Starting a business is a whirlwind of activity that involves a wide range of different tasks, and presents a unique set of challenges for every startup. Amazon makes it easier to reach paying customers by providing an advanced online marketplace with millions of active shoppers, and offering fulfilment warehousing (FBA) to simplify the logistical side of things.
Whilst it is tempting to dive into development and focus on action, some prior research, planning and self-education can make the journey of entrepreneurship much less challenging and significantly reduce your chances of failure.
Earlier this year, we interviewed 4 expert Amazon accountants at the Prosper Show in Las Vegas. During these interviews, we asked them a range of questions about Amazon accounting, sales tax, advice for new sellers and guidance for those looking to expand their operations. We were privileged to speak with:
- Jeremiah Kovacs from MuseMinded.
- Cyndi Thomason from Bookskeep.
- Scott Scharf from Catching Clouds.
- Melanie Shabangu from AVASK Accounting.
This article is the first in a series of three informative pieces, aimed at new FBA sellers, and those looking to enter this space. We have combed through hours of interview recordings to provide you with the best and most relevant snippets.
Set your business up properly from the start
Many Amazon businesses begin as a hobby, and morph over time into multi-million dollar enterprises. It is tempting to avoid registering your company and getting set up with the tax authorities in the beginning. However, this is a vital step in opening your own business – not only does it limit your potential liability if things go wrong, but it also means that your personal earnings are separated from any business income.
Some of the most common accounting mistakes that new Amazon sellers make include purchasing inventory and marking it as an expense rather than an asset, and also forgetting to set money aside throughout the year to pay taxes. The second point about allocating funds to pay taxes is particularly important, as this catches lots of new entrepreneurs out. Unlike working in an employment scenario, you as a business owner are responsible for managing your own tax obligations.
When learning about how to succeed in the FBA space, make sure that you are learning from up to date information. Things change rapidly, and guides from a few years ago may not be relevant anymore. A great way to build confidence in your abilities is to learn from the best – successful Amazon sellers are often happy to provide guidance to new sellers if they aren’t planning to compete in the same niche. Look out for meetups to connect with other FBA business owners, find a mentor and make sure that you are following the rules. The last thing you want to do is be banned by Amazon after spending lots of time and money getting set up properly.
Forget the excel spreadsheets: go with a proper accounting system as early as possible
Spreadsheets and paper-based record keeping systems are easy to create and they cost nothing. They work when you are doing just a few transactions here and there. However, if you are serious about selling on Amazon, it is important to make sure that your systems are robust and that they can handle larger transaction volumes without running into issues. Once a proper accounting system is set up, it doesn’t take any longer to do the books, but you get much more reliable data as a result.
When businesses use systems that aren’t built as dedicated accounting software, the figures recorded are often inaccurate. By using a proper accounting system such as Quickbooks or Xero, it is much easier to gain an accurate understanding of where your business is at.
In the past, digital accounting systems were operated on servers and company computers, which required constant backups and software updates. Now, most accounting systems are remotely hosted in the cloud. This removes the need for duplicating accounts and updating software – or even downloading software for that matter. With cloud accounting systems, you can access your books from anywhere in the world and securely share information as required.
There are lots of great resources available online!
Here are some of our favourites for getting setup with Amazon Accounting:
Catching Clouds Acadeamy – this series of paid online courses has been developed by Patti Scharf and the team at Catching Clouds. It is comprehensive and very insightful.
Zoom! Bookkeeping Automation course – is a free online course by Jeremiah Kovacs at MuseMinded
The Great Seller Games are currently in beta mode. Visit MuseMinded’s website for more information.
Sometimes the best way to learn is to begin with the end goal in mind and work back from there. Our free ‘how to sell your Amazon FBA business’ eBook is packed with valuable knowledge and insights written by the team at Hypergiant.
Getting your accounting right makes the rest of your business easier to operate and grow.
When you’re starting a new business, there are many different things that need doing, and accounting is often quite far down the list of priorities. It may well only be one piece of the puzzle, but it is a very important which many other business functions are reliant upon. By getting your accounting systems set up properly from the start, you can rest assured that your business is backed by a solid foundation that is ready for growth.