Avoiding Common Accounting Mistakes as an Amazon Seller
Practicing proper accounting will keep a business running efficiently and help avoid penalties. This is where you’re going to see which products are considered bestsellers and the amount of fees that you’re shelling out each month when it comes to Amazon.
As a seller, life can be complicated enough, but e-commerce accounting is going to be more stressful if you’re unsure of what to do. Many sellers may not have any background in accounting because the platform has a low barrier to entry. When you’re in this situation, it can harm your sales, and you might get audited by the IRS if you’re not careful.
How Does Accounting in E-commerce Platforms Work?
The sales of your products listed on Amazon should be listed to ensure that your financial records are accurate. If you’re paying several fees, they should also be itemized and reconciled with your bank account to create more accurate reports.
Generally, a platform may issue settlements every few weeks, and in the case of Amazon, this is going to be available on Seller Central. You need to navigate to the right menu and download the specific report on your preferred date. Syncing orders is also possible between a software program and the e-commerce platforms where most of the payments are added automatically, including any adjustments.
Unfortunately, some may encounter problems with their accounts because Amazon may only deposit the net amount of your earnings every two weeks into your nominated bank account. When you insert this into accounting software manually, you might be missing out on sorting debits and credits, so you might want to get help from an accountant to make your life easier.
Common Oversight of Amazon Sellers with their Finances
1. Higher Actual Costs than Anticipated
Some sellers are being charged around $39.99 if they want to set up a professional seller account, but you should include various fees that will be incurred with each sale. Manage your money effectively and maintain a steadier cash flow by anticipating the biweekly cycle of payouts.
There are also referral fees and FBA storage costs that can range from 8% to 45% for various product categories. These can build up quickly, especially if your goal is to increase your visibility.
It’s best if you consider the common fees for clothing,which are around 17% for each item, and 8% for electronics. Hidden costs like 20% of a refunded amount plus the variable shipping costs should also be taken into consideration. Focus on maximizing your returns rather than just spending blindly on paid ads and diversify on other channels like Shopify for more income streams.
2. Not Keeping Track of Your Sales
The landscape of sales taxes is very complex, and there are different rates across various jurisdictions in many countries. These obligations fall on online sellers, and they need to be knowledgeable about this.
Amazon accounting is where you reconcile the statements that you receive from Amazon with your bank deposits. You need to reconcile to know more about discrepancies and make sure that you’re accurate with your financial records.
Profitability analysis as a by-product is also going to help business owners track their revenues. They can use cash-based methods to see the money that’s leaving their bank accounts or choose the accrual one for those who have a higher volume of transactions. With accounting services for amazon sellers, you can leverage your data so you can understand what’s working and know other areas where you can improve.
3. Data Comes Solely from Amazon can be a Problem
Sales metrics data can be available, but it might not be enough if you want a better picture of your business’s financial health. Sometimes, a seller can be puzzled by the profit and loss statements that Amazon is sending.
Generally, you might want to use specific accounting software, so you’ll get a more accurate view of your sales and your taxes due. Others have the misconception that they only have to worry about accounting when they’re near the tax deadlines, but the reality is that if you’re not compliant, it can take a long time to correct your bookkeeping records, and you might face fines if you’re not doing everything right. Get help from the experts and gather data from various sources so you’ll make more informed decisions in the process.
4. The Mistake of Doing the DIY Route
Others may hesitate to hire a professional because they think that they can save more money in the process. However, unless you’re a bookkeeper by profession, you might not want to spend a lot of time doing taxes each month and being buried in receipts and invoices.
Getting the accounting experts to do most of the administrative work will be beneficial because they will have a lot of time to double-check the entries. They are going to fix your books and clean up the financial records so you won’t run the risk of getting audited. See info about accounting terms when you click here.
5. Not Creating a Cash Flow Forecast
It’s best if you’re ready with the worst-case scenario that can happen to your business. It’s going to help you decide the amount that you should be investing in your ads and how much inventory you will need for a specific season.
Generally, most sellers are doing forecasting when they’re planning to scale their brand. These two are connected because you can’t exactly expand if you don’t have stocks. Some tools can provide sellers with confidence about where their money should go and when they should spend it to buy new products. Understanding your profits and not the cash that you have on hand is a very important skill. List your debts and remember that you need to call a professional accountant before you decide on a major expense. These professionals can help you choose Cloud software and create a systematic financial report that’s easy to use. They will also integrate your Amazon sales channels into accounting software and make sure that everything is encrypted for your security.
