Using an Amazon Bookkeeper: Role, Principles, Software, Best Practices, and More

The world of Amazon selling can be a financial jungle, considering all the transactions, fees, and inventory you need to track. While about 34% of business owners are involved in bookkeeping to some degree, many find it challenging to keep up with the complexity and volume of data.

But with an Amazon bookkeeper, you partner with an expert who simplifies this process, keeps your records accurate, and helps manage every minute detail.

In this blog, we’ll explore the critical role of an Amazon bookkeeper in your e-commerce business, the key principles of Amazon accounting, and best practices to ensure that your financial operations run smoothly.

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How is Bookkeeping for Amazon Sellers Different?

Bookkeeping for Amazon sellers differs from traditional bookkeeping in several ways due to the nature of the Amazon marketplace. 

Here are some of the main differences:

• Sales Channels and Transactions: You may often deal with multiple Amazon marketplaces (like Amazon.com, Amazon.co.uk, etc.), each with its own currency, tax rules, and fees.

That, plus the high volume of transactions, including product sales, reimbursements, and refunds, can make bookkeeping a little more complex for you.

• Fees and Deductions: Selling in the Amazon marketplace incurs various charges, such as referral fees, storage fees, and restocking fees for Amazon. Properly categorizing and accounting these fees is essential for accurate financial reporting and profitability analysis.
• Tax Compliance: When you sell in a marketplace with such a wide reach, you’re likely to have customers from all around the world. So, you must comply with sales tax regulations in various states and jurisdictions.

Amazon bookkeeping also requires an understanding of the ‘marketplace facilitator tax’ in which Amazon calculates, collects, remits, and refunds taxes on sales where this legislation applies.

• Currency Considerations: Foreign currencies play a significant role in Amazon bookkeeping. Because you’ll often deal with international customers, Amazon bookkeeping will require the management of foreign currencies, exchange rates, and international fees.

Accounting for currency conversions and their impact on your revenue will be crucial as an Amazon seller.

Amazon FBA Accounting Principles

Amazon FBA accounting involves specific principles essential for accurately managing your finances. 

Here’s an overview of the main accounting principles:

1. Transaction Recording

Accrual accounting and cash accounting are two methods to record your transactions.

• In accrual accounting, you record sales and expenses as they happen, not necessarily when money actually enters or leaves your bank account. This method gives a clearer picture of your profitability and works best for larger businesses.
• Cash accounting only records sales and expenses when the money enters or leaves your account.

Although this is a simpler method of accounting, delayed payments can be a challenge because Amazon often holds onto payments for a while, so your books might not reflect recent sales immediately.

2. Accurate Inventory Management

Your inventory is one of your biggest assets as an Amazon seller. Accurate inventory management helps you truly understand your cost of goods sold (COGS).

It ensures you avoid issues like running out of stock or holding too much inventory, which can lead to lost sales or high Amazon storage fees.

Accurate management involves:

• Consistently updating your inventory levels.
• Recording all costs associated with bringing your products to Amazon's fulfillment centers.
• Correctly valuing your inventory on your financial statements.

3. Sales Tax Compliance

Amazon FBA accounting entails a good understanding of sales tax regulations. Mismanagement of sales tax can result in hefty penalties or even legal issues.

To avoid this, you must understand where Amazon collects and remits sales tax, ensure you’re reporting it correctly, and stay updated on the latest tax regulations.

Role of an Amazon Bookkeeper

The responsibilities of an Amazon bookkeeper span various crucial areas to ensure accurate financial management and compliance. 

Here’s an overview of their key roles:

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Link My Books: The Best Amazon Accounting Software for Sellers

The bookkeeping process can be taxing as sellers, since you need to track numerous transactions, manage inventory, and handle various fees. Considering these requirements, Link My Books is a top choice for Amazon accounting software.

Our advanced tool takes the burden off your shoulders by simplifying the process through powerful automation, saving you time and money. Plus, it prevents common issues like tax overpayment.

Additionally, Link My Books ensures accurate tracking of your COGS, giving you a clear view of your profitability. The tool also automatically applies correct figures, such as tax rates per country, ensuring your records are always accurate and up-to-date.

With Link My Books, you gain a clearer understanding of your financial health and can focus on what matters most — growing your Amazon business. Start your free trial with us today and experience a quicker, simpler bookkeeping process.

How to Find the Right Amazon Bookkeeper for Your Business

Choosing the right bookkeeper can bring innumerable benefits to your business. But how can you ensure that you pick the right one?

1. Identify Your Needs: First, determine the bookkeeping services you need. You may need tax compliance, inventory management, transaction recording, financial reporting, or a combination of these services. Choose a bookkeeper that offers these services.
2. Look for Amazon Experience: When finding the right Amazon bookkeeper for your business, note that nothing beats an expert with hands-on experience in the Amazon marketplace.

Their familiarity with Amazon’s frequently changing rules and requirements ensures that your finances are always managed in line with the latest standards and practices.

3. Seek Recommendations: Reach out to fellow Amazon sellers who can provide firsthand accounts of their experiences with bookkeepers. Use online forums and social media to gather recommendations and feedback on potential bookkeepers.
4. Evaluate Software Proficiency: Ensure that the bookkeeper is competent regarding the bookkeeping software and tools used, particularly those that integrate with Amazon. Xero and Quickbooks are some popular examples.
5. Assess Communication Skills: Effective communication is vital in any business relationship, especially when bookkeeping has several layers that may be difficult to grasp.

An excellent bookkeeper communicates these financial concepts clearly and informs you about your financial status. They must also stay proactive when communicating with you, keeping you up to speed on important updates and issues.

6.  Check their Understanding of Tax Regulations: Managing fees and taxes as an Amazon FBA seller can be a struggle, so you must choose a bookkeeper with a deep understanding of tax compliance. Plus, they must have comprehensive knowledge of the ins and outs of sales tax regulations and marketplace facilitator laws.
7. Discuss Fees and Services: Before you decide on an Amazon bookkeeper:

• Clarify fee structures and the specific services included.
• Select a bookkeeper with a good balance of price and services offered.
• Ensure there are no hidden costs.

Thoroughly discuss the bookkeeper’s fee structure in detail, including any costs for additional services to avoid incurring surprise expenses.

Amazon Bookkeeping Best Practices

Implementing the following best practices in your businesses can help you maintain accurate financial records and effectively grow your e-commerce cash flow:

Document All Transactions

If it wasn’t documented, it didn’t happen. 

Record all receipts, invoices, financial statements, shipment records, and other financial documents. Have a digital copy to ensure easy retrieval of these documents when needed.

Reconcile Your Accounts

Reconciling your accounts regularly is considered good bookkeeping practice. If your volume is high, reconciling daily transactions can help avoid accumulating errors.

If your volume is lower, doing this weekly or monthly might be a better option. To make this process easier, use Link My Books to automate it while reducing manual errors and saving time.

Use Accounting Software

Using technology for bookkeeping is a basic requirement today. Choose a tool that integrates seamlessly with Amazon to import transaction data automatically.

Look for one with the necessary features, be it invoice tracking or financial reporting. It’s a plus if you can customize these tools to meet your business requirements.

Monitor Fees

Pay close attention to all the fees associated with selling on Amazon. Understanding these fees will help you better manage your margins and set appropriate product pricing.

Familiarize yourself with Amazon’s fee structure, which includes fulfillment fees, referral fees, and more.

For instance, Amazon’s referral fees range from 8% to 45% of the total product price, depending on the category. These figures may change over time, so it’s worth watching any fee updates.

Track Your Inventory

Having a good inventory read can result in a more profitable Amazon business. Your inventory has many costs associated with it, including the purchase price, cost of goods sold, and shipping expenses.

When determining the value of your inventory, use a model appropriate for your business — it may be FIFO (First In, First Out) or LIFO (Last In, First Out).

Manage Tax Obligations

Proper tax management is essential for compliance and financial efficiency. You must stay informed about tax requirements and adjust your tax strategy. 

Here’s how you can effectively manage your taxes:

• First, identify all eligible tax deductions, including inventory costs, shipping expenses, and software subscriptions.
• Then, you can consult a tax professional or use tax software to ensure you file your taxes timely and accurately.
• Keep track of all sales tax collected and remitted. Follow tax regulations and adjust your accounting practices accordingly.

Frequently Asked Questions (FAQs)

If you have more questions about Amazon bookkeeping, we’ll share answers to the common questions we receive on this topic.

What is an Amazon Tax Accountant?

An Amazon tax accountant is a financial professional specializing in the tax aspects of Amazon selling. Their services typically include sales tax management, income tax filing, planning, and audit support.

Do Online Businesses Require a Specialized Bookkeeping Service?

While a specialized bookkeeping service isn’t strictly required, it greatly benefits online businesses by optimizing e-commerce transactions, refining inventory management, and handling tax complexities.

All of these will help you to identify cost-saving opportunities and maximize your profits.

What is the Difference Between an Amazon Bookkeeper and an Accountant?

While there is some overlap between the responsibilities of Amazon bookkeepers and accountants, bookkeepers focus on the smaller details and record daily transactions related to Amazon sales.

Meanwhile, accountants are the strategists. Their services cover a wider range of financial tasks, and they provide deeper financial insights based on the data recorded by the bookkeeper.

Conclusion

Amazon bookkeeping is the backbone of excellent financial management and ensures you’re not caught off guard by tax regulations.

By maintaining accurate records, tracking all relevant fees, and staying compliant with sales tax regulations, you will better understand your finances and increase your chances of financial success.

At Link My Books, we specialize in Amazon bookkeeping, making it easier for you to see your business's bottom line.

Our bookkeeping tool will help you save time (and headaches) by automating the bookkeeping process. Plus, it ensures accurate tax calculations, consolidates reports, and prevents costly mistakes like overpaying taxes.

Sign up for a free trial with Link My Books and save time on your bookkeeping tasks.