311 Amazon profit - a podcast by Michael Veazey

This is not something where I’m going to give you every single step blow by blow, because that is a bit complicated. But I can say that it sounds more complicated at the front because Amazon is a complicated business and it can be difficult to determine your Amazon profit.







If you would like a more in-depth look from an accountant’s point of view, check out episode 250, when I interviewed my accountant, Penny Lowe, about this. This episode is really to look at look at setting things up, and could very beneficial for new sellers.

Separate Accounting and Bookkeeping Into 3 Blocks For Different Purposes

Systems thinking

I recently read a book by Sam Carpenter, Work the System, which is reminiscent of Michael Gerber’s The E Myth and Getting Things Done, by David Allen. It’s an obsession with standard operating procedures.



You need to set the objective first of what your system, process, or person you hire is trying to do.



Why do you need this thing?

What outcomes do you need from this?



Then, create systems that fulfill that objective.

Aim 1 - Tax Accounting

I think you should use an accountant for this because the consequences of getting it wrong can be really disproportionate to the money you save by not doing it.



Tools I Recommend to Use:



Xero

A2X Accounting

Quickbooks



I would strongly suggest implementing systems that match what your accountant is familiar with, as long as they are familiar with e-commerce.



First year of trading:



Don’t get obsessed with the tools

A spreadsheet may suit your needs

First, clarify the information that the tax authorities really need from you, which will vary based on jurisdiction



For example, in the UK, corporation tax needs very few details.





Don’t let your accountant use a system that is geared toward a company doing ?25 to ?30 million per year.



Always push for, what is the minimum information I need to provide so that you can provide data on the absolutely critical points.



Bear in mind: corporation tax is a tax on profit, and profit is the difference in the value of the equity of the business at the beginning and end of a period.



Figures you need to determine profit are opening and closing



Cash balance

Stock

Debtors

Creditors



Aim 2 - Management Accounting

Management accounting is not externally imposed by the tax authorities or by your accountant. The reason to have management accounting is to be able to make better decisions.



I would separate it out into 2 areas; gross profit by SKU or product line, and overall P&L for business.

Gross Profit by SKU/product line

For this, the tools I recommend are:



Sellics

Fetcher

Hello Profit



They are all quite similar. They plug into the Amazon seller central via an API and it should show you the profit or loss by SKU.



For these tools, you need to input your landed costs (the cost to get the product manufactured, shipped, import duties, storage costs, etc) and when the products sell,

Further episodes of Amazing FBA Amazon and ECommerce Podcast, for Amazon Private Label Sellers, Shopify, Magento or Woocommerce business owners, and other e-commerce sellers and digital entrepreneurs.

Further podcasts by Michael Veazey

Website of Michael Veazey