This article is has been written with our good friends at OD Accountants in the UK. It discusses the growth of Amazon FBA in the UK and how OD Accountants have been working though the challenges of Amazon accounting with the help of A2X.
During recent years, online marketplaces have transformed the way we shop.
Amazon brings together sellers, merchants and businesses in almost every industry into a highly competitive marketplace. This level of competition helps to keep prices down and offer consumers more choice. Great prices and wide-ranging availability of products draw more and more shoppers to visit Amazon when they are ready to spend money.
As a result, Amazon has become an extremely powerful vehicle for sellers to get their goods to market and reach the masses.
To provide even more value to the end user, Amazon has a range of programmes and initiatives that put customers first – such as Prime (free expedited shipping & more), Frustration Free Packaging and an extremely lenient returns policy.
But wait, there’s more…
Fulfilment by Amazon – a seller’s best friend
Otherwise known as FBA, this facility is basically a branded third-party logistics service with an innovative twist.
Amazon operates 16 FBA warehouses throughout the UK. When sellers deliver their inventory to these modern facilities, Amazon then forecasts which locations sales are most likely to come from and distributes stock to the nearest warehouses to reduce delivery timeframes.
The FBA service is well-integrated into the online economy, and can be used to fulfil orders across many different sales channels. Not only can you sell on Amazon using FBA, but also eBay, Etsy, Shopify and more.
Any marketplace that allows you to ship your products to your customers, is compatible with the FBA setup”. Desmond Campbell, FBA Seller on Quora
By facilitating a hands-off business model, FBA allows sellers to scale their businesses without needing to worry about onerous fixed overheads such as rent on buildings and training logistics staff.
In the United Kingdom, Amazon is growing at its fastest rate since 2012. With far less competition than the US market, it presents a lucrative opportunity for existing merchants looking to expand their enterprise, and new sellers that want to get in on the action.
Which raises the question – how do you account for Amazon sales?
Using Seller Central reports to determine sales on Amazon is difficult.
Instead, many merchants simply record the amounts received in settlement payments as gross revenue. However, this does not solve the problem – when Amazon pays out settlements to FBA sellers, they deduct a range of service charges (referral fees, storage fees, fulfilment fees and more) that need to be accounted for as expenses.
When sellers simply record receipts as revenue, this skews their KPIs and metrics, and provides an inaccurate picture of profits and margins. This is where the A2X accounting software comes in handy.
Simplify Amazon accounting with A2X
When Amazon creates a new settlement file, A2X automatically fetches it, crunches the numbers and generates a summary of revenue, expenses and other transactions.
Using this information, A2X then generates invoices or journal entries from each settlement and posts them to your cloud accounting system – either automatically or at your command. You can then set the ledger accounts and tax rates that apply to each type of transaction.
When settlement payments from Amazon appear in your bank account, you can easily reconcile these deposits with the A2X settlement postings.
This video provides a more detailed guide about how A2X works.
With just a few clicks, you can integrate A2X directly into Seller Central and Xero or QuickBooks Online, enabling monthly time savings, complete accuracy over your Amazon-based finances and an accurate picture of where your stock is being held.
If A2X doesn’t save you at least an hour a month in reconciling your Amazon transactions to your bank account, compared to how you’ve been doing it previously, contact us for a full refund on your subscription (for new customers).” A2X website
Niall O’Driscoll from OD Accountants states:
With a US client we are able to upload all the two weekly statements from Amazon directly into Quickbooks online via A2X for 6 countries in both GBP and Euros which then is used for the quarterly VAT return. We don’t have to worry about exchange rates or mapping the income or costs. It’s such a time saver”.
Automation makes life easier – integrations make it possible
For more information about how integrations and software automation are shaping the way our online marketplaces evolve, and how this is making Amazon businesses more attractive to potential buyers, check out this free eBook on how to sell your Amazon FBA business by A2X.