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How to Record Amazon Sales in QuickBooks Online

 

In this blog we go through three methods on how to record Amazon sales in QuickBooks Online, based on your situation. If you are a young, small Amazon seller, spending time on marketing, advertising, and growing your business may be more important than getting your numbers 100% accurate. But as you grow, you will want better financial data. And better financial data requires more advanced methods of recording Amazon sales.

That’s why we want to show you three methods that will work depending on your stage. It’s important for you to deliberately decide on a method and understand the implications of the one you choose:

  1. Cash deposits recorded as income – least time consuming, least accurate
  2. Amazon activity recording in detail – little more time consuming, more accurate
  3. Amazon activity deep dive – time-consuming or add-on tool needed, most accurate

Let’s dive into each.

First method: cash deposits recorded as income

Amazon deposits money into your bank account every two weeks. This deposit is a summary of a lot of activity that happens in Amazon. Everything from sales to FBA fees, shipping income collected, sales tax collections, etc. All this info is combined into on net deposit that hits your bank account. Most bookkeepers and small business owners that aren’t familiar with ecommerce will record this deposit as “Amazon Sales” in QuickBooks. This is the first method I’d like to address.

Pros

This is the method I would suggest for small Amazon sellers that are trying to grow a business. At this point in the game, you may not want to take the time or spend the money on a tool to get your ecommerce accounting right. You are probably worried about sourcing your product, designing your product, advertising, and more. You don’t have the time for digging into your ecommerce accounting! This method is fast, easy, and at the end of the day your net income is still correct for tax purposes.

Cons

When you record your cash deposits as Amazon sales in QuickBooks, you lose out on helpful information, you have timing issues, and your margins are skewed. Ultimately advanced accounting methods will give you financial data that you can use to make better business decisions. This method doesn’t give you that data. We suggest once you are over $100K in annual sales and growing fast that you move on to the next method.

Recording in QuickBooks Online

To record Amazon sales in QuickBooks Online with this method, first make sure your bank accounts and credit cards are synced with QuickBooks Online. On the banking tab, you will see a transaction from your bank account described as something like “Amazon Settlements”. You simply categorize this transaction as whatever you would like to. You can change this in your chart of accounts. We would suggest something like “Amazon Sales”. Then you click “Add” and it will be added to all your financials.

Second method: Amazon activity recording in detail

This method requires breaking out the details of all the Amazon activity in the net cash deposit you see in your bank account. To show you what this method looks like, let’s compare it to the first method. In the first method, let’s say you had an Amazon deposit of $100,000 in your bank account. You would record this as “Amazon Sales” in QuickBooks Online. But, this table below is more likely what your financial data looked like:

Amazon Sales Data
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

 

Pros

The second method will give you this greater level of detail. You can see how much more data you have available to make decisions. Another important difference is that you will have more accurate margins with this method. As an ecommerce business, understanding your margins on each product SKU is one of the most important things for you to track (learn more about ecommerce COGS and margins). Another key aspect of this method is accurately recording your sales as $150K instead of $100K. This is a huge difference. And it matters when it comes to loans and valuations down the road.

At the end of the day, this method will give you a better level of financial detail. This gives you more visibility to make decisions that will help your business.

Cons

This method requires completing a journal entry in QuickBooks Online and is a little more time consuming (but I’ll make this easy for you!). Although you see more financial data, you still have timing issues that we will address.

Recording in QuickBooks Online

This method will require you to download an Amazon report before recording the data in QuickBooks Online. For a detailed understanding of how to do this method, watch our YouTube video from the 11:00 minute mark to the 17:30 minute mark.

Third method: Amazon activity deep dive

The biggest issue with the second method is that you still have timing issues. This is because Amazon deposits money in your bank account every two weeks. The timing of this deposit usually does not match up with month-end. This mean if you get a deposit on April 7th, this deposit includes financial data in both March and April. This matters if you are trying to watch sales trends, match Cost of Goods Sold with revenue (for accurate margins) and do other month-end activity. The second method does not take into consideration when all the data you are adding into QuickBooks Online actually happened.

Pros

This final method will ensure that your margins are still accurate, and your timing is corrected. In addition, it will give you a source of truth and you will have a high level of insight to make decisions.

Cons

Either you will need a lot of knowledge on Amazon reporting or you will need to pay for an add-on tool. We recommend if you are over $1M in annual revenue that you move towards this method.

Recording in QuickBooks Online

To accurately record Amazon sales in QuickBooks Online with complete accuracy, we suggest an add-on tool. Another option is diving further into Amazon reporting than we did in method two. Watch our YouTube video from the 17:30 minute mark to the 23:00 minute mark to understand how to connect a tool. We highly recommend A2X. You can watch our complete how-to A2X video.

Key Takeaways

Understanding how to record Amazon sales in QuickBooks Online is important to reporting taxes and gaining insight into your business. Doing it with complete accuracy either takes a lot of knowledge or paying for an add-on tool. The three methods in this blog will help you improve your Amazon accounting as you grow. We suggest method one to small Amazon sellers under $100K. Method two is good for growing businesses over $100K. And finally, you should move on to method three by the time you hit $1M in annual sales.

For help with your Amazon accounting, reach out here.

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