Managing Amazon revenues: This is how you simplify your bookkeeping process

Selling on Amazon can be rewarding, yet managing the finances behind it is notoriously complex. This article shows a way to simplify your bookkeeping process, making sure your accounting remains accurate and manageable. 

Understanding Amazon payments

Before we dive in, it’s important to understand the different payments related to Amazon. Amazon distributes earnings every two weeks, per sales platform (e.g., .de, .nl, .fr). These payments typically include:

1. Net Proceeds: The amount deposited into your bank account.
2. Beginning Balance: Funds held by Amazon to process returns and adjustments.
3. Sales: The gross sales for the period, typically two weeks.
4. Refunds: The gross returns for the period.
5. Expenses: The gross costs for the period, including:
   • Amazon selling fees
   • Fulfillment costs
   • Advertising expenses
   • (Potentially other costs you might have had)
6. Account Level Reserve: Funds retained for future returns or adjustments.

Expect multiple payments every two weeks if you sell across several marketplaces.

A simple approach to bookkeeping

Handling these transactions is complex, but here’s a streamlined strategy used for managing Amazon transactions using our software:

1. Monthly Revenue: Extract sales data from the Staxxer software for all European marketplaces and record it as Amazon EU revenue.

   • Record the payment as an asset on the balance sheet under “Amazon EU Credit.”
   • Example: A revenue of €35,000 results in +€35,000 Amazon EU Credit, with
     1. • €30,000 excluding VAT and €5,000 VAT (various rates like OSS, DE local, etc.).

     2. Monthly Expenses: Download expense reports from Amazon Seller Central and record them as Amazon EU costs.

        • Record the expenses on the balance sheet under “Amazon EU Credit.”
        • Example: €12,000 in costs results in -€12,000 Amazon EU Credit (typically under 0% VAT shifted).

        To streamline this process, use the Amazon Seller Fee Invoice Exporter Chrome extension. This tool allows you to download Amazon Seller Fee invoices in bulk. You can filter invoices by date, invoice type, and marketplace, and quickly export them as a zip file. The extension saves significant time, requires no additional account beyond your Amazon credentials, and works with all Amazon marketplaces (.com, .co.uk, .de, .co.jp, .fr, .ca, .it, .es, .in, .com.mx, .nl, .se, .be).

     3. Received Payments: Record all payments received from Amazon’s European marketplaces on the same balance sheet line.

        • Example: €19,000 received results in -€19,000 Amazon EU Credit, moving from the “Amazon fund” to your bank account
          
          Important for Dutch Clients: This 0% VAT on Amazon invoices usually occurs because VAT is shifted to your home country. If your Amazon invoices show a VAT rate other than 0%, it is advisable to check your Amazon settings to ensure they are configured correctly for VAT shifting.

     The Outcome

     • Revenue is accurately reflected in your accounting.
     • Expenses are correctly captured.
     • Bank transactions are processed.
     • The Amazon credit aligns with the reservation on your account.
       • €35,000 – €12,000 – €19,000 = €4,000 Amazon EU Credit.

     A Note on Marketplaces

     For simplicity, this method treats European marketplaces collectively. However, you can apply this approach individually to each marketplace (e.g., Amazon DE Credit, Amazon NL Credit, etc.), though it requires more effort.

     Key Reminder About Accounting in Your Home Country

     Make sure to conduct all bookkeeping, including accounting for all Amazon costs, in your home country where your business is registered. For instance, if you are based in the Netherlands but sell only on Amazon Germany, your bookkeeping should still be done in the Netherlands.

     VAT Flow

     Here’s how you can handle VAT:

     • Customers pay €5,000 VAT.
       • €3,000 to OSS declaration.
       • €2,000 to DE local tax.
     • VAT ledger account:
       1. Increase “VAT payable” by €5,000.
       2. After OSS declaration, pay OSS VAT, reducing “VAT payable” by €3,000.
       3. After DE declaration, pay DE VAT, reducing “VAT payable” by €2,000.
       4. “VAT payable” resets to €0.

     Conclusion

     By following this method, you can maintain a straightforward and precise approach to managing Amazon revenue and expenses. Using tools like this Chrome Extension (Amazon Seller Fee Invoice Exporter) can significantly reduce time spent on administrative tasks, allowing you to focus on scaling your business.

     If you have any questions about managing your European cross-border VAT, schedule a free meeting below for tailored advice. We hope this guide, along with our tool, saves you valuable time and effort!