Starting an online business requires plenty of juggling, but some things will always take priority. Managing finances is probably one of the most essential tasks on your list.
A popular online business model is Fulfilment by Amazon (FBA). This model requires specific accounting considerations that might differ from traditional Amazon accounting methods.
In this guide, we will explore the differences between Amazon FBA accounting and traditional Amazon accounting and how to manage the finances of an FBA business correctly.
What is Amazon FBA?
You may have heard of FBA, but it's helpful to grasp the bigger picture to understand the accounting side. Here's what you need to know about FBA and how the marketing side differs from the more traditional Amazon sellers' model.
The Amazon FBA Model
If you have a business or plan to start one, Amazon FBA could be a great option. It allows you to sell your products online and reach more customers. This could help you grow and become successful in the long run.
The Amazon FBA Model allows sellers to have a simple e-commerce solution. It's one where they can store their items in Amazon's warehouses. Amazon will then handle the sellers' packing, shipping, and customer service.
This gives sellers the convenience of using Amazon's extensive customer base without worrying about all the extra work.
Amazon FBA can make selling in the eCommerce world easy. You don't need to worry about keeping track of items and shipments – all you have to do is focus on marketing and customer service. This can help you get better than other sellers and build a lasting business.
Amazon FBA can save you money and make things easier, but you'll lose some control over your item listing and customer service.
Plus, the commissions that Amazon charges can affect your profits. To decide if FBA is a good idea for you, you should do some research.
Amazon FBA Marketing
If you want to market your business, Amazon FBA offers some tools to help. You have the flexibility to create a shop with products from different categories so that you can pick the best ones for your customers.
It also shows product reviews, so you can learn more about what people think about your products and build stronger relationships with them.
The Traditional Amazon Sellers' Model and Amazon Accounting Approach
Businesses that don't use the FBA Amazon model must open their accounts with payment networks, make invoices, and track their money.
They'll also be responsible for shipping, handling, and associated costs. This means their accounting has to include those costs, too.
The non-FBA model does not require businesses to pay a subscription fee. But they still need to pay for advertising, packaging, customer service, and taxes. They also need to take care of customer returns if they happen.
The accounting process for the non-FBA model requires special financial knowledge. You may need to hire a good accountant.
When deciding between FBA and a non-FBA approach, it is essential to consider how it will affect your money and goals. For small businesses, the non-FBA choice usually costs less overall and can save more money in the long run.
How is Amazon FBA Accounting Different?
It's reasonable to argue that FBA accounting is more straightforward. Here is what you need to know about the fees, reporting and storage costs of FBA accounting.
Amazon FBA sellers pay fees when they sell items on Amazon. This includes a selling fee based on the price and category, a monthly fee for using the services, and a fulfilment fee for Amazon packing and shipping.
Non-FBA sellers only pay the selling and monthly fees, as they are responsible for storage and shipping.
Amazon FBA sellers can quickly discover how they're doing with their sales and expenses. They can see their data in real time to make wise and fast decisions.
Non-FBA sellers don't have this advantage. They have to keep track of their revenue and profit data, which takes a long time.
Amazon FBA sellers pay to keep their products in Amazon's warehouses. Non-FBA sellers have to arrange their storage, and the cost for this is not included in selling on Amazon.
FBA storage fees depend on how much space the item takes and how long you store it. Non-FBA sellers can choose to keep their things themselves or rent storage.
How to Manage Your FBA Accounting Efficiently
If you're selling products on Amazon, you need to understand your business's finances. FBA accounting can seem overwhelming if you're new. To make it easier, here are some critical tips for managing your FBA accounting.
The first step is to get organized.
Make a digital or physical system for all your financial documents like invoices, bills of sale, receipts, and inventory reports. You can easily access any financial document you need when everything is in one place and easy to find.
Track and review your expenses and income often. This helps you find any money problems quickly, so you can fix them before they get too big. Document every transaction you make.
Set aside time each week to review your accounts.
Track your inventory so you'll know how much you have at all times. This will help you buy and sell the right amount. Plus, it stops you from buying too much, which can cost you money.
It's important to know what's new in FBA accounting. Amazon's rules often change, so you should always understand them.
To stay informed, try reading newsletters from industry pros and articles from reliable sources. That way, you'll learn all the latest FBA tips and how to do it right.
Stay on Top of Your Amazon FBA Accounting
Amazon FBA accounting has a different approach than you may have seen before as an online seller. You must understand the importance of tracking specific FBA costs, including storage, prep, and shipping.
With proper Amazon accounting, business owners can streamline their operations. This will help you make more informed decisions about your finances.
The most efficient way to stay on top of your FBA bookkeeping is to use dedicated software designed for Amazon seller accounting. You can try linkmybooks for free by signing up for this trial.