guide for amazon FBA sellers 

When it comes to keeping track of your money in your Amazon FBA business, you have two main options: cash basis and accrual accounting. Let's break down what each one means and how it affects your business. 

Cash basis accounting 

Cash basis accounting is straightforward. You record your income when you get the cash and your expenses when you pay them. It's easy to understand and use. However, if you're selling products through Amazon FBA, this method might not show the whole picture. 

Problems with profit: Because Amazon pays you every two weeks, your profits might look big during payout times but smaller when you're buying new stock. This can make it hard to see how well your business is really doing.  

Ignoring inventory: Cash basis accounting doesn't count the products you've bought but haven't sold yet. This can mess up your calculations of how much it costs you to make your products, which affects how much money you're really making.  

Accrual accounting 

Accrual accounting gives you a better idea of where your business stands financially. It records your income when you make a sale and your expenses when you owe money for something. This method has some benefits for Amazon FBA sellers: 

Better profit tracking: Accrual accounting matches your income and expenses to the time when they happen, not just when you get or pay the cash. This helps you see how well your business is doing more accurately. 

Managing inventory: It allows you to track the products you haven't sold yet, giving you a clearer picture of your available stock and its value. This helps you make informed decisions about purchasing, pricing, and restocking, ensuring that you maintain optimal inventory levels to meet customer demand while minimizing storage costs and stockouts. 

Popular bookkeeping software options for FBA sellers (2024) 

• QuickBooks online: A popular choice for small businesses, offering robust features, scalability, and strong FBA integration. 

• Xero: Known for its user-friendly interface and strong cloud-based capabilities. Xero offers solid FBA integration and a range of add-on features for growing businesses. 

• Freshbooks: A good option for smaller sellers, offering a simple interface, affordable pricing, and basic FBA integration. 

Beyond software: Outsourcing your bookkeeping 

While bookkeeping software offers a powerful solution, some sellers might prefer a full-service approach. Consider outsourcing your bookkeeping to a company specializing in FBA businesses, like BookkeeperLive. 

Creating a chart of accounts for amazon FBA businesses 

Ever feel overwhelmed by your finances? Bookkeeping can be your superhero! It helps you track and organize your money neatly. Let's talk about the chart of accounts. 

Picture a filing cabinet for your money: neat, organized, and easy to find. That's what the chart of accounts does for your business. 

Here's how it works

1. Sorting things out: Every time your business spends or earns money, it's put into a specific category in your chart of accounts. This helps you see exactly where your money comes from and goes. 

2. Mapping your finances: Your chart of accounts acts like a map, showing all the different parts of your business that make money or spend it. 

 

Creating your chart of accounts

While most charts have main categories like assets, liabilities, equity, revenue, and expenses, the real magic happens when you customize them. 

Tailored for you: Your chart of accounts should fit your business perfectly. For example, if you're an online seller, you'll need a category for shipping costs. 

Ready for growth: Make sure your chart can grow with your business. Leave space for new categories as your business grows and changes. 

By organizing your chart of accounts well, you'll understand your business's finances better. This helps you make smart decisions, find ways to improve, and set your business up for success. And if you need help, a professional accountant can guide you in creating the perfect chart of accounts for your business. 

Can FBA integration and bookkeeping make your amazon FBA business easier? 

Running a successful Amazon FBA business involves doing lots of different tasks. One of the important but time-consuming things is keeping track of your money, called bookkeeping. Luckily, using FBA integration can help make this process faster and easier, so you can spend more time growing your business. 

The problem: doing bookkeeping by hand takes a lot of time 

Normally, bookkeeping means typing in information from different places like: 

• Amazon seller central: This is where you see your sales, fees, and how much it costs to send out your products. 

• Bank statements: These show all the money coming in and going out of your business and personal accounts. 

• Receipts and invoices: These tell you how much you paid for products, shipping, and other expenses. Doing all this by hand is not only boring and takes a long time, but you can also make mistakes. 

The solution: Making bookkeeping easier with FBA integration 

FBA integration makes it so your accounting software talks directly to your Amazon Seller Central account. Here's how it helps with bookkeeping: 

• Easy data import: Instead of typing everything in, your sales numbers, fees, and other important info get sent straight to your accounting software. This saves you lots of time and reduces mistakes. 

• Seeing your money in real-time: You can quickly see how much money you're making and spending right now. This helps you see how your business is doing and make smart choices. 

• Keeping track of expenses: You can easily organize and keep track of all the money you spend on things like buying products, shipping, and other costs. 

• Taking care of inventory: Some software can also help you keep track of how much stock you have left, based on your Amazon FBA info. This helps you make sure you don't run out of stock or have too much sitting around. 

• Matching your bank statements: Some software can even check that your bank statements match up with what's in your accounting records, which helps make sure everything is correct and saves you more time. 

Using FBA integration and bookkeeping software can save you a lot of time and make running your Amazon FBA business smoother and easier. 

Amazon FBA taxes: The basics 

• Sales Tax: You might need to collect and pay sales tax depending on where you store inventory or fulfill orders. 

• Income Tax: Track your business income and expenses to calculate your taxable profit. 

• Self-Employment Tax: If you're a sole proprietor or LLC partner, pay self-employment taxes for Social Security and Medicare. 

• Estimated Taxes: Make quarterly estimated tax payments throughout the year to avoid penalties. 

• Recordkeeping: Keep good records of income, expenses, and sales tax for filing and audits. 

Taxes can be complex, so consider consulting a tax advisor specializing in e-commerce for personalized guidance. 

FAQs 

1. What accounting software should I use for my FBA business? 

Popular options include QuickBooks (comprehensive, established), Xero (user-friendly, cloud-based), and FreshBooks (affordable, good for smaller businesses). 

2. How do I handle sales tax for my FBA business? 

Sales tax rules vary by location. Determine if you need to collect and remit sales tax, and configure your accounting software accordingly. 

3. How often should I reconcile my bank statements? 

Aim for monthly reconciliation to ensure everything matches and identify errors. 

4. What are some best practices for FBA bookkeeping? 

Categorize transactions accurately, automate where possible, and regularly back up your data.