So, you’ve made the decision to use Amazon’s FBA suite of services to establish and grow your online business. Congratulations that is a wise decision to let Amazon do a lot of the heavy lifting, especially as it relates to inventory management, remittances processing, and more.
Even with Amazon services handling a significant portion of your business, do you find certain tasks chewing up big chunks of your workday? Remember, you are building a real business and it is not a trivial effort. One blackhole for labor hours is properly entering data from the FBA Bi-Weekly Settlement Report into your accounting system.
Automation to the rescue. This article tackles how to handle getting Settlement Report data properly accounted for without spending endless hours struggling with spreadsheets or manual data entry. With the right automation tool, you can reclaim hours upon hours, enabling you to focus on other parts of your business. And, eliminate accounting mistakes that can become problems later on.
Amazon Seller Accounting for amazon marketplace sellers
To adequately describe the extent of what Amazon’s FBA provides would take pages and pages. That’s neither necessary nor is it the goal here. There are plenty of resources that talk about what the FBA provides. Still, it doesn’t hurt to take a 30,000’ look at the information, merchandise, and money flow of a transaction through Amazon FBA. The graphic below provides that 30,000’ look.
If you are like most online sellers, your passion is all about the store, product selection, product management, promotion, and so forth. There aren’t too many people who start an online store so they can do accounting and inventory management. Doing what you love takes time, but so does doing the stuff you don’t like. And, as we said earlier, the stuff you don’t like doing has serious implications for your success or failure.
Costs of doing business – digging into Amazon’s fees
Just as it is important for amazon sellers to have tools for comprehensive analysis like fba toolkit (set of tools to gain competitive advantage) it is also imperative to gain full understanding and clear visibility to complete amazon fee analysis and good amazon integration software.
Amazon has an amazing logistics system in place, one of the most efficient and extensive in the world. They love having thousands of people and companies like you and yours using their system and services. They especially like making money providing those services. And, they aren’t shy about charging for them.
Don’t get us wrong; we aren’t commenting on the appropriateness of the fees Amazon charges. We have no way to gauge that. What we are saying is the fee structure is complex as are the rules for calculating the fees.
As a user of the FBA services, you can sign up for either a Professional or an Individual Seller account. There are no recurring monthly fees for Individual Sellers. Amazon collects $.99 plus fees on each item sold. Amazon charges Professional Sellers $39.99 per month, plus fees for each item sold.
Note: The $39.99 is a fixed monthly fee and you are charged that amount if you sell zero or 1,000 items. Throughout the article, we’ll keep a running total of these costs.
Monthly fixed cost running total: $39.99
Before you get carried away with the, “Hey, that’s not so bad,” reaction, this isn’t the full extent of FBA fees. According to the Fees page, there are 13 different types of fees, not all of which may apply to your situation. In addition, Amazon has 42 categories products with different fees, as detailed in this list. They are nothing if not thorough.
Recognizing that their options are complex, you can use two Amazon tools to determine the fees you will incur. You can access their Fee Preview tutorial here their Revenue Calculator here, and a 3rd party tutorial for using it here.
Note: Amazon’s support information is phenomenal. It is also overwhelming. The inserted navigation panel from the Fees page is an illustration. Rather than slog around, use FAQ page to focus your search.
What’s all the hubbub about fees anyway?
We’re glad you asked. The reason to pay attention to fees is that they can be the single largest cost, when taken in aggregate, of your online business! There is an excellent online article about fees and how they impacted the article’s author’s bottom line. To save you a bit of time, we’ll hit the high points and let you read the entire article later, using part of the time we will show you how to reclaim.
According to the author, Shane Stinemetz, he paid scant attention to fees when he started his FBA-backed business. He soon realized the error of his ways when he started calculating his profits. Analyzing two different items he sold, fees accounted for 52% of total costs for one product, and 56% for the other!
Using the Amazon Fee Preview tool (fba revenue calculator) we mentioned previously, he calculated the FBA costs for the first product, with the results shown in the accompanying graphic of $8.21 per item sold.
The Referral Fee is usually 15% of the item’s sales price but varies by the product category. Click on our link in the previous page to see all the categories and their percentages.
The Variable Closing Fee is charged to Individual Sellers, so it quickly makes sense to graduate to a Professional Sellers account.
And, FBA Fulfillment Fees involve order entry into Amazon’s systems, pick & pack (get the item of the shelf and into a box), and weight handling, a per pound charge based on the product’s size tier.
In addition to the per item fees and the monthly Professional Seller fee, you can be hit with other monthly recurring service fees. The point we are making is that fees need your attention, so they can be managed, and you can make a profit. You can review in details current amazon fee schedule here.
To get better understanding about complexity of amazon fees here is an example of prepared journal entry in accounting system:
The Amazon Seller Accounting for Amazon FBA sellers
Accounting has to be one of your top five favorite business duties. Are we right? Didn’t think so. Accounting is a complex and demanding discipline that people spend lifetimes mastering. Accounting is also a topic that makes many entrepreneurs’ eyes glaze over with good reason; it is not that exciting to non-practitioners.
Fortunately, you do not have to be an accountant to succeed. We recommend that you have access to an accountant you know and trust, especially at tax time.
Note: Be sure you get a good one! Here’s a nice article on what you should look for when picking a person or firm to provide accounting services.
In the meantime
Until you need the services of an accountant for amazon fba bookkeeping, you can keep everything ship-shape by taking a few steps. Therefore, your mission, should you decide to accept it, is to keep good records of costs and revenues. How do you do this? With our three-step process below!
A. Get a good accounting program.
As the title of this article hints, a good option is QuickBooks Online (QBO). Of course, there are others; we are focused in this article on getting FBA data into QuickBooks Online Accounting system accurately and easily. Amazon seller accounting is not that easy.
Let’s think about this a bit. Can you get by without spending the monthly fee for an application like QBO? Sure, you can but why would you want to do that? You can get the Simple Start version of QBO for an introductory price of $10/month, normally $20.
Your time has a value. No, don’t roll your eyes and think, “I am running the business anyway, I’ll do this too.” You can, but it will involve hours of tedious work. Why didn’t you handle all your own logistics rather than pay Amazon? Because they are experts at it. Same goes for QBO. Pay the $20.
Monthly fixed cost running total: $59.99
B. Set up a Chart of Accounts (COA).
What is this accounting lingo? According to Wikipedia, a COA:
“COA -is a created list of the accounts used by an organization to define each class of items for which money or the equivalent is spent or received. It is used to organize the finances of the entity and to segregate expenditures, revenue, assets, and liabilities in order to give interested parties a better understanding of the financial health of the entity.”
Don’t worry if you have no idea as to which accounts are needed; you can get started with this simple course.
C. Feed your accounting beast with the only food it craves, data.
The world has progressed into the age of data, big data. Your online business, as sleek as it is, survives with the proper use of data, data that Amazon provides in abundance.
Amazon’s Black Box – The Bi-Weekly Settlement Report and Payment
We’ve termed this staple of Amazon’s FBA program a “black box” because it meets the definition rather nicely. According to Merriam-Webster, one definition of a black box is:
“anything that has mysterious or unknown internal functions or mechanisms”
Boy, do these two items fill that bill! This Settlement Report contains the explanations and details of all the activity that has taken place within your account in the previous two weeks including all your amazon fulfillment fees. Things like sales, returns, damaged products, payments collected, fees incurred, and so forth.
You get this report as a flat file which you can open in a spreadsheet and scroll through to your heart’s content. More on this later as it isn’t that simple. Yes, it opens just fine but then comes the hard part of deciphering what it contains.
The bi-weekly Payment is always a delight. Money is rolling in, and that’s why you are in business, right? You look at the amount that magically appeared in your bank account and may be tempted to break into your end zone or happy dance. Caution is advised against excessive celebration. You may receive a penalty if you don’t break the funds down into their proper categories. You see, some of that money belongs to State and National government entities in the form or Sales and VAT-style taxes. And, they are going to want those funds.
Collecting and remitting taxes is a horrible mess, one that can pose serious issues if incorrectly implemented. Fortunately, distributing taxes collected to their proper COA location is handled by DataQlick’s App that we will delve into in a couple more minutes.
It’s all about automation of reconciliation
This isn’t about burying the hatchet to repair a relationship; this is about taking steps to analyze the FBA Report, identify the individual pieces of information, and clean it up, so it matches your records, eliminates duplication, reverses charges and revenues, and so forth. You want to reconcile the Report with your COA.
To automate or not to automate, that is the question.
With apologies to the Bard, you must embrace automation in order to have time to do the things you want to do in your business. Let’s take an example, how do you feel about balancing your checkbook and bank statement, assuming you write checks? Loads of fun isn’t it.
Now, magnify that effort 10 or 100-fold, and you have an idea of manually reconciling your FBA report and your COA. Amazon provides instructions for manual reconciliation, something they recommend you do daily. Depending upon your volume of transactions, this is going to consume a lot of your day, time that could be reclaimed, freeing you to do the things you want to do.
You can also pay an accountant to perform the reconciliation function. They can be an employee with the attendant salary and overhead costs or a consultant with a retainer, hourly rates, or both costs.
4 simple (truly) steps to automate the feeding of the COA beast
We come down on the side of automation, and not just because that’s our business. Automation is the driver of productivity. When you automate repetitive tasks, especially those that are data intensive you;
- Eliminate data entry errors
- Reduce the time to import data to one or, at most, a few keystrokes
- Reduce the expenses related to the entry process
- Free up staff and personal time for other efforts
You will need to spend about 30 minutes to get started. After that, it is a one-button process! How does that sound compared to how you handle reconciliation now? If you aren’t addressing this task, shame on you! Take this opportunity to rectify that mistake for your own sake.
Step 1: Authorize DataQlick’s Amazon to Accounting App to access your FBA data and QBO account
Authorize DataQlick’s Amazon to Accounting App to access your FBA data and allow quickbooks amazon automation. DataQlick app provides seamless Amazon quickbooks integration (QuickBooks Online integration with the best accounting software for amazon sellers).
When you launch the DataQlick Amazon to Accounting App, you’ll see the start screen shown below.
First, connect the App to your QBO account by clicking the big friendly green Connect button circled in yellow. You’ll be asked to confirm, and it will connect in seconds.
Second, connect to your Amazon Seller Account by clicking the other big friendly green button circled in blue. This time, you’ll see the following dialog box open. Select your Marketplace in the drop-down field marked A. Follow steps 1 – 8 as directed. Enter your Amazon Seller ID in field B, and your Amazon MWS Auth Token in field C then click the OK button. In just a few seconds, you will be connected to your Amazon account.
Congratulations! You have successfully connected your Amazon FBA Seller Account to your QuickBooks Online account. Not so bad, was it?
What have you just done?
You have given your DataQlick App permission to take the Amazon bi-weekly Settlement Report and deliver it directly to your QuickBooks Online account, automatically parsing out the myriad entries as it does so.
What else have you done? You have set the stage to reclaim the hours you used to spend hand entering data into your accounting system, hours you can now apply to other tasks!
The Consolidated Report from your Amazon FBA account is now set to be imported automatically into Amazon to Accounting app. However, the data is not automatically posted into your accounting system to allow you the opportunity to review and approve it before you submit it with single click.
Step 2: Import historical data on an as-needed basis.
By default, your DataQlick Amazon to Accounting App provides you with the current and previous month’s data. This gives you the foundation to dive into the App and see what it can do without overpowering you with data.
Historical data is also available if you wish to fill out an accounting year for $29.00 for each month. Hold on, what’s this? Bait and switch? Why are you charging for data retrieval that already exists? I want it free.
Sure, free is nice. However, it would not be fair to our other customers who have paid and continue to pay, to retrieve their data on an ongoing basis. There are also additional programming requirements on our end that we must cover, just like Amazon covers their expenses. As you use the App, you’ll realize just how valuable it is in reducing the costs of data entry the old way.
Step 3: Aligning Amazon fee categories with your Chart of Accounts
Nearly done! Next, you need to align the Amazon fee and revenue categories to your COA “buckets.” In essence, you are “mapping” the Amazon data into your QuickBooks Online. You point the data from each Amazon category to the appropriate account.
This will sound odd, but it is quite satisfying in a peculiar sort of way. Maybe you’ll agree. Here’s how you accomplish this step. Click on the Dashboards link at the upper left of the App screen below the DataQlick logo. Then click on the Configuration button to get to the screen shown below.
You implement your mapping process by choosing the appropriate categories and accounts from the drop-down lists in each field. The beauty of your App is that it has already populated these lists with the categories from Amazon and your COA selections from your QuickBooks Online. Click and select. That’s all there is to it!
The top box is where you point data for banking purposes, circled in green. Below that is the section where the rest of the categories and accounts are linked, circled in yellow.
Step 4: Monthly split or NO monthly split
Before you leave this screen, you have another easy task to complete, decide if you want to see your data split into monthly buckets format (hat accountants prefer) or leave a true amazon reporting format. Don’t worry; you can move back and forth at will. Selecting one option over another is not an irrevocable decision. The buttons to make this choice are circled in a lovely shade of brown.
Okay, DataQlick, you’ve gotten me this far, now what? We’re glad you asked that question. First of all, let’s take a look at how your Amazon data displays in your App. In the image below, you’ll see your data in the monthly view.
And, here in the Split Processing mode. Feel free to switch back and forth at will. Your App will act like fba toolkit allowing you to drill down into data where you see the complete details. Click on it to expand the data for a closer look at specific items. Click it again to return to the consolidated or collapsed view. Your App is designed to let you work the way you prefer.
Still with us? Good, because here comes the best part, using the One-Click and Submit process to create perfect journal entries. Click on the Payments link next to Dashboards, and you’ll see your version of the following screen. This shows the Amazon data ready for entry into your QuickBooks Online general journal. Let’s point out a couple of features on this screen.
Do you sell in multiple marketplaces? View the data for a particular by selecting it from the drop-down list circled in blue.
Want to see more general ledger categories? Click on the numbered buttons or navigation arrows.
Time for the One-Click and Submit magic.
When you check an empty box, your App displays the dialog shown below. At the lower right is the Submit to Journal button. If you are satisfied with your data, simply click once to create the appropriate journal entries. You are done!
Want to know with certainty that you have submitted (or not) a particular period to your general ledger? A green checkmark indicates processed submission; a checkbox indicates it has not been submitted. These identifiers are circled in green. This feature is especially handy in preventing double entries.
Putting DataQlick’s Amazon to Accounting App to work
Your next question is going to be, “How much will this set me back?” Drumroll, please…$29.00 per month. An amazing value for an application that will save hours of time every two weeks and keep your books in a pristine state for the accountants at year-end.
On top of this One-Click and Submit capability, your App has much more to offer like SKU analysis to analyze each individual item your sell for P&L performance, robust data display, and more. But those are topics for another time. No risk trial
We here at DataQlick are so certain that you will love the capabilities of the Amazon to Accounting App and the hours it will reclaim for you, we are offering a free, two-week trial. No credit card required, just download the App, follow the instructions we’ve given here, and see for yourself.
If you like it, sign up. If you don’t, thanks for giving us a shot. Follow this link to get started.
You have turned to Amazon’s FBA program for a large chunk of your business operational needs in the areas of inventory management, fulfillment, remittance processing, and more. As an FBA Seller, Amazon provides you with immense amounts of data designed to help you manage your business. Unfortunately, they do not provide that data in a form that can be easily managed using manual processes and spreadsheets.
Put the benefits of automation to work for your online business. Free up your time (or someone else’s), save money, avoid costly accounting errors, and breathe easy with DataQlick’s Amazon to Accounting App. You trust Amazon for their piece, you can trust us for ours. Start your free trial today or contact us for a demo. Either way, we think you’ll be glad you did.