The world is fast moving into the digital age, and in the near future, almost all businesses will operate online. There are very slim chances of success for a business that does not operate online. According to online figures, more than 100,000 people start their Amazon businesses yearly. You can guess the importance of Amazon’s business from this number. However, not all of these businesses need to survive or be successful. There could be many reasons for their failure, but one substantial reason is poor Amazon bookkeeping.
Amazon bookkeeping is a long-term strategy. The success or failure of a business depends on the management of income, expenses, cash flow, the correct amount of taxes, and other financial statistics. For this, you don’t need to be an expert in bookkeeping; the basics will do the job for you. The following article has a few basic bookkeeping tips for Amazon sellers, but before that, you need to know what Amazon bookkeeping is.
What is Amazon bookkeeping?
Amazon bookkeeping refers to all the transactions and records of Amazon sellers’ businesses. It is the process of tracking and managing all the financial statistics in the most accurate way possible. Amazon bookkeeping records product costs, shipping fees, Amazon seller fees, advertising expenses, and other business-related expenses, helping sellers know the condition of their business. A seller can decide about the future of his business by calculating and monitoring his profits, cash flow, and taxes. Following are some additional terms that an Amazon seller should know.
Accounts receivable
All those payments that are due from customers are called accounts receivable. You have a healthy cash flow if your account receivables stay on top. You can then plan according to the accounts receivable.
Accounts payable
Accounts payable is the opposite of accounts receivable. It is all that money that you need to give to suppliers. A bigger accounts payable can hurt sometimes, but a seller should be fine with the dues he needs to pay if he plans according to the accounts payable. Additionally, it helps you be cautious about the future.
Purchases
You need to be sure where your money is going next and make a budget accordingly. For instance, you will need to pay for office supplies, professional subscriptions, equipment, travel, entertainment, and meals.
Loans
Most people start businesses by taking loans; are you one of them? If yes, you must know when and how much you will repay. Similarly, you need to include all the loans you have taken, whether for hiring someone in your business, buying products and equipment, or anything else.
Sales
You need to keep records of your business, no matter how big or small that is. This will help you know the status of your current account. Similarly, it can tell you not only about the present but also about the past and future of your business.
Tips for Amazon bookkeeping
Now you know all the basics about Amazon bookkeeping, which leads us into another area called tips and tricks for Amazon bookkeeping. Following are some tips for Amazon sellers to apply to be more successful in their businesses.
1- Do bookkeeping every month
Most Amazon sellers are procrastinators when it comes to bookkeeping. They tend to do bookkeeping at the end of each year or quarterly because of the taxes. However, if you want to be successful, you need to do it each month and, if possible, each week. It will help you know about the status of your business, and you can increase or decrease your products rate accordingly. Additionally, when you do bookkeeping now and then, you will know how much time you are giving to your business, which will help you consider giving it more time if it is not doing well.
Bookkeeping takes a lot of time, and people leave it until the end of each year. To avoid this, you can divide the bigger tasks into smaller ones and then do bookkeeping for them each week. You need to do taxes and manage income and expenses each week, which will help you budget your business and do a review about it.
2- Do not mix business with personal finances
This rule applies to all those who are in the business sector. For instance, if you are an Amazon seller or a traditional businessman, you must separate your business from personal finances; otherwise, it could give you headaches. According to a QuickBooks study, more than 47% of people in business mix personal and business financing, which results in accounting problems. You need to know the records of all the purchases that you have made for personal and business reasons to avoid financial issues.
You can make a separate bank account and credit card for your business records and use these accounts exclusively for business-related transactions, such as purchasing inventory or paying Amazon seller fees.
3- Track all expenses
The success of a business, whether small or large, depends on its expenses. According to a JPMorgan Chase study, if a business tracks its expenses, its chances of success are higher than 58%, compared to 39% for businesses that do not track their expenses. Tracking the expenses helps the business know and understand its expenses, profits, and cash flow, which helps the business owner make timely decisions about the products and services of the business.
A smaller business should keep track of all expenses, including product costs, shipping fees, Amazon seller fees, advertising expenses, and other business-related expenses. Tracking business expenses can be done through spreadsheets or with the help of accounting software.
4- Track inventory
The National Retail Federation did a study to find out about the potential failure of smaller businesses. It found that over 56% of small businesses fail because they need help with inventory management. They need to learn the art of inventory management, which leads to lost sales, stockouts, and overstocking. A business owner should know the number of products in stock and the sales data to meet customer demand and avoid stockouts. By doing this, a business can reduce costs, increase profits, and improve customer satisfaction.
Now the question is: how can Amazon sellers track inventory? There are different ways to do that, among which Amazon’s built-in inventory management tools or third-party inventory management software are considered the best.
5- Know about the taxes
Imagine your business is doing well, but suddenly you are hit by penalties, fines, and legal actions because of irregularities in the tax. To avoid such a situation, an Amazon seller should know the basics of taxes because it is one of the most important factors to consider. It can make or break your business. You should track taxes, which involves understanding tax obligations and collecting and remitting taxes.
Amazon sellers must collect sales taxes in every state where they have a “nexus,” or a real presence. You will have a nexus in any state where Amazon Fulfillment Centres store or ship your goods (over 20 states). You can find out where Amazon stores your goods by running an Inventory Event Detail report from Amazon Seller Central.
Hire a professional
If you think bookkeeping is time-consuming and you do not have that much time, you do not need to worry because professional bookkeepers can help you. It will save you time to focus on your business and help you do all your bookkeeping tasks more accurately and efficiently. According to a study by the National Small Business Association, more than 58% of successful businesses are taking help from professional bookkeepers, which increases their profit by 46%. These bookkeepers provide different services, which include maintaining financial records, preparing financial statements, reconciling accounts, and managing payroll.
Additionally, suppose you want to avoid legal issues, costly mistakes, and other bookkeeping-related errors in that case, you need to hire professional bookkeepers because they ensure that taxes are properly calculated and paid on time and that financial records are accurate and up-to-date. This can help to avoid penalties, fines, and legal action.
Conclusion
Amazon bookkeeping is one of the best strategies for a business’s success because it helps the seller know about the status of their business and then decide accordingly. It helps Amazon sellers keep track of income and expenses, helping them monitor their profits and cash flow. Moreover, keeping all the available data in mind, an Amazon seller can decide what to do next. Bookkeeping can be done through a simple spreadsheet or with the help of accounting software. However, if you think it is time-consuming, you can hire a professional for Amazon bookkeeping.