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Knowing Your Numbers On Amazon


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Britney Brown joins to talk through knowing your numbers on Amazon, how ecommerce businesses are different from traditional ones, sales tax and how to manage it plus a free ebook to help

  • CPA in USA
  • LedgerGurus is Britney’s business

eCommerce Businesses are different

  • Accounting on Amazon is very different to other businesses
  • Bank accounts are usually where all the activity happens in most businesses and i
  • eCommerce businesses are more challenging as most of the activity in the business is going through channels and only the deposits hit the bank account and they are only a summary

Accounting Problems for eCommerce Businesses

  • Problems:
    • Transparency of data – you sold $100k but only $70k got deposited
    • Timing problem of when deposits land – when things land in terms of sales versus deposits and your month end
  • Putting out cash 3-4 months ahead of sales and the lead time
  • Getting all this data correct and knowing what’s happening
  • A2X – Amazon to Xero is a great tool for getting the Amazon data during that month into your chart of accounts in Xero
  • It ties the deposit back to the activity – giving a higher level of confidence
  • Solves the month end recording problem by tying back the in-month activity
  • Webgility is a similar product but A2X stands on its own

Knowing your Numbers and Optimizing for Profit

  • Knowing your numbers helps so much in optimizing for profit
  • How can an ecommerce business become as profitable as possible
  • Understanding your margins is key
  • Brining their manufacturing back to the US from China
  • Had not done a great job of understanding how huge a task this was
  • This decision almost finished them as a business

Optimizing costs

  • Don’t allow costs to get hidden or lost in transition to a big change knowing your numbers is key
  • Changing the way they do fulfilment – thoughtful what-if analysis is really needed here
  • Understand margins by channel and margins by SKU
  • Cost of Goods Sold by SKU and by Product line helps focus where your marketing spend is best spent

Trump Tariffs

  • Understand how their relationship with different countries will impact their costs to get products across the line
  • Can have a huge impact on your profitability

Cashflow Struggles

  • Cashflow is a really interesting issue for ecommerce businesses
  • Your P&L statement shows wild variations on how you’re doing and cash coming in and out
  • Flow of inventory into the company – you have to pay out cash right away or 30-90 days
  • You are having to pay out cash right away for this inventory
  • This is not expensed on your P&L right away
  • The inventory moves and sits on your balance sheet
  • This inventory moves out of your balance sheet through Cost of Goods Sold (COGS) each month as product is sold
  • That’s how the inventory hits your P&L and your net income
  • But it’s not reflective of all the ways cash is moving through your business
  • Press the importance of forecasting cash in your business
  • Recommend you setup a structure with P&L on a monthly basis but looking at cashflow forecasting 6 months out
  • things like Black Friday can create a cash crisis for a business if you don’t see it coming

Sales Tax

  • Selling in US need to be hyper-aware of the sales tax
  • Supreme Court decision on South Dakota versus Wayfair case
  • Instead of location being Nexus for a company they left it upto the States to decide what creates Nexus –
  • Lots of States looking at transactions as Nexus – economic Nexus – sell 200 trans or $100k of product in 12 months then you have Nexus in teh State
  • You stealthily pass a threshold and your in Nexus in that state
  • You have to turn on nexus in the state when you cross the threshold
  • If you didn’t turn on and they audit you – then you can get hit by back sales tax
  • And this hit could cripple your business
  • The State doesn’t care if you didn’t collect it – they want their money
  • eCommerce businesses are not carrying large cash balances as they are re-investing in their stock
  • Beware Amazon might FBA your stock into multiple warehouses across States and you’re suddenly in Nexus in many states!

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