Bookkeeping for Amazon sellers begins with a clear picture of cash in, cash out, and the fees Amazon pulls from every sale. When you track each dollar the moment it moves, you see profit in real time, steer clear of tax headaches, and build a store that scales with confidence.
Introduction to Amazon Seller Bookkeeping
Running an Amazon storefront feels like sprinting on a treadmill that never stops. Orders drop, returns arrive, and payouts hit your bank on Amazon’s schedule. Without tight books, those rapid‑fire transactions blur into chaos. Smart bookkeeping turns that blur into a readable dashboard. It captures sales, fees, inventory costs, and taxes the same day they happen, letting you adjust prices, reorder stock, and plan growth before problems bite.
How 1‑800 Book Keeping Supports Amazon Sellers
Our services at 1‑800 Book Keeping plug straight into Amazon Seller Central. We set up your chart of accounts, integrate A2X, and reconcile payouts within 24 hours. You get weekly KPI snapshots and month‑end financials that speak plain English. Need sales tax filings or inventory valuation? We handle those too, letting you focus on sourcing winning products.
Contact us for our ecommerce bookkeeping packages.
Why Accurate Bookkeeping Matters for Amazon Sellers
Amazon sellers live on thin margins. FBA fees, storage costs, and shipping eat profit fast. Accurate records reveal true margin on every SKU, spotlight waste, and protect cash flow. Lenders, investors, and the IRS trust clean books. Messy ledgers raise audits and block funding. Precise numbers also power smarter ad bids and reorder points, keeping best sellers in stock without tying up cash in slow movers.
Common Financial Challenges Faced by Amazon Sellers
• Fee overload: Referral, FBA, storage, and advertising fees pile up and hide in payouts.
• Inventory guesswork: Poor tracking leads to stock‑outs or dead stock that drains cash.
• Sales tax confusion: Different states demand filings once you hit nexus thresholds.
• Cash crunch: Two‑week Amazon payout cycles strain suppliers that want payment sooner. • Data overload: Seller Central exports arrive in raw form that need heavy cleanup.
Setting Up Your Amazon Business for Financial Success
A solid foundation prevents future headaches and keeps personal money separate from business money. Treat your Amazon store like a real company from day one.
Choosing the Right Business Structure
Sole proprietorships work for hobbyists, but growth demands liability protection and tax flexibility. Many sellers form an LLC for legal shielding and elect S Corp status once profit tops roughly $60,000 a year, saving on self‑employment tax. For official definitions and requirements, review the IRS guide to business structures.
Opening a Dedicated Business Bank Account
Run every sale, fee, and expense through a business checking account. Match Amazon deposits to bank activity with one click and avoid commingling funds that invites audits.
Separating Personal and Business Finances
Use a business credit card for inventory, software, and shipping. Pay yourself through owner draws or payroll, not random transfers. Clean separation simplifies bookkeeping and proves professionalism to lenders.
Selecting the Appropriate Accounting Method
Cash Basis vs. Accrual Basis Accounting
Cash basis books revenue when Amazon pays you and expenses when you pay bills. It feels simple but masks true profit because payouts lag behind sales. Accrual books revenue when the sale happens and expenses when inventory ships, giving an honest profit line each day.
Benefits of Accrual Accounting for Inventory Management
Accrual treats inventory as an asset until it sells, then records cost of goods sold. That clarity stops you from thinking you made money just because cash arrived. It shows real margin per unit and flags SKUs that drain capital.
Essential Accounting Software and Tools
Overview of Popular Accounting Software
QuickBooks Online and Xero rule small business accounting. Both link bank feeds, automate rules, and spit out financial statements with a click.
Integrating Amazon Seller Central with Accounting Software
Direct feeds often fall short. Connect through middleware like A2X or Link My Books. These tools translate raw Amazon settlements into tidy journal entries that land in QuickBooks or Xero daily, split by sales, refunds, fees, and taxes.
Utilizing Add‑Ons and Automation Tools
Inventory planners, forecasting apps, and repricers integrate with accounting data to sync stock levels, reorder points, and ad spend. Automation cuts manual entry and slashes errors so you focus on growth, not data cleanup.
Creating a Customized Chart of Accounts
Categorizing Income, Expenses, and Fees
Set separate income lines for product sales, shipping income, and promotional rebates. Break expenses into inventory purchases, FBA fees, storage, shipping labels, advertising, and software. Clear categories let you spot leaks fast.
Tracking Amazon‑Specific Transactions
Map Amazon reserve amounts, reimbursements, and inventory adjustments to dedicated accounts. This practice stops those odd entries from distorting gross profit.
Managing Inventory and Cost of Goods Sold (COGS)
Importance of Accurate Inventory Tracking
Every unit represents cash on a shelf. Real‑time counts prevent overselling and needless restock fees. Track by SKU, lot, and location to know what sits in FBA, a 3PL, or your garage.
Calculating and Recording COGS
COGS equals landed cost per unit times units sold. Landed cost includes product, freight, duty, and prep fees. Record COGS at sale to show true gross margin on every payout.
Handling Amazon Fees and Transactions
Understanding Amazon’s Fee Structure
Amazon charges referral fees on each sale, FBA pick‑pack fees, weight handling, long‑term storage, and returns processing. Advertising fees hit your card daily. Knowing each fee helps you price for profit. Check the current Amazon fee schedule for exact percentages and examples.
Recording and Reconciling Fees in Your Books
Middleware posts fees to the correct expense accounts automatically. Reconcile settlements against bank deposits weekly to catch missing or duplicate charges.
Sales Tax Compliance and Management
Sales Tax Nexus and Obligations
Amazon’s marketplace facilitator model collects and remits sales tax in many states, but some still require seller filings. Economic nexus thresholds vary by state, often 200 transactions or $100,000 in revenue.
Tools for Automating Sales Tax Calculations
Software like TaxJar or Avalara pulls Amazon data, files returns, and reminds you of due dates. Automation cuts penalties and late fees.
Financial Reporting and Analysis
Preparing Key Financial Statements
Profit and Loss Statement
This report shows revenue minus COGS and expenses. Review it monthly to measure profitability by SKU group.
Balance Sheet
The balance sheet lists assets such as inventory and cash against liabilities like credit cards and sales tax payable. It proves solvency to lenders.
Cash Flow Statement
Cash flow tracks operating, investing, and financing cash. It reveals whether growth eats cash faster than profits replace it.
Monitoring Key Performance Indicators
Watch gross margin, advertising cost of sales, inventory turnover, and return rate. Set benchmarks and adjust strategy when numbers drift.
Reconciling Accounts and Ensuring Accuracy
Regular Bank and Account Reconciliations
Match bank feeds, Amazon settlements, and credit card statements each week. Quick matches confirm data integrity and catch fraud early.
Addressing Discrepancies and Errors
Investigate mismatched amounts the same day. Correct coding mistakes, request Amazon reimbursements, or dispute bank charges while records remain fresh.
Preparing for Tax Season
Organizing Financial Records for Tax Filing
Store digital receipts in folders by month and category. If you need hands‑off support, our monthly bookkeeping service keeps every receipt and reconciliation tax‑ready year‑round. Attach invoices to transactions inside your accounting software for instant reference.
Collaborating with Tax Professionals
A CPA who understands ecommerce can trim taxes with inventory methods such as first‑in first‑out or landed cost valuation. Provide complete books and avoid rush fees.
Scaling Your Amazon Business with Solid Financial Practices
Planning for Growth and Expansion
Use rolling forecasts to predict cash needs for new SKUs, marketplaces, or international launches. Secure credit lines before you need them.
Budgeting and Forecasting for Future Success
Compare actual results to budgets monthly. Adjust ad spend, reorder quantities, and pricing to hit profit goals.
Conclusion
Professional bookkeeping turns Amazon chaos into clear numbers you can trust. Accurate books reveal profit leaks, ease tax filings, and prove your business worth to lenders. Start by separating finances, choosing accrual accounting, and automating data feeds. If time or confidence runs thin, partner with experts who live and breathe ecommerce accounting. Your bottom line will thank you.
FAQs
What records should Amazon sellers keep for taxes?
Keep invoices, shipping receipts, Amazon fee reports, and bank statements for at least seven years.
Do I need a separate LLC for my Amazon store?
An LLC offers liability protection and looks professional to suppliers. Many sellers form one once revenue grows.
How often should I reconcile Amazon settlements?
Weekly reconciliations catch errors quickly and keep books current.
Which accounting software works best with Amazon?
QuickBooks Online paired with A2X or Link My Books automates most entries and suits many sellers.
When should I switch from cash to accrual accounting?
Switch when inventory grows or revenue tops roughly $1 million, as accrual provides clearer profit data.
