Amazon FBA Sellers make up a significant portion of the site’s online marketplace. About 73% of all sellers on Amazon use their FBA program in order to sell, with some estimates stating a 30 to 50% increase in their overall sales. Not only that, being able to sell your products without worrying about shipping, packaging, and even refunds and returned items seems like the best deal for online sellers nowadays.
With that in mind, you might be thinking that now’s the time to get into such a lucrative business. Not so fast though, as many aspects of this business lie in wait to surprise you with more problems than you may feel it’s worth.
That’s where the prospect of Bookkeeping comes into play, a measure that can save you both time and resources should it be managed well enough. We’ll be going through what a CPA Firm such as ourselves can do for Amazon FBA Sellers, as well as discussing other services such as Tax Planning.
Bookkeeping for Amazon FBA Sellers
Now, first thing to realize is that keeping track of all your finances can save you a lot more than just precious time. It’s not just important during the tax season as responsible bookkeeping can save business owners a large amount of time and money, as well as providing them with accurate metrics of which they can base their decisions upon. This is immensely important for startup operations, as proper bookkeeping can serve as a good foundation for further developments.
There are multitudes of ways to keep track of your cash flow and finances, but what we recommend is doing that through Cloud Based Bookkeeping services. A reputable accounting software package is invaluable to businesses no matter the size as it can help you to more easily keep track of the various dynamic aspects of your business.
CPA Firms, including our own, make use of cloud-based accounting software in order to efficiently manage things such as Reports, Inventory Stocks, Charting of Accounts, and other aspects of your business.
What Is Cloud Based Accounting Software?
These applications are online accounting apps that are hosted on a virtual server, also known as a “cloud”. Through these virtual servers, clients can easily access important data about their business from the comfort of their own devices.
Potential Benefits of Cloud Based Accounting
Not only that, but another benefit of cloud also based software includes easier collaboration between you and your assigned accountant.You are also able to improve how your business gathers performance metrics and other vital information regarding your daily operations. For businesses aiming for an eco-friendly setup, the use of cloud based software can help you to lessen the amount of paper needed for your accounting affairs.
Automation of Accounting Affairs for Amazon FBA Sellers
Automation is another key advantage of using Cloud Based Accounting Software. Manual accounting can be subject to a multitude of problems with the most notable being having to make decisions using inaccurate date. This can be circumvented with automation which streamlines reconciliations and provides you with insights about your business quickly and efficiently.
Certain Cloud Based Accounting Software such as “quickbooks”, a well-known accounting software package, offer features such as invoicing and inventory tracking. This is why many CPA Firms, including ours, make use of their services to keep our client’s finances in order.
Free 30-Min Strategy Session
By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.
Although it’d be easy for you to simply use the software yourself, the real draw in making use of a CPA Firm’s services lie in the specialized knowledge and grounded advice they offer. Their knowledge in leveraging business metrics in order to pivot your operations to a lucrative direction can be important in establishing the growth of your business.
Tax Planning for Amazon FBA Sellers
Another added benefit that a CPA Firm can bring to your online commerce business is the implementation of key strategies to increase tax deductions and make sure you pay the lowest amount possible. They can also help you to keep on top of your tax obligations and help you to identify the states where you qualify for sales taxation.
This is especially notable for US-Based Amazon sellers that are operating within states that require sales tax collection and remittance.
The Concept of a “Substantial Nexus”
For many states, one of the conditions for the collection of sales tax depends on whether or not you have a “Substantial Nexus”. This essentially means that your business has a connection to the state you’re operating in. For the purposes of Sales Tax, this connection must be found to be a physical one.
This can take the form of an office, a warehouse, and even through non-concrete means such as affiliations with advertisers and even activities that can be linked to your business. Some good news for Amazon FBA sellers is that it’s easier to nail down which activities can be considered as ones that create a business nexus.
For the purposes of Amazon FBA Sellers, it’s a good idea to take note of where Amazon is storing your items for sale.The company’s various Fulfillment Centers are located within 16 different states, with 14 of those enforcing sales tax on all vendors who own inventory within the state. Even simply keeping your inventory in one of those 14 states is counted as establishing a substantial nexus, requiring you to meet their sales tax requirements.
This only covers sellers in the US as each country can have their own stipulations on how they enforce this policy.
Other aspects of Sales Tax
For sellers, they also need to look into whether or not the products they sell fit into certain categories. Most of the time, products sold on Amazon are referred to as “Tangible Personal Property”. This can differ wildly according to location, so it’s a safer bet to refer to professionals to assist you in navigating thought this stipulation. Amazon may be able to help you somewhat, but a respected CPA Firm can bring you more value by presenting tax strategies for your specific location.
Selecting a CPA Firm to aid your FBA Business
There are many CPA Firms that you can choose from to help you manage the financial front of your business. However, how do you pick from the sea of firms available to you? We’ve put together some pointers that you can use to narrow down your choices.
- Does the firm specialize in dealing with Amazon FBA Sellers?
Ask the firm whether or not they have had experience in helping to manage a business like yours.Especially with how wide-reaching the sales of an Amazon FBA Seller can get; this puts a significant twist in your accounting problems when compared to that of a brick-and-mortar store.These can include logistics problems, inventory management, analyzing financial data, and exploiting said data to induce positive business growth.
It’s also important to ask if they have experience in other online marketing platforms, especially if you’re aiming to expand or already have a presence on other E-Commerce sites. A CPA Firm that has experience in your field of business can make use of industry expertise and a vast array of resources for the purposes of business growth and management.
- What are your Firms measures for tax planning and audits?
We know how taxes can be a fickle matter, especially with the sales tax stipulations we went through in the previous section. Even a small accounting error can end up in fines for your business, a prospect that no one wants to go through. Ask what the firm’s measures are in ensuring that you stay compliant to your tax obligations, especially for businesses that sell across multiple locations. Not only should they give you their strategies for avoiding any errors, but they should also ensure that their accountants are entirely familiar with the requirements you’ll need to meet.
Audits are also an important aspect that you should prepare for. As long as you meet the requirements and follow the guidelines set by the IRS, you should rarely have to be subjected to one. However, it would be a good idea to partner with an agency that comes equipped even in this fringe situation.
- Do you outsource your accounting work?
A rising trend in today’s industry is Outsourced Accounting where certain firms will outsource certain day-to-day transactions to other workers outside their respective organizations. This can be quite off-putting to some as it exposes their business to certain security risks and reduced control over your finances. It can even cause dilemmas for Amazon FBA Sellers in the worst-case scenario. Find a CPA Firm which ensures that in-house accountants will be the ones to manage your accountancy affairs.
If all of this seems to be overwhelming, then you can make use of our free consultation and strategy Session in order to clear the air on this confusing topic. Alan Chen, the CEO of Free Cash Flow, will be the one to discuss with you the many routes and strategies that you can take in order to build your business further in this digital-leaning age.