Running a business on Amazon is an exciting venture, but it also comes with significant responsibilities. One of the essential aspects of operating an Amazon store is bookkeeping. Bookkeeping refers to keeping track of a business's financial transactions, including sales, expenses, profits, and losses.
So, if you want to learn more, keep reading as we discuss some important things Amazon sellers should know about bookkeeping.
Understand the Basics of Bookkeeping
Bookkeeping involves recording financial transactions systematically. Therefore, it is essential to understand bookkeeping basics, including the different types of accounts, financial statements, and bookkeeping software. A seller can perform bookkeeping manually or use software like QuickBooks to automate the process.
Separate Business and Personal Finances
Many Amazon sellers operate their stores as sole proprietors. However, separating business and personal finances is crucial to avoid confusion and maintain accurate records. Sellers can open a separate business bank account to keep track of all business transactions effectively.
Track Sales and Expenses
Tracking sales and expenses is essential to ensure accurate financial records. Amazon sellers can use Amazon's seller central to track sales and fees paid to Amazon. They can also keep track of expenses such as product costs, shipping fees, and advertising costs. Maintaining detailed records of these transactions is crucial for tax purposes and can help sellers make informed business decisions.
Calculate Profit Margins
Calculating profit margins is an essential aspect of bookkeeping for Amazon sellers. Profit margin is the percentage of revenue that exceeds the cost of goods sold. Sellers can use this information to set prices, negotiate with suppliers, and evaluate the success of their business. To calculate profit margin, sellers must subtract the cost of goods sold from total revenue and divide the result by total income.
Understand Sales Tax Obligations
Amazon sellers are responsible for collecting and remitting sales tax in states with a significant presence. Sellers can use Amazon's tax calculation service to calculate and collect customer sales tax. It is also essential to keep track of tax obligations to avoid penalties and fines.
Keep Track of Inventory
Inventory management is a crucial aspect of bookkeeping for Amazon sellers. Sellers need to keep track of inventory levels, costs, and sales to ensure they have enough stock to meet customer demand. Inventory management software can help automate this process and provide accurate insights into inventory levels and costs.
Hire a Professional Bookkeeper
Bookkeeping can be time-consuming and challenging, especially for sellers unfamiliar with accounting principles. Hiring a professional bookkeeper can help ensure accurate financial records and provide valuable insights into the business's financial health. A bookkeeper can also help sellers prepare tax returns and provide advice on improving profitability.
Conclusion
Bookkeeping is an essential aspect of running an Amazon store. Sellers need to understand the basics of bookkeeping, separate business and personal finances, track sales and expenses, calculate profit margins, understand sales tax obligations, keep track of inventory, and hire a professional bookkeeper as needed.
Stay on top of bookkeeping and contact The ECommerce Accountant. We help Amazon sellers make informed business decisions and ensure long-term success. With our extensive knowledge of bookkeeping for Shopify, Xero, Integrations, and E-commerce, we can leverage our years of experience to integrate an efficient solution into your business. Book a discovery call today!