Running an Amazon FBA business can be highly profitable, but keeping track of finances is essential to ensuring success. Proper bookkeeping helps you understand your profit margins, manage expenses, and stay compliant with tax regulations. Without a clear financial system, your business could lose money without you even realizing it.
In this guide, we’ll break down essential bookkeeping tips tailored for Amazon FBA sellers. Whether you're just starting out or scaling your business, these strategies will help you maximize profits and maintain a healthy financial outlook.
1. Separate Business and Personal Finances
One of the most critical steps in bookkeeping is keeping your business and personal finances separate. Not only does this simplify tax filing, but it also helps you track the true financial health of your business. Many new sellers make the mistake of using their personal accounts, leading to confusion during tax season and potential audits.
A separate account ensures that all income and expenses are accounted for properly. Open a dedicated business bank account and credit card to avoid confusion when tracking expenses. Mixing funds can lead to bookkeeping errors, missed tax deductions, and difficulty understanding your business’s true profitability.
How to Do It:
- Open a business bank account and credit card.
- Use your business account for all Amazon-related transactions.
- Avoid using personal funds for business expenses and vice versa.
2. Track Every Transaction Accurately
Amazon FBA involves multiple transactions, including sales revenue, Amazon fees, refunds, and inventory costs. Keeping a detailed log of every transaction helps prevent discrepancies in profit calculations.
Use automated tools to categorize transactions correctly and ensure that expenses are deducted accurately. Keeping records up to date helps in tax preparation and financial planning. If you don’t track these accurately, you might end up with incorrect financial reports that misrepresent your actual profit.
Best Practices:
- Use bookkeeping software like QuickBooks, Xero, or A2X to automate transaction tracking.
- Regularly reconcile transactions to ensure accuracy.
- Keep records of all receipts, invoices, and sales reports.
3. Understand Amazon’s Fees and Their Impact on Profit Margins
Amazon charges a variety of fees that can significantly impact your profitability if not accounted for properly. These include fulfillment fees for storing and shipping products, referral fees based on a percentage of each sale, and long-term storage fees for inventory sitting in Amazon warehouses too long.
Additionally, there are refund administration fees, advertising costs, and potential high-volume listing fees. Sellers should closely monitor these costs and explore ways to minimize them, such as optimizing product pricing, keeping inventory levels efficient, and using Amazon’s fee calculators before launching new products.
How to Manage Amazon Fees:
- Review your Amazon reports frequently to see what fees you’re paying.
- Use an FBA calculator to estimate your profit margins before listing products.
- Identify high-cost fees and look for ways to optimize, such as reducing long-term storage fees.
4. Monitor Cost of Goods Sold (COGS)
COGS includes all costs associated with acquiring or manufacturing products. This means not just the cost of the product itself, but also additional expenses like inbound shipping, customs fees, and even packaging materials. Keeping an updated record of these costs allows you to set the right selling price and maximize profit margins.
Make sure to review supplier pricing regularly and negotiate better deals where possible. Many FBA sellers fail to track these costs properly, which leads to an inaccurate picture of their profitability.
How to Track COGS:
- Include costs like purchasing price, shipping fees, customs duties, and packaging.
- Update your COGS regularly, especially when suppliers change pricing.
- Use accounting software that automatically updates COGS when inventory is sold.
5. Reconcile Your Amazon Deposits
Amazon deposits your earnings into your bank account every two weeks, but this doesn't always match up with your actual revenue. Since Amazon deducts various fees before making payments, reconciling deposits with reports from Seller Central ensures you don’t overlook hidden costs.
Conducting regular reconciliations helps maintain financial accuracy and ensures that discrepancies are caught early. However, these deposits do not reflect the exact amount you earned, as Amazon deducts fees before making payments.
Steps to Reconcile Deposits:
- Compare the deposit amount with your Amazon payout report.
- Account for deductions like Amazon fees, refunds, and chargebacks.
- Use reconciliation tools or hire a bookkeeper to ensure accurate records.
6. Stay on Top of Inventory Accounting
Inventory is one of the largest assets for an Amazon FBA business, and mismanagement can lead to excessive storage fees or stockouts. Keeping track of inventory costs and sales velocity helps prevent dead stock and ensures you have enough inventory to meet demand.
Regularly review your FBA storage fees and remove slow-moving products to avoid unnecessary costs. Poor inventory tracking can lead to cash flow issues, stockouts, or excess storage fees.
Best Practices:
- Use inventory management software to track stock levels and COGS.
- Avoid overstocking to minimize long-term storage fees.
- Implement a first-in, first-out (FIFO) method to ensure older inventory sells first.
7. Automate Bookkeeping with Software
Manually tracking sales, expenses, and inventory can be time-consuming and prone to errors. Leveraging automation tools reduces errors and ensures accurate financial records. Many software solutions integrate directly with Amazon to categorize transactions and generate financial reports instantly. Investing in these tools saves time and prevents costly mistakes. Bookkeeping software tailored for Amazon FBA can save time and provide accurate financial data.
Recommended Tools:
- QuickBooks Online – General accounting software with FBA integrations.
- Xero – Cloud-based accounting software with automation features.
- A2X – Specialized tool that syncs Amazon transactions with accounting software.
- Sellerboard – Helps track profitability and expenses specific to Amazon FBA.
8. Set Aside Money for Taxes
As an Amazon seller, you’re responsible for paying income tax and potentially sales tax, depending on where you operate. Failing to plan for taxes can lead to financial trouble at the end of the year. Set aside a portion of your revenue for taxes, and consider using tax automation software to handle sales tax collection and reporting.
Consulting with an eCommerce tax specialist can help you understand your tax obligations and avoid unexpected liabilities. Many sellers make the mistake of spending all their earnings without setting aside money for tax obligations.
Tax Planning Tips:
- Estimate your tax liability and set aside a percentage of your revenue.
- Track deductible business expenses, such as shipping, software subscriptions, and marketing costs.
- Work with a tax professional to stay compliant with federal and state tax laws.
9. Regularly Review Financial Statements
Understanding your financial health requires more than just tracking revenue. Financial reports provide insights into profitability, cash flow, and areas of overspending. Regularly reviewing your profit and loss statement helps in identifying trends and adjusting strategies accordingly.
Analyzing cash flow statements ensures you have sufficient funds to cover business operations and growth initiatives. You should analyze financial reports to make data-driven business decisions.
Key Financial Reports to Monitor:
- Profit and Loss Statement (P&L): Shows revenue, expenses, and net profit.
- Balance Sheet: Summarizes assets, liabilities, and equity.
- Cash Flow Statement: Tracks money coming in and out of your business.
10. Implement a Budget and Cash Flow Forecasting
A budget helps Amazon FBA sellers allocate resources wisely and plan for future expenses. Without a structured budget, unexpected costs can strain your finances. Set monthly and quarterly budgets for key areas like inventory, advertising, and software subscriptions.
Regularly compare actual spending with your budgeted amounts and make adjustments to maintain profitability. Cash flow forecasting ensures you have enough funds to cover operational costs.
How to Manage Budget and Cash Flow:
- Set clear financial goals and allocate funds accordingly.
- Monitor trends in revenue and expenses to anticipate financial needs.
- Regularly update forecasts based on actual performance.
11. Stay Updated on eCommerce Accounting Regulations
Tax laws and accounting regulations change frequently, and Amazon FBA sellers must stay proactive to avoid potential legal and financial pitfalls. Sales tax laws vary by state and country, so it’s crucial to understand whether you need to collect and remit sales tax in different jurisdictions.
Additionally, regulations on deductible expenses, income reporting, and international sales may evolve, impacting your bookkeeping processes. Subscribing to tax compliance updates, working with an eCommerce tax professional, and utilizing automated tax software can help ensure that your business stays compliant while maximizing allowable deductions.
Ways to Stay Updated:
- Follow IRS guidelines for eCommerce businesses.
- Subscribe to financial news sources that cover Amazon seller policies.
- Work with an accountant familiar with online selling regulations.
12. Hire a Professional Bookkeeper If Needed
If managing your finances feels overwhelming, consider hiring a professional bookkeeper or accountant who specializes in eCommerce and Amazon FBA businesses. A knowledgeable expert can help with financial organization, tax compliance, profit analysis, and strategic planning.
They ensure accurate reporting, help you identify cost-saving opportunities, and assist in scaling your business efficiently. Many professional bookkeepers also integrate automation tools to streamline your financial processes, saving you time and reducing costly errors.
When to Hire Help:
- If you struggle to keep accurate financial records.
- When you’re scaling your business and need financial insights.
- To ensure compliance with tax regulations and financial reporting.
Final Thoughts
Proper bookkeeping is essential for Amazon FBA sellers looking to maximize profit margins and scale their businesses. By tracking expenses, monitoring Amazon fees, reconciling transactions, and automating processes, you can gain better financial control and avoid costly mistakes.
Investing time and effort into bookkeeping not only ensures compliance but also helps you make informed decisions that improve cash flow and long-term profitability. Whether you handle it yourself or hire a professional, keeping your books in order is a key step to running a successful Amazon FBA business.
Author bio
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, eBay, Etsy, WooCommerce, & other eCommerce channels. We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
