Outsourced Amazon Bookkeeping: The Ultimate Profit Strategy for Amazon Sellers
- Hamamd Hasan
- October 9, 2023
- 11:09 am
If you operate an ecommerce business, whether as an Amazon seller or through another platform, you’re undoubtedly familiar with the demands of a constantly evolving consumer market. You must keep your product offerings fresh and engaging while striving to establish a distinctive brand presence.
However, in the midst of all this, it’s equally crucial to manage your company’s day-to-day finances effectively. This includes ensuring your business remains profitable and compliant with tax and regulatory obligations.
Regardless of whether your ecommerce venture is large or small, bookkeeping is an inescapable task. It involves meticulously recording all financial transactions, both on the income and expenditure fronts, that occur during your daily operations. The role of a bookkeeper is to guarantee that every financial aspect is properly accounted for and managed.
Bookkeeping holds particular importance when running an Amazon seller account in the USA, given the potentially high volume of daily transactions. Unfortunately, it’s also a process that can easily be overlooked, as businesses often prioritize sales, branding, and enhancing the customer experience. If you’re seeking assistance with managing the bookkeeping aspects of your Amazon account in the USA, this article will help you identify the key areas where many businesses encounter challenges.
Understanding the Significance of Outsourcing Amazon Bookkeeping Services for Amazon Seller
Bookkeeping involves the meticulous recording of daily financial transactions within a business, encompassing the identification and categorization of sales, purchases, and payments. This precise tracking conducted by a bookkeeper plays a pivotal role in facilitating informed financial decisions, enhancing overall cash flow management, and opening up avenues for growth within the organization.
Bookkeeping primarily focuses on the nitty-gritty details of monetary inflows and outflows, ensuring that these details are accurately and promptly documented. In contrast, accounting delves into the analysis and interpretation of the financial information generated by the business through its accounting records.
For eCommerce businesses, including Amazon seller accounts in the USA, bookkeeping services can present various challenges for proprietors and internal accounting teams. Here are some reasons why these challenges often arise:
Diverse Sales Channels: The proliferation of eCommerce and numerous online selling platforms means that sales transactions can originate from various channels (brick-and-mortar stores, eCommerce websites, social media, Amazon, Ebay, Lazada, Shopee, etc.). Validating and consolidating transactions across these channels can be a complex task.
Multifaceted Payment Methods: With the advent of payment gateways, portals, and e-wallets, customers now have a plethora of payment options (cash, debit card, credit card, online banking, e-wallets, etc.). Matching and reconciling these payments has become more intricate.
Vendor and Inventory Management: Many retail businesses purchase products from suppliers/vendors on credit terms. During events like the COVID-19 pandemic, payment terms may change. Bookkeepers must remain vigilant in tracking payments to suppliers, upcoming bills, and monitoring available cash reserves and cash flow.
Stringent Tax Regulations: The U.S. Tax Code, along with IRS guidelines and memorandums, outlines specific requirements for supporting documentation in business transactions, both in terms of sales and expenses. This documentation is critical, particularly during audits. Therefore, bookkeepers must ensure the availability of the correct supporting documents before recording or categorizing a transaction.
These challenges illustrate the considerations that expert bookkeepers in the USA can solve when providing Amazon bookkeeping services to clients.
Below, we outline common areas where issues and errors can frequently occur in the amazon business, when amazon seller in USA doesn’t hire expert bookkeeper.
11 Bookkeeping Mistakes to Avoid for Amazon bookkeeping
Here are some common bookkeeping mistakes to avoid as an Amazon seller in the USA:
Mixing Personal and Business Finances: It’s important to keep your personal and business finances separate. Open a dedicated business bank account and use it exclusively for your Amazon business transactions. Mixing finances can lead to confusion and make it difficult to track your business’s financial performance.
Not Tracking Expenses Thoroughly: Amazon selling involves various expenses, such as product costs, shipping fees, Amazon seller fees, advertising costs, and more. Failing to track these expenses accurately can result in incomplete financial records and higher tax liabilities.
Failing to Keep Receipts and Records: Always keep receipts and records of your business expenses, including invoices, shipping receipts, and bank statements. These documents serve as evidence for your expenses and can be crucial during tax audits.
Inadequate Sales Tax Compliance: Sales tax regulations can be complex and vary from state to state. Failing to collect and remit sales tax where required can lead to legal issues and penalties. Consider using sales tax automation software to ensure compliance.
Not Accounting for Amazon Fees: Amazon charges various fees, including referral fees, fulfillment fees, and storage fees. These fees can significantly impact your profitability. Make sure to accurately account for these fees in your financial records.
Ignoring Inventory Valuation: Accurate inventory valuation is important for both financial reporting and tax purposes. Use a consistent method (e.g., FIFO or LIFO) to value your inventory and update it regularly to reflect the current market value.
Neglecting Depreciation: If you have assets like computers, printers, or office equipment used for your Amazon business, consider depreciating them over time rather than expensing them all at once. This can help reduce your taxable income.
Misclassifying Workers: Ensure that you correctly classify workers as employees or independent contractors. Misclassification can lead to tax and legal issues. Familiarize yourself with the IRS guidelines for worker classification.
Lack of Regular Reconciliation: Regularly reconcile your financial records with your bank statements and Amazon reports. This helps identify discrepancies and ensures that your financial data is accurate.
Not Planning for Estimated Taxes: As a self-employed Amazon seller, you are responsible for paying estimated taxes throughout the year. Failing to do so can result in penalties and interest. Set aside a portion of your income for these payments.
Not Seeking Professional Help: While it’s possible to manage your bookkeeping on your own, it’s often beneficial to consult with a professional accountant or tax advisor who specializes in e-commerce businesses. They can help you navigate complex tax laws and ensure compliance.
Avoiding these bookkeeping mistakes can help you maintain accurate financial records, reduce tax liabilities, and ultimately run a more successful Amazon-selling business in the USA. Keep in mind that tax laws and regulations can change, so it’s essential to stay informed and adapt your bookkeeping practices accordingly.
Case Study: How Excel Business Resource's Bookkeeping Services Assisted Sarah in Navigating Amazon Bookkeeping Challenges.
Meet Sarah, an ambitious Amazon seller who has been successfully running her e-commerce business for several years. As her business continues to grow, she realizes that managing her finances and keeping track of her sales, expenses, and taxes has become increasingly complex and time-consuming.
The Challenge: Sarah finds herself overwhelmed with the daily demands of her Amazon business, leaving her with limited time to focus on strategic decisions and business expansion. She understands the importance of accurate financial records and compliance with tax regulations, but she’s struggling to keep up.
The Solution: Sarah decided to explore outsourcing bookkeeping services to streamline her financial management. She researches and finds Excel Business Resource, a reputable bookkeeping services provider with a team of expert bookkeepers specializing in Amazon businesses.
The Benefits
- Time Savings: By outsourcing her bookkeeping to experts, Sarah frees up valuable time that she can now dedicate to growing her Amazon business. She no longer needs to spend hours reconciling transactions and tracking expenses.
- Accuracy and Compliance: The expert bookkeeper assigned to Sarah’s account ensures that her financial records are accurate and up-to-date. They also stay informed about the latest tax regulations, ensuring Sarah remains compliant.
- Cost Efficiency: Sarah realizes that outsourcing bookkeeping services is cost-effective. She no longer needs to hire and train in-house bookkeeping staff or invest in accounting software. The outsourcing provider offers a cost-efficient solution tailored to her needs.
- Financial Insights: With access to accurate financial data and reports provided by her outsourced bookkeeping team, Sarah gains valuable insights into her business’s financial health. This information helps her make informed decisions and identify areas for improvement.
- Scalability: As her Amazon business continues to grow, Sarah’s outsourced bookkeeping service adapts to her needs. They handle increased transaction volumes, ensuring her financial management remains seamless even during periods of rapid expansion.
- Peace of Mind: Sarah can now rest easy, knowing that her financial records are in the hands of experts. She no longer worries about missing tax deadlines or encountering financial discrepancies that could harm her business.
In this scenario, Sarah’s decision to embrace outsourced bookkeeping services tailored to Amazon sellers has transformed her business operations. With more time, financial accuracy, and expert guidance, she can focus on scaling her Amazon business to new heights while ensuring financial stability and compliance.
Ensuring Consistency and Efficiency Your Amazon Bookkeeping
Bookkeeping encompasses numerous critical aspects, and neglecting a well-established bookkeeping process can result in significant setbacks for your Amazon business in this fiercely competitive industry. To maintain consistent and efficient handling of your bookkeeping responsibilities, partnering with seasoned experts is paramount.
Excel Business Resource stands as a cloud accounting and startup advisory firm, specializing in providing bookkeeping services and comprehensive financial solutions to startups and small businesses across the USA. Our extensive experience working with numerous companies throughout the country has endowed our team with in-depth knowledge of the business landscape, along with a keen understanding of the challenges and pain points associated with bookkeeping and tax compliance.
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