A lot of things about running a business can be hard. Figuring out marketing for one thing can be a bear. Hiring can be tough too. And don’t even get me started on firing. Then there is product creation, patent protection, competitors, and shipping logistics. On top of all those issues, if you are selling on Amazon, you know financial accounting is a nightmare.
The good news is, while we can’t tell you which 3PL will get all your orders right and ship them cheaply, and we can’t tell you how to reach your target buyer on Instagram, we can tell you how to instantly solve your Amazon accounting woes. We use A2X – a cloud-software app for Amazon accounting. We don’t often write an entire blog series about our vendors, how to use them, and how to set them up. This is NOT a paid advertisement. So why would we do it now? Honestly, there are certain tools that deserve a real shout out, and frankly A2X solves real accounting problems and deserves that shout out.
The Challenges of Amazon Accounting
Let me start with painting a picture of the mess that you may or may not realize you are in as an Amazon seller.
One of the most important things for businesses to know in order to operate successfully are their numbers. Not their employee count or the pounds they’ve gained since starting a business, which I suppose are also important, but their financial numbers. They need to know how much they are generating in sales, paying in shipping, the margins on their products, and the fees for selling on different channels.
Amazon doesn’t easily tell you any of that information and they don’t make it easy to find either. All you get from them in your bank account is one deposit every two weeks. This deposit doesn’t match the revenue you think you’ve made and feels like a big black hole of nothing. It leaves you wondering if Amazon is ripping you off. If you are using Amazon for shipping, you could have as many as 40 different types of incomes and expenses passing through your relationship with them. Yet all they give you is this one deposit? Somewhere buried in that deposit is the net effect of all your activity over the last several weeks.
How much did you make in sales? Who knows. How much did you pay for storage with FBA? No clue. How much did you collect for shipping? You uncle’s underwear knows better than you do.
For more on the basics of Amazon accounting (in addition to A2X), click here.
Solving Amazon Accounting Yourself
You have two options. You can either throw your hands up and just record the deposit that came through as “Amazon sales” and call that your accounting. Or you can try to dig through all the reports to break all out all the activity and have a clear picture of what went down.
Option 1: Recording Amazon’s deposit as “Amazon Sales”
If you go with option one, you will be in murky waters until the end of time. You will be trying to run a business with no clear idea of what the “swear–word” is going on. Not only will you have no idea how the Amazon activity breaks out, but your timing will be totally screwed up as well. This is because Amazon deposits hit every two weeks, but that doesn’t align with month–end. If you get a deposit May 2nd and you call that “May sales”, you are robbing April to pay May because that deposit was really from sales in April.
Does that timing issue matter? If you are trying to record accurate cost of goods sold to clearly see your margins you have the expense of the inventory all hitting April while all the sales went into May. On top of that you thought April sales were going to be great, so you invested in a new marketing admin. On the contrary, all April sales went into May so now April looks terrible. You have trust issues, and you feel like a dog chasing its tail because you’re so confused.
Option 2: Digging through all the information yourself
You choose option two instead. You are going to sift through the back end of Amazon to find all your financial data. You’re going to figure this out even if it kills you!!! And trust us, it does. Now you’re dead. The end.
No really, you spend all your time trying to figure it out. You spend hours, days, weeks sorting through Amazon’s back-end reports. Marketing goes by the wayside along with the hiring AND firing. You don’t sleep, for weeks. You don’t eat, for weeks. At last you get it all worked out two weeks later!
Now it’s time to start again with the next deposit. Now you’ve lost your will to live. You see, we were right after all...it will kill you.
A2X Solves Your Amazon Accounting Issues
I’m sure you can see option 2 is not viable either. What if you could just wave a magic wand and all this would be sorted out for you. That lovely deposit could be sorted out into all the things that really happened and it could reconcile perfectly to what you saw deposit. All your burning questions could be answered. Your timing nightmare could be resolved as well.
This is exactly what A2X does for Amazon accounting. It solves all this for you, and much more actually. We love A2X because it makes accounting easy. A2X accounting is “peaceful night–sleep” accounting. It’s “get your life back and walk your dog at night” accounting. A2X accounting is magic–wand accounting.
A real example of A2X solving the pain of Amazon accounting
I’m sure I’ve made my point, but just in case I haven’t, I want to show you a real example. This will show you the transparency A2X accounting gives Amazon sellers. All with the ease of a click of a button.
Recently, one of our clients did $125,958 in sales over a two-week period. (These are actual numbers with names stripped to protect the innocent.) But they only saw $44,170 deposit into their bank account during that time frame.
|Deposit from Amazon||Actual Sales (found by A2X)||Discrepancy|
If they were going totally off the deposit that hit their bank account, this would be incredibly discouraging. Their deposit would be far off from what they thought they did in sales and they wouldn’t know why. They would have no idea how much they were paying to use Amazon for shipping and storage. So, they could not make informed decisions about whether to keep doing that.
This is where A2X accounting came in to play and provided clarity on what actually happened.
What happened (as found by A2X):
|Gift card credits||$2,992|
|Amount lost with timing issues||$25,360|
|Net deposit in bank account||$44,170|
In addition, A2X allowed them to follow the expected deposits coming up, see where all the money was going (as shown), and rest easy knowing exactly what was happening. All this happened with the click of a button. In addition, the information broken up by A2X connected straight to their accounting software, saving tons of time.
Setting Up A2X
We’d like to help you harness the power of this tool by making your own setup as easy as possible. The following articles help you to do so:
Very few tools are so well designed. Very few tools enhance quality of life this effectively. Welcome to the other side.