In the same way that tracking COGS will let you know which products make you the most money, keeping your channel transactions separated will let you know which channels are worth your while. Breaking out expenses and income by sales channel is the best way to keep your books and your data organized so your decision points are clear. This will make working on your profit a lot easier and you’ll be able to tell which products may not be worth the expense. By including your product cost and any other expenses it took to send your product to Amazon, you’ll get the most accurate cost of your products. Keeping up with Cost of Goods Sold (COGS) is one of the most important parts of Amazon accounting and often one of the biggest expenses in an ecommerce business. Of course, we can do that if it’s necessary for your business, but most Amazon businesses don’t require that until they get to be very large. And it comes without all the headaches and extra expense of accruing operating expenses such as your insurance or payroll. This method gives you the benefits of accrual accounting where it matters-matching revenue and cost of goods sold expenses in the period where the sale occurs. With accurate numbers, you’ll know where to cut out expenses that may be too costly or invest more in areas where you have the opportunity for greater return.Īccounting Methods. For ecommerce and Amazon businesses, using the Modified Cash or Modified Accrual Accounting method is best for your books. If your books aren’t in order or you don’t understand the numbers, it can be hard to see where you’re spending too much and receiving too little. While this only provides a general direction the business is headed in, you’re more prepared when you need to make quick decisions.īookkeeping also helps with cash flow management. Take your total sales revenue and subtract out any costs and fees, and you will have a better idea of where your business stands. You also have quick and easy access to your Gross Profit, a key metric to help you stay on top of inventory and cost information. Do you have confidence in your Inventory and COGS numbers? How much do you owe in Sales Tax? What is the trend with your Amazon Fees and what percentage of your revenue do they take? When the numbers are right there in front of you, keeping up with revenue and expenses is much easier. You know your sales numbers, but that’s not enough. Amazon accounting or bookkeeping is vital to your business’s financial health.
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