Ever since my post about my attempt to run a business without an accountant, I have received a lot of emails asking me to write a post that goes into much more detail on how I do my Amazon FBA accounting. So here it is.
FBA stands for Fulfilment By Amazon, a service offered by Amazon that lets you store your products in their warehouses and sell them on the Amazon platform.
If you have no idea what I’m talking about, check out my detailed how to guide on how to start an Amazon FBA business.
It’s an awesome business model, that lets a one man band run an international business selling thousands of products. I currently have stock in UK, USA, Canada, Germany, Italy, France and Spain.
Which is very cool. But does mean that Amazon FBA accounting is a massive pain. Multiple currencies, multiple taxes, and thousands of transactions. When I first started, I used to record everything in a spreadsheet, and send that spreadsheet to an accountant.
That accountant had no idea what was going on and I used to spend hours and hours trying to explain everything. And I’m still not sure he got it quite right. Small and cheap accountants aren’t going to be experts in international business.
So after that, I started looking at automating it.
It is a bookkeeping system that draws in information from all your bank feeds, bills and invoices. And then reconciles all the transactions. From there it can generate any report imaginable. Including the quarterly VAT return which it can automatically file with HMRC.
Apart from making it very easy to do your tax returns, I also use the reports to very quickly see how profitable the business currently is and that catch any expenses that are starting to get out of control.
Introducing A2X Accounting
But even though Xero made things a lot easier, it required a lot of manual copy and pasting from the different Amazon marketplaces. Then, about a year ago, I came across A2X Accounting.
A2X Accounting is a service designed to be the final step to completely automating your Amazon FBA accounting. It translates the information from your Amazon seller central account into invoices and then imports them into Xero.
It is quite expensive. The standard package is $59 a month and if you are selling internationally you will need two subscriptions. One for Europe and one for the Americas.
But without it, you need to write each invoice individually. That can be up to four a month per marketplace. And I sell on seven different marketplaces… trust me, it takes forever.
I update my accounts every three months and for me the time saved and the removal of human error makes it worth the cost. But you will need to assess your business and act accordingly. If you’re still in the bootstrapping phase it is probably worth doing it manually yourself.
While I was writing this blog post I contacted A2X and they kindly offered us a discount. If you want to sign up to A2X then use coupon code TRYA2X19_10%OFF for 10% off the first six months of subscriptions.
Tying Together Amazon FBA Accounting
A2X imports into its dashboard all the information needed from your Amazon seller account and splits it to correspond with the payments that Amazon sends to your bank account.
The first time using A2X Accounting you need to select which Xero account each line in the invoice links up to.
You can set this up however you like, but I prefer creating a separate account in Xero for each Amazon country.
To add new accounts in Xero, simply go Settings -> Chart of Accounts.
That screenshot above really shows why I think A2X is a lifesaver. Can you imagine typing all that out, multiple times a month for all seven marketplaces I sell on? It was a nightmare.
You only need to fill in the drop down boxes the first time you set up. After that, A2X will remember what you previously selected and auto-populates the list.
Once you are happy, it will be sent to Xero as a draft invoice. Approve that invoice, then match them up to the transactions into the bank account:
Xero is able to synch up with your bank account and pull in all transactions automatically. I use Santander, but most banks in the UK are covered.
And that’s it. All your Amazon sales and expenses will be correctly logged in Xero.
At the end of each year, my accountant just: logs in, asks me a couple of questions, adds a few extra expenses to maximise tax efficiency, and then generates the returns. Easy peasy. And it actually costs less than paying for the extra hours it took to decipher my old spreadsheet-based system.
EDIT: Remember you can get 10% off for the first six months at A2X using voucher code TRYA2X19_10%OFF.
Other Useful Tools
The other Amazon FBA accounting tool I use is Seller Spike. It tracks all your products from initial purchase to final sale and works out your exact profit. Taking into account everything from returns and advertising to shipping and insurance.
You can do this with Xero, but the problem is your information is not live. And by the time you realise you are losing money or your margin isn’t correct, it could be too late. And flexibility and moving fast is very important in an Amazon FBA business.
So I combine. Seller Spike for daily monitoring and my own dashboard. A2X and Xero for legal compliance and paying my Amazon FBA VAT.
For this article I got in touch with Seller Spike and they offered readers a special discount. Use SAM10 for 10% off your Seller Spike subscription.