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Amazon Accounting: A Seller’s Guide

Selling products on Amazon offers immense opportunities for e-commerce entrepreneurs, but it also demands meticulous financial management. From tracking sales and managing inventory to navigating complex fee structures and tax obligations, effective Amazon FBA accounting is crucial for success. In this detailed guide, we’ll explore essential practices and strategies for Amazon FBA sellers, emphasising the role of Amazon accountants and highlighting Amazon accounting best practices.

Understanding Amazon FBA and Its Financial Implications

Amazon’s FBA (Fulfillment by Amazon) service allows sellers to leverage Amazon’s vast logistics network. Sellers send their products to Amazon’s fulfillment centers, and Amazon handles storage, packing, shipping, and customer service. While FBA simplifies operations, it introduces complexities in financial management, requiring accurate tracking and reporting.

Why Xero for Amazon Accounting?

Xero is a cloud-based accounting software known for its user-friendly interface, robust features, and seamless integration capabilities. As a platinum partner with Xero, eAccounts recommends it for Amazon sellers due to the following benefits:

  • Integration with Amazon: Xero integrates smoothly with Amazon Seller Central, automating data entry and reconciliation processes.
  • Real-time Financial Insights: Track sales, expenses, and profitability in real-time with customisable dashboards and reports.
  • Inventory Management: Manage inventory levels, valuations, and COGS (Cost of Goods Sold) efficiently.
  • Ease of Use: User-friendly interface with mobile accessibility for managing finances on-the-go.

Managing Amazon Accounting Fees Effectively

Amazon charges various fees that impact sellers’ profitability. Understanding and accurately accounting for these fees is essential:

  • Referral Fees: Fees based on a percentage of each product’s selling price, varying by category.
  • Fulfillment Fees: Charges for order fulfillment, including picking, packing, shipping, and customer service.
  • Storage Fees: Costs for storing inventory in Amazon’s warehouses, which fluctuate based on storage duration and inventory volume.

Example:

Consider an electronics retailer selling Bluetooth speakers through Amazon FBA. For each unit sold at £100, Amazon charges a 15% referral fee (£15), plus a £3.50 fulfillment fee. If the product remains in Amazon’s warehouse for more than a year, additional storage fees apply.

Using Xero to Track Amazon Transactions

Integrating Amazon Seller Central with Xero streamlines transaction recording and reconciliation:

  1. Automated Data Sync: Sales, fees, refunds, and reimbursements from Amazon are automatically imported into Xero.
  2. Expense Categorisation: Classify Amazon fees under specific categories in Xero’s chart of accounts for accurate financial reporting.
  3. Bank Reconciliation: Match Amazon disbursements with corresponding transactions recorded in Xero to reconcile accounts seamlessly.

Understanding Tax Obligations for Amazon Sellers

Amazon sellers are responsible for various taxes, including:

  • Income Tax: Report Amazon sales as part of your total business income.
  • Sales Tax/VAT: Collect and remit sales tax or VAT based on your location and Amazon’s nexus rules.

Example:

A UK-based seller exporting goods to Europe via Amazon FBA may need to register for VAT in EU countries where sales thresholds are met.

Utilising Xero Reports for Business Insights

Xero provides powerful reporting tools to monitor business performance:

  • Profit and Loss Statements: Track revenue, expenses, and net income over a specific period.
  • Inventory Reports: Monitor inventory levels, COGS, and gross profit margins to optimise stock management.

FAQ – Amazon Accounting

Q: Do I need to register for VAT as an Amazon seller?

A: If your sales exceed the VAT registration threshold in the UK (£85,000), or if you sell goods to customers in other EU countries, you may need to register for VAT in those jurisdictions. Consult with a tax advisor for guidance tailored to your specific circumstances.

Q: How can Xero help me manage Amazon fees effectively?

A: Xero’s integration with Amazon Seller Central automates the import of sales, fees, and reimbursements, allowing you to track and categorise expenses accurately. This integration simplifies financial management and ensures compliance with Amazon’s fee structures.

Q: What are the benefits of using Xero for Amazon FBA accounting?

A: Xero offers real-time financial insights, automated transaction reconciliation, and customisable reporting tools tailored to e-commerce businesses. Its user-friendly interface and mobile accessibility make it ideal for managing finances on-the-go.

Conclusion

Effectively managing Amazon accounting is crucial for maximising profitability and ensuring compliance with tax regulations. By leveraging Xero’s powerful features and integrating it with Amazon Seller Central, sellers can streamline operations, gain actionable insights, and focus on scaling their Amazon businesses successfully. Whether you’re new to selling on Amazon or looking to optimise your existing operations, partnering with eAccounts and utilising Xero can pave the way for financial success in the competitive e-commerce landscape.

For more information, please get in touch today! Click one of the buttons below to either ‘Get a Quote’ for your business OR ‘Book a Meeting’ with one of our experts!

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