Amazon Seller Bookkeeping Basics (for Accurate Financials)

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0:48 Basic one, record your sales accurately

Okay, so the first basic of Amazon bookkeeping is to accurately record your sales.

Now, every one to two weeks depending on your plan, Amazon will deposit money into your bank account as a seller. That deposit from Amazon in your bank account does not equal sales. If you record that number as sales, you are likely understating your sales number and you're going to come across a lot of issues.

Your gross profit margin may be skewed. When you go to sell your business it may come back to bite you, because you're going to look at a multiple of revenue, and your revenue may be understated. So getting that number is super important.

To get accurate sales numbers, you're going to need to dive into Amazon Seller Central, look at sales reports, and look at the month that you're recording for sales and make sure that that matches up with what is in Amazon Seller Central. So this is super important.

1:44

Now there's a tool that we really like. It's called A2X. And A2X will integrate Amazon Seller Central with QuickBooks. And what it will do is, all the activity that goes on in Amazon Seller Central, so when you get sales coming in, then all the other activity that goes on, it's going to pull that all in to QuickBooks.

And if you set it up right, it's going to automatically pull all the data from Amazon Seller Central, so that you get accurate sales numbers and other expenses that are going on at Amazon accurately recorded in QuickBooks.

So A2X is a great tool to help you to accurately record your sales, and this is a super important step in getting good numbers for your Amazon business.

2:36 Basic two, sales tax is a liability

Okay, the second basic of Amazon bookkeeping is to accurately record sales tax as a liability.

If you collect sales tax from a customer, that is not income. And when you pay that to the state, it's not an expense. Sales tax should never show up on your income statement. But when you receive sales tax from a customer, you technically now have a liability to pay back to the state. So it should show up as a liability when you receive it from the customer, and your liability will decrease when you pay that to the state.

Now you may have a lot of sales tax questions in addition to just the bookkeeping aspects, such as, what state should I be collecting sales tax, how do I set up Amazon to collect that sales tax, and how do I pay the states. I'm not going to dive into all the details in this video.

But do you know that a lot of states are implementing laws now that actually require Amazon to collect sales tax for its sellers, relieving the burden for a lot of Amazon sellers? Now you should be aware that you still may be liable in some states, especially if you're selling on other sales channels. So you can check out our blog and website that has a lot of good content, and that will help you become sales tax compliant as an ecommerce company.

3:52 Basic three, get COGS right

All right, so the third basic of Amazon bookkeeping is to accurately calculate your cost of goods sold, or COGS, and record that COGS at the right time.

So let's talk about why COGS is so important to get right as an Amazon seller. If you get an accurate sales number and you get accurate COGS, then you're going to have an accurate gross profit margin. Having a good gross profit margin, or accurate, is super important for the decisions that you will make, such as, can I hire these additional people, can I use this software. All additional expenses that you have, you can decide if you have enough money for those expenses based on your gross profit margin.

4:36

So we often see Amazon sellers get their COGS wrong. The first step they need to do is calculate an accurate COGS for each product. Now we see them miscalculate this number because they are not including all the costs that it takes to get that product to their door. So remember to include all those costs.

Now once you calculate the accurate COGS, then you need to record it at the right time. So instead of recording COGS when you order product, you don't record COGS until you actually sell that product.

And if you're doing this correctly, then from month to month you'll see an accurate cost of goods sold and therefore an accurate gross profit margin. But if you're just recording COGS when you order the product, and you have a huge COGS that month, you don't really know your gross profit margin, right? And then the next couple months you won't really have COGS and you'll have tons of sales, and so your gross profit margin is going to be all over the place and it won't be accurate for you to be able to make those decisions.

So the goal here is to get to a point where you have an accurate COGS and an accurate gross profit margin for each of your SKUs, and then you can start to compare them, you know, which SKUs are making the most money. And then you can take a look at your overall gross profit margin when making important business decisions. So make sure and get that COGS accurate.

6:06 Where to learn more

If you'd like additional information about calculating COGS and recording it at the right time, I included a link down below to a blog that will go into greater detail on this subject. I also included a link to our sales tax downloadable PDF. You can download this PDF and get ten steps to sales tax compliance, because I know a lot of you will have additional questions in this area.

If you found this video helpful, make sure and hit that like button, subscribe to our channel, and share this video with any friends that you have in ecommerce space. Also comment with any questions you have, things that you've found helpful, and maybe I can dive into some things in greater detail.

So thank you so much and have a great day.