A Common Amazon Bookkeeping Mistake to Avoid

Avoid This Common Amazon Bookkeeping Mistake to Keep Your Finances in Check

Are you an e-commerce seller navigating the Amazon marketplace?

Ever wondered if you're making the most of your bookkeeping practices?

Well, you're in luck!

In a recent conversation with Daniel Little, the CEO and co-founder of Link My Books, we delved into the world of e-commerce bookkeeping and uncovered some valuable insights. 

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3 Common Bookkeeping Mistakes Of e-Commerce Sellers

In this article, we're focusing on one particular aspect: a common Amazon bookkeeping mistake that could be costing you money.

It's a mistake that many sellers unknowingly fall into, leading to inaccurate financial records and potential overpayment of taxes.

But fear not!

We're not just here to point out the problem; we're also going to share some expert tips on how to avoid it and ensure your Amazon business's bookkeeping is spot on.

And that's not all!

As a bonus for y'all, we've got some exciting offers lined up: a free trial of Link My Books, a special 50% off coupon code valid for three months (code: VOVA20), and even a chance to book a free demo call to see the software in action. 

So, if you're ready to take your Amazon bookkeeping to the next level and save yourself some headaches come tax time, keep reading!

We've got all the information you need right here.

Let's dive in and make your Amazon bookkeeping a breeze! 🚀

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Daniel: Let's dive into mistake number one: using the wrong reports.

Now, if you're an Amazon seller or involved in e-commerce, chances are you have some dealings on Amazon.

Let's take Amazon as our example for this discussion.

Many sellers are accustomed to accessing a report called the date range summary report.

It's a common practice to log into your account monthly, head over to the reports section, select payments, and then generate the date range summary report for the entire month.

Once downloaded, you'll see your income on the left and your expenses on the right.

Now, keep in mind, what you can see on the screenshot above is just a mock-up, but in reality, this report would be filled with your financial data, and there's even more information below.

Here comes the common misconception: assuming that this report is sufficient.

Many sellers either hand it over to their accountant or bookkeeper, or they input the figures into their bookkeeping software themselves, thinking they're done for the month.

However, relying solely on this report poses several issues, with two main ones standing out.

Firstly, it lacks the necessary level of detail for accurate bookkeeping.

Specifically, it fails to indicate the destination country of sales.

For instance, if you're selling on Amazon Europe and you download the report for the UK marketplace, assuming all income is from the UK would be incorrect.

It's crucial to recognize that sales might have occurred outside the UK.

If you're a UK seller or registered for VAT, it's crucial to differentiate between sales made within the UK and those outside of it. 

Failing to do so could result in all sales being treated as subject to UK VAT, leading to an overpayment of taxes at a rate of 20 percent.

By accurately separating out sales made outside the UK, you could potentially reduce your tax burden by paying less VAT.

This principle applies to other countries as well.

In Australia, for instance, you have sales within the country and those outside of it.

Similarly, in the US, certain sales may be subject to different sales tax rates depending on their destination, especially if you hold sales tax permits.

Unfortunately, this level of detail regarding destination countries and tax responsibilities isn't included in the standard report.

These examples highlight instances where the marketplace collects VAT, tax, or GST.

This issue affects almost every seller who relies solely on this report.

I also welcome you to discover how to use Link My Books, so you can handle all those issues easily with this software.

Additionally, there's another reason why this report falls short: its monthly frequency doesn't align with the payout frequency of platforms like Amazon.

While Amazon and other sales channels may pay out bi-weekly, weekly, or even daily, the monthly report makes it challenging to reconcile these payouts with the figures you've inputted.

What we often encounter is sellers who have followed a similar process: they've used the date range summary report, entered income and expenses into accounting software like Xero or QuickBooks, and then tracked Amazon payments separately.

They typically create a clearing account, essentially a virtual Amazon bank account, where sales income is recorded along with incoming payments.

However, despite their efforts, they often find a remaining balance at the end of the month that doesn't quite match up with the reserve balance in their Amazon account.

However, most sellers don't perform this reconciliation check, and even when they do, they often struggle to interpret the results accurately.

It's challenging to pinpoint the exact balance at the month's end when payments trickle in sporadically throughout the month.

Consequently, sellers are left feeling uncertain about the running balance in their clearing account.

When their accountant queries the balance, they might casually dismiss it as "money due from Amazon," perpetuating this cycle of uncertainty.

This lack of clarity persists throughout the year, leading to year-end adjustments by accountants to rectify discrepancies.

Ultimately, relying on this method sets the stage for potential accounting headaches down the line.

These practices often lead to inaccurate accounting, which can have significant consequences.

Overpaying taxes means parting with money that could have stayed in your pocket.

On the other hand, underpaying taxes can result in penalties and back taxes if discovered by the government.

Neither scenario is favorable.

It's crucial to strive for accuracy in your accounting to avoid these potential pitfalls and ensure your financial affairs are in order.

Conclusion: Don't Let Bookkeeping Errors Sink Your Amazon Success!

Alright, let's sum it all up. 

Now you've identified the hidden danger of relying solely on the date range summary report and the potential tax implications it can bring.

But fear not, fellas!

This doesn't have to be your reality.

Explore my full conversation with Daniel Little, where we delve deeper into other common mistakes and their solutions for accurate bookkeeping.

You'll discover:

Don't let bookkeeping errors hold you back from achieving your Amazon dreams.

Take control of your finances, save yourself from tax headaches, and free up valuable time to focus on growing your business.

Also, don't forget to claim your free trial of Link My Books today!

Once the trial ends, use my code VOVA20 to snag a special 50% discount on your first 3 months and schedule a free demo call to see the software in action.

Link My Books Free Trial

Use my coupon code VOVA20 to get an extended 50% OFF for 3 months!

Link My Books Free Demo Call

Remember, accurate bookkeeping is an investment in your business's future – make it a priority today!

P.S. - Some say that Link My Books is the best accounting and bookkeeping software for e-commerce!