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How to Record Amazon Sales in QuickBooks Online

By May 7, 2020 August 5th, 2020 Ecommerce Accounting

 

In this blog we go through three methods on how to record Amazon sales in QuickBooks Online, based on your situation. For a visual walk-through, you can also view our YouTube video here.

The challenge with e-commerce accounting is that it is fundamentally different from any other type of accounting because financial activity flows through your sales channels, not your bank accounts. There are different methods of e-commerce accounting, and where you are in your business determines which one will work best for you now.

What works well at one level probably will not work as well for another level. So, we suggest asking yourself 3 questions to narrow down which method is best for you right now:

  1. How big is your business right now?
  2. Where does getting financial data fall on your list of priorities?
  3. What kind of decisions are you trying to make with this data?

Let’s look at three different scenarios and methods to see which one may be a fit for you.  But first, we need to set the stage (using Amazon as our sales channel example).

Amazon deposits into your account every two weeks. What you’re seeing when that deposit hits your account is actually a summary of everything that has happened over the past 2 weeks. It includes all the activity with orders, refunds, shipping services, selling fees, and other stuff. All of this is lumped into one deposit.

How you record all of these activities depends on which method you choose.

 

Method 1 (best for small Amazon Sellers): Record Amazon cash deposits as “Sales Income” in QuickBooks Online

We are assuming you are using QuickBooks Online (QBO).  You’ve synced your bank accounts and your credit cards and now the data is flowing into your Banking Center.

  1. Find your “Amazon Settlements” deposit
  2. QBO will probably default to the category of Sales of Product Income and that is totally fine. Or, you can change it to Amazon Sales or whatever makes sense to you.
  3. After you decide where you want to put this deposit, just click Add.  It will hit your financial statements and you’re off and running!

This is by far the simplest, least time-consuming option, and at the end of the day your net income is correct. This is best if you are a small e-commerce seller making less than $100K/year. You are in the throes of figuring out how to build your business. You are driving revenue, learning how to market effectively, figuring out how to design a great product and source it, figuring out how to work with your vendors…

Your to-do list just goes on and on and on! These activities are significantly more important to the life of your business than spending hours digging into all the details of your e-commerce accounting.

You just need to know if your business is making or losing money, and then have something to hand to your accountant at the end of the year so you can fulfill your obligation to the tax man. Some cons of this method are that it doesn’t give you a whole lot of detail, creates some timing issues, and it skews your margins at the gross profit level. There is a lot of information that you’re not seeing, and that information is important if you’re trying to make decisions about your e-commerce business, but you may not need to know all that detail right this minute.

If you’re making over $100K a year AND you’re scaling your business AND trying to use your financial statements to make good decisions, you probably need to look at the next method for recording Amazon sales data in QuickBooks Online.

Method 2 (for growing Amazon Sellers): Amazon activity recording in detail

This method is usually best for Amazon Sellers making $100K-$500K a year. You’ve worked hard and you’re starting to get the hang of all this! Take a moment to strut around town, acting like you’re the king of the world. You’ve earned it! But you still don’t have time to spend hours analyzing a long list of numbers on an Excel spreadsheet to figure out the data you need. Hey, we hear you and we’ve got your back!

(By the way, this may be a good time to consider outsourcing your accounting.)

This method will give you more detailed Amazon sales data in QuickBooks Online, but without having to go crazy getting it. Basically, the only difference is that you’re going to break out your Amazon accounting information into categories instead of lumping it all into one line item. You’ll be able to see data like the following:

Amazon Sales Data in QuickBooks Online
Amazon Sales $150,000
Shipping Income $1,000
Sales Tax Collected $3,000
FBA Inventory Reimbursement $6,000
Amazon FBA Fees $36,000
Chargebacks/Refunds $20,000
Shipping Fees $3,000
Promo Rebates $1,000
Net Deposit In Bank Account $100,000

Heads up!  This method does require a journal entry in QBO. (Actually, don’t let this scare you off.  We’ll walk you through it to make it so simple and easy that you’ll be shouting from the rooftops that you can make journal entries like a pro now! Go YOU!!)

1. Download your settlement report from Amazon:
      1. Sign into your Amazon Pay account on Seller Central.
      2. Click on the reports menu, and then click payments.  On the Statement View tab, a view of your current open settlement appears.
      3. To view and download copies of your settlement reports, click the All Statements tab.  Click the buttons to view or download the applicable reports.On this page you’re going to see all the order activity, refunds, shipping information, selling fees, and any other transactions that have happened in the past 2 weeks.Notice that the number at the bottom is what was deposited into your bank account.So, now you’re going to put all this accounting goodness into a journal entry.
2. Create a journal entry in QuickBooks Online
      1. Click on the + NEW button at the top left, and then click on Journal Entry. Inside the journal entry window, you’ll see Accounts, Debits and Credits.
      2. You can map all these line items however you want to inside of QBO. Do what makes sense to you. Rule of Thumb:

        Black = Credits (money coming in)

        Red = Debits (money going out)

      3. For instance, you can lump all the Order info together, the Refunds together, etc., OR you can do individual line items.  What level of detail do you need?
      4. At the bottom, you’ll select which Bank Account it’s being deposited into and, if you’ve done all your debits and credits correctly, the total should default to the amount that’s being deposited. Whoopee!

Note:  You can also generate and download custom reports from the Date Range Reports tab.

Method 2 Cons

The biggest problem with this method is the timing issue. For example, if Amazon is depositing into your account every 2 weeks, it may not always line up neatly with the end of the month. What do you do if you get a deposit on the 5th?  Most of that revenue is actually from the previous month. If you’re watching the trends of your business, trying to close out a month and match your income with the cost of goods sold (read our COGS blog here), you’re really going to care about period-ending stuff.

Also, this method doesn’t give you a lot of control over seeing all the detail of what’s going on behind the scenes. Did you know there’s literally over 400 different line items of how Amazon can be bringing money in and taking money out? To figure all that out, you’re going to have to do a deep dive into the back-end reports, and sort it out according to date, and then sort that according to activity, and then…

Is your head spinning yet? 

Ours, too! But Method 3 will help you get everything under control

Method 3 (for established Amazon Sellers): Amazon accounting apps

This method is for established Amazon sellers, usually doing more than $500K in annual sales. You have been doing your business long enough that you know you need to make your accounting be a source of truth for you.

Some of the complaints we hear from people before they start working with us are:

  • My accounting is not a source of truth for me
  • None of this looks right to me
  • My accounting doesn’t match the reports coming off my channels
  • I have no idea what’s really happening.

You’re to the point in your business where you need to do a deep dive into the Amazon activity, and every other channel you’re selling on, so you can make your accounting become a source of truth for you now and so you can reference it later to get really good, solid data.

Remember, good data makes good decisions possible.

Apps to better record Amazon sales data in QuickBooks Online

This requires a highly sophisticated knowledge of Amazon and your accounting tools OR a much better alternative is to attach a tool that will allow you to sync the two systems together.

In an attempt to save you hours of learning and mastering time, let us introduce you to some tools that make this easy and affordable:

  1. Go to your Apps in QuickBooks Online. 
  2. Type in Amazon and it’ll bring up a list of applications that integrate with Amazon and QuickBooks Online.
  3. Two of our favorites are Webgility and A2X (view our A2X video here), though there are lots of others, too.
  4. When you click on an app, it’ll take you to an overview, usually with a quick video to show you how it works, and what it costs.

When you look at the pricing, you’ll see that these apps are very reasonably priced for the work they’ll be doing for you.

It is worth it to invest a little money to save yourself hours and hours of time figuring out your accounting with spreadsheets and columns and numbers and all that. Ugh!

Or, if you still don’t have the time to dig into all this, remember that outsourcing is always a great option. Come talk to us. This is what we do best!

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