If you’re a newer seller who is in the beginning of scaling your Amazon business, you might not know what the best solution for accounting.
Sales under $20,000 per year / 200 transactions
If you’re still really new to selling, and your sales will not hit either 200 sales/transactions or $20k per year, then Amazon will not even report your sales to the IRS, and they will not even know that you sell at all.
At this level, you can choose to let the IRS know about your new revenue stream, or choose not to. This works out well because if you’re “testing” Amazon out still, you don’t have to worry about it affecting your taxes below this threshold.
Monthly sales from $10,000 – $50,000
This is a very tricky spot for many sellers, as your revenue is too low for many eCommerce accounting businesses and websites to even take you on as a customer, and if they are willing then it might be too expensive to justify the cost.
This presents a problem because after you pass the $20,000 yearly sales mark, Amazon will report your sales to the IRS and you’re on the hook for paying taxes.
At this point, you have a few options to take:
- Learn the basics of accounting and bookkeeping and do it yourself. This option can save you the most money, and using software like QuickBooks online can help you with logging transactions. However, this option is risky as the discipline of accounting can get caomplicated fast.
- Get a bookkeeper and an accountant that are willing to work with smaller businesses. With the increased popularity of freelancing on demand sites like Upwork, you can find more affordable accountants and bookkeepers that will work with you and charge less than dedicated accounting firms. This is the option I went with as I love freelancing sites to help run an Amazon FBA business.
- Utilize either of the first 2 options then transition to an accounting agency/firm or CPA. If you’re looking to sell your business eventually, you’ll want the cleanest financials possible. With that in mind, when your revenue starts to get on the higher end, you might want to use an agency that has a CPA (or hire a CPA directly) that can produce perfect tax returns.
Monthly Sales $50,000+
Looking back at step 3 for under $50k revenue, a potentially good idea is to acquire an established accounting firm that specializes in eCommerce, or hire a CPA to do your accounting. At the larger revenue levels it can only be to your benefit to hire competent bookkeepers and accountants to take the worry of taxes off your mind.
If you went with an independent freelancer for an accountant and are comfortable with them at higher revenue levels, then you can keep working with your accountant.
Don’t Forget Bookkeeping
Bookkeeping is different than accounting. Typically, most businesses and eCommerce sellers will need a bookkeeper that is separate from their accountant. The skills of a bookkeeper and a CPA are different, and you wouldn’t expect your accountant/CPA to do your bookkeeping in most cases.
Every eCommerce business has different accounting needs at different times.
Check where your revenue levels are at and the current level of complication of your business to make the best accounting decision and know that your accounting needs will change and evolve over time.
Summary: Accounting for your growing Amazon FBA Business
- Based on your revenue and how complicated your business is determines what level of accounting you need
- Below $20k yearly revenue / under 200 transactions yearly: Amazon doesn’t report your sales to the IRS
- $10k – $50k monthly revenue: Either learn some accounting basics yourself or hire a freelancer on a site like Upwork.
- $50k+: Consider hiring a CPA or accounting firm.
- Always have your bookkeeping done at all levels of your business.