There's no denying that Amazon is one of the largest e-commerce business platforms in the world today. In a recent report, this e-commerce giant generated total revenue of $280 billion in 2019. Out of this, 50 per cent of all sales came directly from independent sellers, typically FBA sellers.
What's great about Amazon is that it has a seller central that allows you to manage your inventory, get custom reports, use selling partner support, and track products' daily sales. You can also take advantage of the Fulfillment by Amazon (FBA) service that takes care of your inventory's warehousing. This means that they pick, pack, and send orders to your customers on your behalf.
A vital facet of the overall equation is proper accounting for your FBA selling. In this article, we will share three accounting tips that can help you make the most of your FBA sales and help you sell on Amazon:
1. Consider your expenses and overall finances—not just sales and revenue
Most FBA sellers resort to bank balance accounting, which is a process that entails checking their sales in the Seller Central Account and seeing their income on their bank accounts. The problem arises when your sales are increasing, yet your bank balance remains the same.
This usually means that you shouldn’t only be looking at your sales and revenue. It's also important to track your expenses and understand your overall finances. Apart from your sales, be aware of your expenditures, such as the cost of goods sold (COGS), Amazon listing fees, sales tax, and marketing costs. Ultimately, you should be particular with your cash flow—what comes in and what goes out.
2. Draw the line between your personal and business finances
FBA sellers often take advantage of what Amazon has to offer. As such, some feel like they don't have an independent business; they're just selling products and generating income out of this e-commerce platform. The chances are that they don't have proper accounting, and they don't separate their personal and business finances.
What many online entrepreneurs fail to realise is that mixing personal and business finances are actually unprofitable. There should be separate accounting and bookkeeping for your FBA selling. In doing so, you can clearly see where your FBA selling stands and if you're making a profit out of your business on Amazon.
3. Take advantage of accounting software—instead of DIY spreadsheets
Today, there are various software and apps that businesses can utilise to do away with manual bookkeeping or DIY spreadsheets. By taking advantage of accounting software for your FBA selling, it will help you manage your finances smoothly and seamlessly to make your life easier. As a result, you can focus more on marketing your products and growing your business.
Even if you're utilising the FBA service of Amazon, proper bookkeeping and accounting are a necessity. As discussed above, account for your expenses and overall finances, separate personal and business finances, and utilise reliable accounting software. Although they may seem minor at first, all these will help you manage your finances, generate more income for your FBA selling, and take your independent business up a notch!
Do you need proper accounting for your FBA selling? Book our free strategy session with one of our e-commerce accountants today, as we offer e-commerce accounting services in Australia to help entrepreneurs grow their business!