Many Amazon sellers initially find Intuit QuickBooks or QuickBooks Online (QBO) to be an effective solution for their ecommerce accounting. As their businesses grow, however, it becomes clear that the software is still time-consuming and doesn’t necessarily check all the boxes for a busy entrepreneur.
QuickBooks integration for Amazon sellers
At this time, Quickbooks only offers an Amazon integration for business owners to directly import their expenses. By connecting your Amazon account to Quickbooks Online, transactions will automatically be recorded on your books with information on what was bought. This means no more logging back into your Amazon account to confirm what a transaction was.
Although QuickBooks offers great inventory management and SKU tracking tools, Amazon sellers still need to do a lot of manual work in order to keep their bookkeeping up-to-date.
When you sell on Amazon, they will hold onto your money for a while before making a transfer. Money is also taken directly from your deposits before they hit your bank account. This money is used to cover shipping costs, gift wrapping, selling fees, and more. Despite this money never entering your bank account, it’s still covering expenses that are tax deductible and need to be tracked.
Monthly QuickBooks adjustments for Amazon sellers
You need to do some account customization before you do any of your bookkeeping. QuickBooks is not an “out of the box” solution for Amazon sellers and requires some upfront work to be ready to use. In particular, you need to create customer ledgers in your chart of accounts to accurately capture your Amazon activity and its unique costs.
How you track your Amazon revenue will depend on whether you operate on a cash or accrual basis. On a cash basis, you only recognize the money once it’s in your bank account while on an accrual basis, you recognize the money at the point of the sale. For example, if someone bought a product on June 29, the deposit was sent on June 30, and it entered your bank account on July 1, the sales revenue is recorded in June on an accrual basis and July on a cash basis.
Generally speaking, FBA retailers use the cash basis since it’s a lot easier to stay on top of. If you operate on the cash basis, you can do a monthly adjustment using the following steps:
- Log into your Amazon Seller Central account.
- Navigate to your Payments under the Reports tab.
- Generate a “Summary” report to be used to make the journal entry for the month you are adjusting for (see sample below).
- Categorize all Amazon sales deposits in QuickBooks to a custom Amazon Holding ledger before doing your monthly adjustment. Double check you haven’t recorded any refunds from past purchases to this ledger.
- Start a new journal entry with the date being the final day of the month.
- Sum up the amounts in the income expenses and debit and credit the corresponding ledgers in your chart of accounts.
- Your Amazon Holding ledger should zero out so long as there’s no extra transfers in your account or on your monthly report. If there is a balance, check to make sure you don’t have any transfers on the report that didn’t hit your bank account in the month or refunds that were wrongly categorized.
There are some potential pitfalls to doing your own bookkeeping as an Amazon seller. Be cautious about the following:
- Initially setting up your QuickBooks account: Having the proper ledgers set up in your chart of accounts is crucial for correctly categorizing every cent so you can accurately file your taxes. Working with a professional bookkeeper will ensure it’s correct from the get go.
- Troubleshooting when the books don’t balance: Finding the mistake that puts everything out of balance is like finding a needle in the haystack you just fed the farm animals. Not only will it be difficult, but it could have already done its damage by providing you incorrect information.
- Repeating an incorrect process: If you do your own bookkeeping incorrectly, you likely won’t find out until somebody else, likely your CPA, points it out. Doing the adjustment correctly the first time is essential for when you repeat the process. Otherwise, you’re looking at hours of fixing the mistakes of a year of bookkeeping.
- Spending too much time on your books: As a business owner, your time is quite literally the biggest value generator you have. It’s important to notice when your bookkeeping is taking up too much of your time and preventing you from doing more valuable tasks.
Why do you need to stay on top of your books as an Amazon seller?
Amazon’s Fulfillment by Amazon (FBA) service makes it easy to start a small business through the platform. They help you handle the logistics and shipping through your Amazon seller account, but you’re still responsible for crunching the numbers and keeping your chart of accounts to monitor your cash flow.
If you can’t keep up, you might find yourself facing a sticky late tax payment situation down the road.
Here are just a few of the reasons you may need a more robust ecommerce bookkeeping system.
- You need to know your net profit. Is your business profitable? What’s your cost of goods sold? A quick glance at your updated bookkeeping numbers can tell you.
- Your tax payments depend on it. As a successful business owner, you likely need to make quarterly estimated tax payments, which you can’t do accurately without updated numbers.
- You want to avoid being audited. The IRS keeps a close eye on small businesses and having sloppy numbers when it’s time to file your taxes is one of the top IRS audit triggers. Additionally, staying on top of your books helps you find additional tax deductions.
- You’re ready to borrow money or seek investment. If you want to make a big leap forward in your business, you may need to borrow some money or seek out investors to make it happen. Banks and investors alike will expect to see current and past financial information about your Amazon store, and diligent bookkeeping will ensure you have those numbers ready for them.
- You want to stay in business. Not tracking your money typically leads to financial mistakes, and financial mistakes can be a death sentence for a new Amazon FBA seller. Bookkeeping helps you stay on top of your income, spending, projections, and inventory costs in a constantly shifting environment, ensuring the long-term health of your business.
What Amazon sellers need from an accounting solution
Every small business owner needs an accounting solution to stay on top of the numbers, but what do Amazon sellers specifically need for bookkeeping? Here’s a brief list of what you should look for.
Ability to generate reports at any time
You need to be able to review your data on demand, whether to apply for a loan, file your income taxes, inform discussions about inventory or payouts, or simply for the joy that comes with seeing a healthy income statement! Integrated bookkeeping or accounting software streamlines report generation and your real-time numbers are available with a simple click or tap.
International currency management
Amazon is a worldwide platform, which means you should be able to sell to different countries with different currencies. It’s hard to do this, however, if you’re scrambling to figure out exchange rates to calculate profits and expenses.
Sales tax calculations
Being in business—and doing it successfully—requires a lot of tax payments. You’ll not only pay income taxes, but you’ll also be handling sales tax payments to any state you do business in. Your financial solution should allow you to calculate the sales tax that your customers are paying and track the sales tax you’ve received and need to pay to the state, city, county, or other taxing body.
Ability to keep track of seller fees
Amazon FBA is a convenient and efficient way to do business. Amazon doesn’t offer this service for free, however. There are Amazon seller fees to track and a good accounting system should help you do that, making your Amazon business as streamlined as possible.
Accessibility
Your accounting and bookkeeping solution should be accessible not just to you, but to your business partners, employees, and your tax professionals. You should be able to access your numbers from anywhere: your home office, your actual office, your accountant’s office, or your laptop on the beach.
5 reasons why Amazon sellers should work with a professional bookkeeper
If you’ve worked with a DIY accounting software program like QuickBooks, you know that these products can help you manage more complex financial situations than a simple spreadsheet (where most business owners start their bookkeeping). However, as your business grows, you may start to come up against their limitations.
First, you need a third-party software system to connect your Amazon account to QuickBooks. Secondly—and more importantly—you’re still doing a tremendous amount of the work yourself. That’s why many Amazon sellers move on to a third solution: They outsource bookkeeping completely.
Bench offers Amazon sellers many reasons to consider making a switch.
1. You get expert support.
If you’ve been running your books yourself through Intuit QuickBooks, you might feel like an unwilling expert on your financials—and you may also have a few accounting mistakes under your belt! With Bench, there’s no need to worry about mistakes or oversights as you’re working with a team of tax and bookkeeping professionals. You’re truly outsourcing your bookkeeping, which means you get that time back for other tasks.
2. You can enjoy visual accounting.
Being able to see at a glance how well your business is doing or what your business needs allows you to make better decisions and adapt more quickly to changes in the market. With Bench, you can dig into fully-featured financial reports any time you want to.
3. You get to automate and offload the full bookkeeping process.
Automation is one of the best ways to make your business efficient. Your automation starts with the software. Bench connects your bank account, your credit card company, and your processor. It can also tap into your Amazon seller central.
Once your transactions are imported, the bookkeepers at Bench take over to handle the rest of the process, categorizing your transactions, setting up your ledger, updating your receipts, and tracking everything you’ll need for financial reporting at tax time.
4. You can enjoy a customized experience.
There are many uniform standards when it comes to bookkeeping and accounting, but how do those standards apply to your specific business? When you start working with Bench, we’ll work with you to understand your business transactions, find the right way to categorize them, and make your accounting system match the rest of your business processes.
5.You can enjoy tax planning services year-round.
Bench isn’t just basic bookkeeping. It’s a full financial solution that includes tax preparation and even filing, if needed. You can also count on Bench to help determine how much you should be paying in quarterly income taxes and sales tax, plus how to structure your business and expenses for optimum ecommerce tax deductions. And if you ever find yourself facing an IRS audit? We can help there as well.
