As an Amazon seller, every day brings new challenges and opportunities. From sourcing new products to managing inventory and shipping orders, the life of an Amazon seller is always exciting.
It’s a journey requiring passion, creativity, and hard work. As a small business owner, you’re in charge of every aspect of your Amazon store, from marketing and customer service to bookkeeping and financial management.
While it can sometimes be overwhelming, the rewards of running a successful business are worth it.
However, to achieve long-term success, it’s crucial to avoid common mistakes in Amazon bookkeeping that can hold you back.
In this article, we’ll look closely at some of Amazon Seller’s most common mistakes and provide tips for overcoming them.
So, let’s identify and fix these mistakes to develop your Amazon brainchild into a thriving eCommerce business.
#1: Not tracking expenses correctly.
One of Amazon sellers’ most common bookkeeping mistakes is incorrect tracking expenses. Tracking means keeping an accurate record of all the costs incurred while running your Amazon Seller bookkeeping.
These expenses include inventory, shipping, office supplies, and other costs incurred while running your business.
So, if the Amazon Seller does not track expenses correctly can lead to severe consequences for your business.
With an accurate record of expenses, you may avoid deductions and pay more taxes than necessary.
Additionally, inaccurate financial records can make it difficult to analyze your business’s performance and make informed decisions about future investments.
Over time, this can hurt your bottom line and hinder your business’s growth.
Consider using a bookkeeping software like QuickBooks or Xero, which can help you categorize your expenses and keep track of your financial transactions. Make sure to keep all receipts and invoices organized and up to date.
#2: Failing to reconcile accounts
Another common Amazon bookkeeping mistake made by sellers is failing to reconcile accounts. Reconciling your accounts involves comparing your bank statements to your financial records to ensure that all transactions are accurate and accounted for.
When you fail to reconcile your accounts, you may miss out on fraudulent transactions or errors in your financial records.
Not reconciling can lead to inaccurate financial statements and make understanding your business’s financial health difficult.
Over time, this can lead to poor decision-making, missed opportunities, and financial losses.
Furthermore, failing to reconcile accounts can lead to tax issues. With accurate financial records, you may underreport your income or avoid deductions, leading to costly penalties and interest charges.
So, make sure to reconcile your accounts regularly, preferably monthly. It will help you catch any errors or discrepancies in your financial records and ensure they are current.
#3: Mixing personal and business finances
Mixing personal and business finances is another common bookkeeping mistake Amazon sellers make.
The consequence of mixing personal and business finances can be severe. Firstly, it can make it difficult to accurately track your business’s income and expenses, leading to inaccurate financial records.
Moreover, it can result in missing out on valuable tax deductions and paying more taxes than necessary.
Mixing personal and business finances can put your personal assets at risk. In the event of a lawsuit or other legal action against your business, personal assets could be seized to pay for any damages or debts owed.
Moreover, combining personal and business finances can lead to clarity and make it easier to analyze your business’s financial health. This can hinder your ability to make informed decisions about your Amazon business and could ultimately harm your bottom line.
Open a separate bank account and credit card for your own bookkeeping. Both accounts will make tracking your business transactions and expenses more manageable.
#4: Not keeping up with sales tax.
Sales tax is another area where many Amazon Sellers need to correct things. Collecting sales tax on all eligible transactions is essential, and remitting that tax to the appropriate tax authorities.
Not keeping up with sales tax can lead to penalties and interest charges from the taxing authorities, which can add up quickly over time.
Additionally, failing to collect and remit correctly can harm your reputation and result in negative reviews from customers who are unhappy with unexpected charges.
Furthermore, legal issues and even lawsuits will occur to Amazon Sellers. If you’re not collecting and remitting sales tax as required by law, you could face fines, legal action, and even the loss of your Amazon Seller Central Account.
Obtain a sales tax permit in any state with a nexus. Here are the steps for registering a sales tax permit.
#5: Not properly categorizing expenses
Properly categorizing expenses is essential for accurate financial record-keeping. Please do so to avoid errors and make analyzing your business’s financial data easier.
For instance, you can’t understand a business’s profitability properly. Also, you can miss opportunities to reduce costs or invest in areas generating revenue.
Additionally, this dangerous mistake can result in tax issues. The IRS requires you to report expenses by category when filing your tax return.
Underreporting and overreporting expenses may happen, leading to penalties and interest charges.
Choose and use the proper accounting method for your business. If you use accrual accounting, you’ll need to categorize expenses by the month they were incurred, while cash accounting recognizes revenue and expenses when they are received or paid.
#6: Not keeping track of inventory properly.
Properly tracking your inventory is essential for accurate financial records and understanding your cost of goods sold. You may face serious consequences that can hurt your bottom line and reputation without proper inventory management.
One of the most significant consequences of not correctly keeping inventory track is stockouts. This happens when you need more stock of a popular product, leading to lost sales and frustrated customers.
On the other hand, overstocking can increase storage costs, adding up quickly and hurting your profitability.
Moreover, inaccurate inventory management can lead to order fulfillment issues and delays. Customers who receive the wrong or late orders may leave negative reviews, harming your reputation and future sales.
Use a proper accounting system, such as double-entry accounting, to accurately track your inventory and the cost of goods sold. Consider using inventory management software to make the process easier.
#7: Failing to account for Amazon fees
As an Amazon seller, it’s easy to get caught up in the excitement of making sales and forget about the fees associated with selling on the platform. However, failing to account for Amazon fees can severely affect your business.
Amazon charges several different fees, including operating expenses, fulfillment fees, and storage fees, to name a few. These fees can add up quickly and eat into your profits if not adequately accounted for.
Failing to track all those fees leads to inaccurate financial records and misunderstanding your business’s profitability.
Moreover, it can lead to tax issues. You may pay more taxes than necessary without deducting these fees from your income.
Keep track of all fees Amazon charges and include them in your financial records. You can use accounting software like QuickBooks or Xero to help you track and categorize these fees.
#8: Not keeping a record of refunds.
Refunds are a part of doing business on Amazon, and failing to track them can lead to errors in your financial records. Customers may return items for various reasons, from a change of heart to a defective product.
But what happens if you don’t keep a record of those refunds? Well, let me tell you – it can lead to severe consequences.
Firstly, failing to keep a record of refunds can throw off your financial records. Refunds affect net revenue and profitability; with an accurate record of them, you may avoid deductions or overestimate your revenue.
It can lead to incorrect financial statements, making understanding your business’s proper financial health easier.
Additionally, not keeping track of refunds can result in missed opportunities to improve your customer service. By keeping a record of the reason for each refund, you can identify patterns or issues with your products or shipping process.
#9: Failing to use accounting software for bookkeeping
Some Amazon sellers still rely on manual bookkeeping, such as Excel spreadsheets. While these methods may work for some small business owners, they can be time-consuming and prone to errors.
Also, you can miss opportunities to save time and risk errors by not updating technology as eCommerce sellers. Moreover, you can miss out on these valuable tax deductions, which can help you lower your tax bill.
Discover the Top 10 QuickBooks Features You Can Take Advantage Of
These top-notch accounting softwares not only help you with automating Amazon bookkeeping tasks but also you can focus on growing your business into the success you know it can be.
#10: Not reviewing financial reports regularly.
Finally, remember to keep a close eye on financial reports regularly. Amazon Seller must pay attention to financial statements to avoid missing out on potential opportunities for cost savings, identify areas where their business could be performing better, and make better decisions about future investment.
Additionally, not staying up-to-date with financial reports can lead to missed tax obligations, resulting in avoidable costs for the business owner.
With a clear understanding of your business’s revenue, expenses, and net income, you’ll be better equipped to identify areas where you can save money and take your Amazon business to the next level.
Set aside time each month to review your financial reports to help you identify areas you can take advantage of and stay on top of your business’s financial performance.
Final Thoughts
In conclusion, bookkeeping for Amazon Sellers is critical to running a successful eCommerce business. By avoiding these common bookkeeping mistakes and implementing best practices for Amazon Seller bookkeeping, you can ensure that your business has accurate financial records and is set up for ongoing profitability.
Don’t hesitate to reach out to a professional bookkeeper or accounting service for help if you need it. With the right accounting software and resources, you can save time, reduce stress, and focus on growing your Amazon business. Contact us today to learn more!
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