Knowing Your Numbers On Amazon


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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