Hey - it's Patti Scharf, CPA and Co-Founder of Catching Clouds, the leader in
e-commerce accounting, and today we're gonna talk about how not to do your
Amazon bookkeeping (and why you're probably doing it the wrong way). Then
I'll tell you the right way to do it to get to a good end result fast. Make sure
you stick around to the end where I'll give you more useful tips on how to do
it right and with very little effort. Let's start by talking about how you're
probably doing it and why that's wrong. If you aren't really familiar with
accounting, chances are you've seen the deposits landing in your bank account
from Amazon, and you're coding all of that to sales. If you're coding from your
bank accounts, it may seem really simple, especially if you're using QuickBooks
Online or Xero where you've got Bank rules set up where it just automatically codes
everything to sales and you're like, "Done!" I know that's really simple, but please
please, please don't do that. It is not right. That number that is
landing in your bank account is the net amount after all of the Amazon fees, and
if you've been selling on Amazon for any period of time, you know that they are
taking 15 to 40 percent of the gross sales and keeping it for themselves as
some type of service fee for allowing you to sell on their marketplace. That's
great. You may think that's super fine and fair; you may think it's really
excessive. But if you're not keeping track of those numbers, you don't know
how much money they're taking of yours.
And if you're keeping track of that over time in your accounting system, you can
see if they start jacking up your fees. We just found out in January almost all
of our clients noticed that all their fees from Amazon went up. If you're not
paying attention to that, you don't know. So how do you get that information? That
brings us to the second method that's probably wrong, and that is going to your
settlement statement. Your settlement statement may look something like this.
It includes product charges and it shows you some shipping fees and things
like that. Do you know what is not showing on this report? Any sales tax
that you collected. So it doesn't give you all the
information that you need to keep track of. The other thing is if you look up
here, the statement date range is from October 23rd to November 6th. That means
what's in this amount, even though it may tie to the amount that lands in your
bank, it's for sales that cover a period that's not in the right period, so if
you're recording this in November, you're recording some of your October sales in
November. That means you can't track what you're selling over time. You can't track
fees over time. It's all just kind of a hodgepodge of things, and I know if
you're if you're telling me that, "Hey, I'm cash basis - it doesn't matter. It matters
only when I collect it, not when the transaction occurs." I'm telling you that
the sale - you collected this in October - so you're still doing it wrong. You
collected it in October. Amazon collected it on your behalf, but
it still needs to be reported in your October books. So this is a bad problem.
So, if this doesn't give you the information you need,
where do you go next? And the next step would be to look at all the
individual sales from Amazon. Okay, so you go into Amazon, you download all those
individual orders. It gives you the break out including sales tax collected,
it gives you the break out with shipping income, and all these different things,
but the problem now is that - how do you line that up with your batch settlement
statement? You saw before the batch of settlement statements equal what gets
deposited into your bank account, but a massive spreadsheet download from Amazon
does not. And the unfortunate thing is a lot of Amazon's reports don't match each
other, so you may pick the same period for one report as another one and
they don't match. Now you're ready to pull your hair out. The other
problem is if you're selling like ten orders a month, it's not a big deal. If
you're selling ten thousand orders a month, it is a big deal. If you're pulling
all that information into your accounting system, 1) systems
like Xero, they'll only let you pull in a thousand orders a day,
2) it's going to crush your system because your accounting system wasn't
built to house all that information. You really need to enter the information in
a summary fashion. So you're like, okay - I can't do this, this, or this. What do I
do? And I'm so glad you asked. Here is the
answer, and I'm telling you - this is not a paid advertisement. I've been doing it
since 2012. I started doing number one with the bank deposits. No, I knew that
wasn't right right off the bat. Number two, went to the settlement statements.
Within a few days, I was like that's not right either. Tried the individual orders.
That wasn't working either. We ended up creating our own database to just track
everything and make sure we could keep track of returns and everything else, but
in 2014, A2X came along, and it changed my life. It is an amazing tool. I highly
recommend you look into it. This is the right way to record your accounting for
Amazon. The good news is it will go in, it will grab all the information from your
settlement statement, all the details. It'll include all the fees and sales tax
and knows exactly where to put everything. If it spans two different
months, it will create one invoice in one month, one invoice and the other one.
It'll show up in your accounting system and you can just go OK and it reconciles.
It is a beautiful, beautiful thing. And in 2017, they started integrating with
QuickBooks Online in addition to Xero also. The A2X - Amazon to Xero - they now
integrate with QuickBooks Online, so people who love Intuit, they can use
that as well. So now you know why you need A2X to make your bookkeeping life
simple and fast and accurate, but how do you get started? If you
look at the link down below, I have a link to a blog post that we wrote
about getting started on A2X and why you need it and all that stuff. So go
check that out. If you like this video and find it helpful, please like, comment,
and subscribe, and I'll catch you next time.