As an Amazon seller, you already know how important it is to keep track of numbers. For example, if you keep your inventory too low or your sales price too high, you will lose valuable sales. But if you keep your price too low for a long time, your profit margin will suffer badly!
Bookkeeping is an essential activity in order to keep track of your business numbers. How much are you spending every month, how much money are you making on sales, how much is tied to your inventory, how much do you pay to your people, and how much are you paying yourself?
Who still likes to use spreadsheets and paper systems nowadays? Sure they are free, but it will be hard to manage data when the volume of your transactions goes up. It’s not scalable.
Here are the steps you’ll need to follow if you’re just getting started with bookkeeping for your Amazon business.
Basic 1: Get simple and reliable accounting software.
QuickBooks products are highly reliable, easy to use, and very scalable with the right foundation in place.
We recommend using QuickBooks Online, not only it is a very user-friendly app, it is very reliable, and has what e-commerce sellers need for their accounting and bookkeeping.
Basic 2: Find the best third-party app to sync Amazon Sales, Fees, and COGS to QuickBooks Online.
There can be so many choices, I have seen some of the apps that sync all sales details into QuickBooks Online order by order, and these are not very ideal. Soon, these apps will dump too much data and soon your QuickBooks Online will begin loading forever, even for simple tasks.
A2X is the app we trust most for syncing Amazon sales, fees, and COGS to QuickBooks Online. It tracks your Amazon settlements and sends a summary to QuickBooks online. It also works for Shopify, Walmart, eBay, and Etsy.
Basic 3: Standard Chart of Accounts for eCommerce Sellers
When using accounting software, it’s very important to systematize the categorization of your income and expenses. This way, the transactions will be organized in an easy-to-understand, easy-to-use, and easy-to-follow format.
The reports you will generate will make more sense when you have a good chart of accounts tailored for eCommerce sellers.
A good strategy is to keep all income and expenses related to Amazon in a single group so you will easily see them whenever you run your Profit and Loss reports.
Basic 4: Be ready to track Cost of Goods Sold accurately
Cost of Goods Sold can be tricky, basically, it involves the cost of purchase, cost of shipping, duty and freights, custom fees & taxes, and all costs to bring the item to the market. Then once sold to your customers, it becomes cost of goods sold in the profit and loss.
You will need to have good inventory management software to make this process easier. If you are selling in the US, InventoryLab is one of the apps we recommend to help track inventory costs and quantity.
BASIC 5: Record and Track Inventory Costs properly
When you purchase inventory, the cost of purchase is the first inventory cost you should record.
If you manufacture your own product, the raw materials, supplies, and labor to make it are inventory costs.
When you ship your product from your supplier to Amazon warehouse or your own warehouse, that’s another inventory cost.
You need you compute the Unit Costs per product so that you can:
a. Compute the inventory balance every month or year end based on remaining quantity
b. Calculate Cost of Goods Sold based on quantity sold per product
BONUS TIP: Get extra help when you need it
While it’s very exciting to see your Amazon sales going up, and your business growing bigger….this also means now you have a lot more stuff to do, which may eat a lot of your precious time.
Get the help of professionals, a good bookkeeper or accountant specializing in e-commerce sellers is most recommended. Saving you time and effort so you can focus more on growing your business