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December 12, 2022

Accounting for Amazon Sellers

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Over 50% of all Amazon sales come from third parties. Even though most have correctly organized bookkeeping for Amazon sellers, most still need to learn how to do it. Doing inaccurate calculations might result in tax issues.

Your online marketing on Amazon is built on accurate bookkeeping. As an entrepreneur, you must submit a profit determination based on your incoming and outgoing invoices, a tax return, and an advance VAT return to the government. Therefore, it is advisable to consult with your accountant for the necessary details.

Basic concepts of accounting for Amazon sellers

Keeping track of your Amazon sales might seem complicated, especially if you receive many orders. But as long as you do it frequently, it gets much easier to handle. The following are some fundamental accounting terminology that Amazon FBA Sellers should be familiar with:

  • Accounts receivable is a summary of all the money you owe from clients. If you don’t get paid upfront for everything you sell, you have accounts receivable to track and ensure the money comes in on schedule.
  • What you owe suppliers is called accounts payable. The sight of all the money you owe might occasionally be overwhelming, but timely and precise payments depend on clear knowledge of what is required and when. It will also help you avoid paying twice.
  • The lifeblood of your firm is inventory. It gauges how much inventory you presently have, how quickly it sold, and when you’ll next need to place an order with suppliers to get more merchandise to satisfy demand.
  • Purchases. Office supplies, professional subscriptions, equipment, travel expenses, entertainment, and meals are all included in this.
  • Loan debt. What you borrowed, from whom, how much you presently owe, and when those payments are due are all important.
  • Sales. Every business owner enjoys monitoring sales. Therefore, you should maintain accurate sales records. It will help you demonstrate how much money you have, and also, it will give you a clear picture of your company’s present state and future direction.
  • Equity. Net worth is a record of how much of your money you invested in the business for sole proprietors. There should be a record of each owner’s financial contribution to companies with multiple owners, so there is no doubt about who owns the company.

Understanding the meaning of these terms is essential to start organizing your business correctly.

As an Amazon seller, do I have to keep accounts at all?

The answer is simple “yes”! You must register your business with the appropriate authorities as an Amazon seller and keep records of any commercial dealings impacting the company’s finances. You must submit a profit calculation, a tax return, and a sales tax return to the tax office after the fiscal year. Also, possible monthly or quarterly advance sales tax returns.

Accounting for Amazon Sellers

No More Bookkeeping Stress

Keeping proper financial records is time-intensive and small mistakes can be costly. BooksTime makes sure your numbers are 100% accurate so you can focus on growing your business.

Beginning of work

Starting your firm on the right foot requires proper registration. A lot of Amazon companies begin as side hustles and grow over time. If something goes wrong, registering your business can shield the owner from some duties and let you keep your business revenue expenses distinct from your income. All legal and tax liabilities belong to the business owner alone.

It is crucial to remember finding the most recent information is always essential. Avoid being fooled since the requirements are continually changing, particularly concerning e-commerce sales tax.

Equally crucial to efficient Amazon bookkeeping is the move of your accounting to the cloud. It is essential to ensure your systems are reliable to process large volumes of transactions without problems. You won’t need to retain books if a comprehensive Amazon seller accounting system is in place, but you’ll get far more reliable data. Nowadays, the majority of accounting systems are hosted remotely on the cloud. Moreover, the most accessible approach to gathering reliable data for dependable forecasting is establishing books on a GAAP-approved accrual accounting basis. Due to this, there is no longer a need of additional accounts, software updates, or even software downloads. You may view your books from anywhere globally with cloud accounting services, and you can securely exchange data as required.

One of the many advantages of an Amazon business plan is that it will help you with your bookkeeping. Business plans assist you in coordinating your objectives with spending and actions. They serve as the foundation to your whole company journey, may be altered throughout time, and provide a solid starting point to gauge your success.

Amazon documentation is another thing you need to keep organized. It can be controlled in your accounting software, but using an aggregator app that ensures each statement, invoice, and receipt is recorded, uploaded, and scanned before it reaches your accounting software.

Business activity

In order to be eligible to trade through Amazon, it is mandatory to have the status of an enterprise (individual or legal entity), since any other option is not acceptable. The sellers must be self-employed or carry out business operations through a legal corporation (company). However, there are also several pragmatic justifications why having corporate status is essential. Having the ability to collect and pay VAT is one example. A VAT number cannot be granted if such a status is absent.

Selling without collecting the requisite VAT effectively denies the government the funds are due and should be collected following tax law. As a result, you are immediately under the scrutiny of the tax office, with all the potential repercussions ranging from a fine to criminal prosecution.

You must keep track of all financial transactions involving your company. You can only scale your business if you know its financial situation. Moreover, you can store your data in a variety of ways. To ensure you have access to your data whenever you need it, you should plan out the precise Amazon Sellers accounting structure in advance.

Remember, Amazon seller accounting involves the following four obligations:

  • Create Amazon invoices.
  • Keep incoming invoices.
  • Quarterly VAT return.
  • Submit a tax return to the tax facility.

If you sell without collecting the required VAT, you are effectively depriving the government of the money that is entitled to be and should be collected under VAT law. Thus, you are automatically in the field of view of the tax office with all the possible consequences varying from a fine to criminal prosecution.

Organize your accounting

Account statements and invoices should be stored in folders, whether digitally or physically. After learning to maintain all account statements, incoming bills, and outgoing invoices, you must establish a proper system. It will ensure you always have an overview and your papers can be submitted entirely in the case of a tax audit.

In some cases, you can infer something about your interactions with the examiner from this. Therefore, the auditor will more likely believe that you are running your business efficiently and transparently if you have a well-planned folder structure and everything is easily traceable.

Accounting for Amazon Sellers

Proper invoicing for Amazon accounting

For each purchase, an outgoing invoice may be made. Although Amazon provides its billing solution, having your personal one has several advantages. It is possible to custom-create and edit invoices. Additionally, after you’ve sent a customized invoice, clients may contact you to make changes rather than canceling and starting over with an Amazon order.

Furthermore, you may include a thank-you offer for a purchase, get a review if the buyer enjoyed the item, and send a customized greeting to your clients. It is possible to quickly build your own accounts using solutions that provide other helpful CRM capabilities. If you choose only to use invoices created by Amazon, be sure to download and save them monthly so that you can send them to your accountant.

Digital accounting

There are currently online tools available that offer digital bookkeeping. Study the market proposition to find the best option, which suits you for price and functions. Follow the next criteria to fully comply with Amazon seller accounting obligations:

  • Outgoing invoices. Email-based invoices made to Amazon customers must be preserved and audit-proof stored. It calls for you to keep them in a form that prevents further manipulation or editing. The payment tool may simultaneously register all document changes and immediately save invoices online.
  • Incoming invoices. All email-based invoices and receipts, such as documents relating to purchasing products or travel expenses, must be electronically submitted in an audit-proof way. All receipts may be digitally filed using the applications, and you can share them with your tax adviser.

The receipts need to be posted as the final step. It implies that the pertinent incoming and outgoing bills are tied to your account statements and then manually entered or exported into the financial accounting analysis tool.

Tips to get structured and transparent bookkeeping

With a few tips, you can significantly simplify your Amazon seller accounting and minimize the effort. Below you will find helpful advice.

Make decision in advance

Make your accounting decisions before you launch your Amazon business. It impacts the billing service, preventing Amazon and other billing systems from issuing bills twice.

Set up workflows

The key to successful Amazon ecommerce accounting is painstaking effort. Workflows can be helpful here. To standardize the processes, it is best to organize the workflow in writing. If unusual business cases happen more frequently, you are immediately aware of what to do, therefore, it can save time.

Fixed accounting days

It is preferable to schedule specific days or times of the week to devote a few hours to bookkeeping. It enables you to establish a pattern and consistently do the task straight immediately. Furthermore, it prevents you from spending weeks or months catching up on financial Amazon seller accounting.

Conclusion

If you sell on Amazon, you can’t avoid accounting. However, it will be much simpler if you have the correct software and know a few insider secrets. It might be pretty challenging to understand how Amazon billing affects your bookkeeping. Find out in advance what you need to pay attention to and use the appropriate program to make your job easier to avoid experiencing troubles. To ensure that your bookkeeping is accurate and you do not have to worry about additional payments to the tax office, heed the advice and coordinate with your tax advisor. You may save time and money by forgoing a tax counselor to concentrate on your Amazon company.

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Author: Charles Lutwidge

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