How Allan Fefergrad and the team at AF Accounting uses A2X for Amazon seller clients
Located nearby Griffintown, Montreal, AF Accounting is a contemporary accounting firm catered towards professionals, small and medium-sized businesses. Through adopting modern accounting technologies, they are able to offer a complete suite of accounting expertise in the most efficient manner possible.
The firm was founded in 2008 by Allan Fefergrad, CPA, CGA. He has several years of experience in general accounting, taxes and finance. Allan is a Chartered Professional Accountant of Quebec and holds a Bachelor of Commerce from Concordia University.
Ten years ago, Allan was introduced to Xero by his website designer who wanted something that could run on his mac at the time. He was intrigued by the idea of the cloud. In particular, Allan was interested in how it suddenly became so much easier and more accurate to share data with clients.
He loved the intuitive design on Xero and quickly become one of the first Xero advisors in Canada. Today, Allan is a Xero Gold Partner.
The mission of AF Accounting reflects their desire to help clients by selecting the right technologies and applying their financial knowledge to provide valuable solutions that improve their businesses. More specifically, their mission is to:
“Enable financial growth by strengthening our client’s foundation and by optimizing their accounting. We believe in simplifying the accounting process by effectively leveraging technology”
Xero - Beautiful Accounting Software
Xero is a perfect solution for tracking financial matters for all businesses - from the startup phase to those who are well established. Using Xero makes it easy to import all of your banking transactions online into your own accounting system.
There are a wide range of benefits to using Xero - from automatic currency conversion to invoicing. However, one of the greatest benefits of Xero is that it’s cloud-based. This means no more manual backups, users can access the accounts from anywhere in the world, and data is shown in realtime on any device.
Not only that, but Xero can integrate with hundreds of different apps and websites, which means that users can automate away much of the accounting workload, simply by setting up the right applications and integrations.
A2X - Simple, Automated Amazon Accounting Software
As Allan’s business evolved, he began to take on a number of Amazon seller clients.
Initially, his clients were happy with the ability to recognise the fortnightly Amazon settlements that were deposited into their bank account. These payments were used to determine profits, and also served as the basis for tax returns.
But as they grew in size, both Allan and his clients began to question what the actual cost of selling on Amazon was, and how profitable this was for his clients. The problem with recording settlement payments as revenue is that the amounts received are deposited once Amazon has taken away their fees. The accounts will still balance if Amazon fees aren’t recorded, but any further financial analysis will be somewhat inaccurate.
Allan found A2X.
He was amazed at how elganlantly it integrates with Xero and how it can provide a very accurate picture of his clients profitability without much manual input required.
As soon as the Amazon settlement files are available, A2X automatically loads the transactions and then maps them to predefined accounts in Xero. A2X then sends either 1 or 2 summarized invoices across to Xero (depending on whether the settlement period spans across one or two months).
“These invoices will then 100% match what has been deposited into my clients bank account. However, I now know what all the underlying sales, fees and refunds there actually were in each settlement instead of being unaware of what Amazon are charging my clients.”
“Now the business owner really knows truly what are their total top line sales and all their fees that they are paying to Amazon”
By understanding how fees and other costs affect the settlement amounts, Allan was able to accurately show his clients how much they were making from Amazon compared to other distribution channels. This helped Allan’s clients to make informed decisions about what they should sell more of, and which items weren’t performing well.
By understanding when value has changed hands, Allan’s clients were able to gain a much more accurate picture of their businesses by being able to compare transactional activity from one period to another. He states:
“The settlements never occur at the end of the month, so that is amazing how A2X splits into two invoices when it spans a month. At the end of the year, the second half of the settlement can be booked into the following fiscal year as well.”
A2X does this by automatically fetching settlements from Seller Central, crunching the numbers and generating a summary of the revenue, expenses and other transactions for each period. This helps sellers (and their accountants) to simplify the financial reality of understanding what’s going on in the business.
“We have the data to make proper business decisions because you guys take a very foreign language and make complete sense of it all”
Accrual-based accounting involves recording revenues and expenses when they are incurred (but not necessarily paid for yet). It is much easier to record Amazon transactions on an accrual-basis when using A2X compared to just accounting for settlement deposits.
Cost of Goods Sold
Keeping a close eye on your margins is an important part of running a successful Amazon e-commerce business. This includes more than just knowing how much Amazon deposits into your account each fortnight.
You also need to know what your actual gross margins are each month, as this allows you to track trends, plan for growth, and spot potential problems. The key to calculating your true monthly gross profit and keeping an accurate set of books is understanding the cost of goods sold.
Allan found that with A2X, the process of determining cost of goods sold was made very easy. Thanks to A2X and Xero, Allan is able to advise his Amazon seller clients about the financial position of their businesses with confidence that the numbers are accurate.
By automating away the workload, not only does it make Allan’s job easier - it also improves the accuracy of accounts and makes it easier to trust that the numbers are correct.