Expense reports can be difficult to write up. Whether you’re preparing for taxes or just performing regular business responsibilities, there’s a level of challenge involved. Of course, having an accountant helps. That said, sometimes there are nuances that are still out of their expertise.

Today, we’d like to focus on how to record Amazon FBA fees in your books. “FBA” stands for “fulfilled by Amazon.” If you’re running a storefront on the site, that should hopefully make some sense to you.

Regardless, we’ll be exploring this concept here today. Small businesses are the ones who tend to reap the most benefits from the FBA program. However, it can be hard to understand how to record those types of fees properly.  

Stick around to learn more about how this process works. While it can be strange at first, it’s definitely worth understanding. That way, you can more accurately record earnings and spending. 

Understanding FBA – What is it?

In order to get a sense for FBA accounting tips, it’s a good idea to understand what this all means first. That’s especially true for the small business owners out there. After all, why invest in this sort of accounting tool (or these tips) if you don’t understand the basics, right?

Obviously, Fulfillment by Amazon” (FBA) is a service offered by Amazon. Essentially, it allows third-party sellers to store their products in Amazon’s fulfillment centers. Once the products are stored there, Amazon takes care of various aspects of the sale process.  

That includes things like picking, packing, shipping, and even customer service. How does it work, then? Let’s look at some specifics.

Key Features of FBA

There are a few big things to keep in mind along the way. As far as storage goes, you as the seller send your inventory to Amazon warehouses. They keep it safe there, so you don’t have to worry about that.

Then comes order processing. When a customer orders a product, Amazon handles the picking and packing. You can probably see how that makes things easier, right?

Shipping and delivery are big ones as well. Amazon is the one who handles shipping logistics. That even includes offering fast shipping options like Prime for those select customers who pay that premium.  

What does that really mean for your small business, though? Essentially, it lessens the stress you have. You can also improve your own outreach, since you don’t have to personally determine the shipping costs.

Customers are more likely to buy products with lower shipping prices, after all. This program enables that for your company.

When it comes to customer service, Amazon also helps handle that. They respond to customer inquiries, help with returns, and provide refunds related to FBA products.  

The last thing we’d like to mention here is Prime eligibility. All FBA products automatically qualify. This increases their visibility and appeals to Prime members. Overall, you can see why this program is so valuable for partners who are involved.

How to Record the FBA Fees

Effective accounting is a big deal when using Amazon FBA to ensure accurate financial tracking. After all, compliance is an important part of running a small business. There’s also the matter of profitability analysis. Let’s look at some of the specifics.

Separate Business and Personal Finances

Overall, this is one of the most important things you can do. Now, it’s pretty critical no matter what type of small business you run. However, it’s doubly so when you’re using the FBA program.

Use dedicated bank accounts and credit cards for your FBA business. This helps you simplify tracking income and expenses. It also keeps your personal finances separate from the company costs. 

That way, when you’re reporting on your taxes, you won’t have inaccurate numbers. Trying to fix that sort of thing is a big pain, after all.

Track FBA Fees and Expenses 

This point probably seems obvious. However, we consider it worth mentioning. Do your best to keep detailed records of Amazon FBA fees.

What might that include? Some key examples are storage fees, fulfillment costs, and shipping costs. At first glance, this probably seems like it might be difficult.

Thankfully, there are external and internal tools you can use to help keep track of these things. You can use Amazon’s reports or third-party tools to export and categorize these fees regularly. This helps make sure there are no errors down the line.

Record Inventory Purchases and Costs

For some of us, this probably seems like small business 101. That said, it doesn’t hurt to point it out. There are plenty of third-party accounting programs and tools that can integrate with Amazon or allow importing FBA reports. They may be worth exploring.

Don’t forget that you can automate transaction recordings to reduce errors and save time. Again, that’s something available with most tools that can integrate with Amazon FBA.  

Monitor and Reconcile Amazon Reports

Regularly reconcile your Amazon seller reports with your accounting records. This really just means that you should cross-check them. Make sure they’re accurate.

Examples of these records include payments, FBA inventory, and transaction reports. Do your best to keep them the same across all your records. That way, you know you’re looking at accurate information no matter where you check.

Pay attention to refunds, chargebacks, and reimbursements from Amazon while you’re doing this. It can be easy to have that sort of thing slip your mind. Still, it’s an important part of this type of accounting.

Track Shipping and Advertising Costs Separately

Most small businesses have a lot of expenses. Shipping costs are one thing—but it’s probably not a bad idea to track them separately from your advertising costs.

Essentially, you’ll want to record expenses related to shipping supplies, freight, and advertising campaigns separately for clearer profit analysis.  

Overall, it’s not hard to see the benefits of the Amazon FBA program. For a lot of small businesses, it’s a great way to increase exposure and to make a higher profit. Just keep the fees and expenses in mind as well!