If you are an Amazon seller or an Amazon FBA seller the following article will help you to understand more about Amazon accounting and how to manage it effectively and efficiently. This article is drafted by an Amazon accountant and covers almost everything you need to manage your Amazon accounting, from bookkeeping to tax returns.
We receive a lot of inquiries from our clients or potential clients about accounting tips for Amazon sellers. How to make accounting and financial activities more efficient and cost-effective for the business. One of the most common questions we receive from clients are, “how to make everything simple?” or “why is everything so complicated?”. Dealing with multiple e-commerce sellers, we have noticed a few common problems that most e-commerce or any online retailers face on a regular basis. We will try to highlight those problems and provide possible suggestions on how to overcome those issues.
The boom of coronavirus-led online sales has created thousands of global entrepreneurs over the past two years. The emergence of e-commerce has brought enormous opportunities to operate your business beyond any region or border. You can run your business from anywhere in the world with a mobile phone as long as you have access to the internet. With Amazon being the biggest retailer in the world, almost 50% of Amazon sales are from amazon FBA sellers.
Selling on Amazon is becoming very competitive and complicated. The number of Amazon FBA sellers are on the rise from the beginning of the COVID-19 pandemic. We receive enormous numbers of accounting inquiries from Amazon sellers from Brazil, India, Pakistan, China and other parts of the world. Based on our analysis from our clients’ accounting, we can conclude, the profit margin is declining due to high level of competition among the amazon sellers. Some of our clients are making losses, although, we recommend them to use use junglescout or to use free Google Trend before making any bulk purchases.
If you have not signed up with the Amazon FBA programme yet, then we recommend you form a limited company first and sign up your business under the newly formed company. A limited company is more formal and credible which improves your business acceptability by vendors as well as your customers.
You can form a limited company by yourself or you can get an accountant to set it up for you. At TaxCare we offer a free company formation service for our clients.
Now you have set up your business structure, signed up with Amazon and it’s time for you to list your products.
If you are not sure what to sell on Amazon then we recommend using product researching and scouting tools such as Junglescout or analyzer. If you do not wish to pay a fee then we recommend using Google Trend to understand the market and customer demand. You can also use Seller Drive or Seller running to list your product on Amazon quickly and automatically.
It is important to use accounting software for your business if you wish to become a successful seller on Amazon or on Ebay or on any other e-commerce platform. Because you would need to review your business performance on a regular basis to ensure you are not making losses. Accounting software will help you to organise your sales, calculate your profit and predict your future profit. You can also set up a budget, cost centre for your business with the help of an accounting software such as Xero or QuickBooks or Sage. You also need accounting software to prepare and file your VAT returns.
There are a lot of accounting software out in the market. We recommend using any cloud-based software as they are easy to integrate with other third party software to manage your business. If you are not sure whether to use Xero or Quickbooks or Sage or Quickbooks or Sage or Xero you can read our recent blogs to get a good understanding.
Majority of our clients use Quickbooks as we think it is more suitable for Amazon or other online retailers as both Amazon and Quickbooks are US based companies. We offer 40% off on Quickbooks software and we also offer free QuickBooks customisation for your business.
A2X helps Amazon sellers by syncing the latest Amazon transactions automatically and post summarized transactions to your QuickBooks account. We recommend you integrate A2X as it is one of the most popular apps used by Amazon sellers.
In order to simplify your business and improve automation, we recommend you connect your bank account with your accounting software. It will help you to automate bank reconciliation and get access to your business live data on a single platform.
You can create bank rules to automate your bank reconciliation. It will help you to save time and you can avoid making mistakes.
There is a lot of inventory management software available on Amazon Marketplace. However, we would recommend to use Amazon FBA & Seller Fulfilled Accounting & SKU Profitability to manage your inventory. You can sync your Amazon SKUs to QuickBooks/Xero inventory, receive a report that will give you a real-time look at your SKU profitability on Amazon, and this app features a unique automatic reconciliation algorithm that guarantees correct imports.
As HMRC is cracking down on online sellers, Amazon is becoming stricter. Amazon can block your account without any prior warning if you do not comply with the VAT rules. Furthermore, you can upto 2 years prison sentence and a big penalty if you do not comply with VAT regulation. Therefore, VAT compliance is mandatory if you want to run your business online. You would also need to comply with making tax digital when you file your VAT return. If you are not sure how to do it you can contact us for a free VAT consultancy.
Profit analysis: in order to become a successful Amazon or online retailer you would need to focus on quality and profit. With modern accounting methods, you need to calculate your profit from your sales not from your expenses (Sales price- profit margin=expenses). For example, a pen is listed on Amazon for £1. Your profit margin needs to be 30% to cover up FBA, other expenses and your expected profit. So you need to source this product less than £0.70 to avoid any losses.
It is your responsibility as a business owner to:
One of the major requirements for an online retailer is to prepare and submit the corporation tax to HMRC. We recommend you to hire an accountant to do it for you as you may receive a penalty if you make a mistakes.
If you wish to save money on your tax bill then we would recommend employing the director onto the payroll scheme. It will help you to utilise the tax-free allowance available for the director and save money on your corporation tax bill. You must apply for PAYE scheme and use HMRC approved payroll software to submit RTI to HMRC.
You can use your accounting software to set up your budgeted sales and expenses. Once your business is established, you would know your business key numbers such as sales, expenses etc. You can set up a budget every month as it will help you to track your business performance.
You can use an accounting software to forecast your business cash-flow. Your can also use third partly software to predict your business future cash-flow with the help you artificial intelligence.
Online sales are growing and it will not stop anytime soon. It is reshaping our lifestyle, our industries and our high-streets. Due to high profit margin and lower cost, the online retail industry is attracting hundreds of retailers which is driving more competition. The entire e-commerce business depends on technology. Therefore, the success factor depends on how good you are at it. By implementing cutting edge technology to automate your online business process, you save the money and become more competitive.
We work with a lot of online retailers and we would love to work with you. If you are looking for an accountant feel free to contact us to get a free initial consultation.
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Accounting and taxation tips from an Amazon accountant If you are an Amazon seller or an Amazon FBA seller the following article will help you
Tax Care Certified Accountants Limited
The Vault Business Centre
123 High Street, Birmingham
B12 0JU
Tel: +44 (0)1213681277
info@taxcare.org.uk
Looking for a professional accounting service? TaxCare Accountants offers a simple, affordable accounting service with a fixed fee.