Setting up an Amazon FBA business is relatively easy to do (FBA stands for fulfilled by Amazon), and it offers a clear path to becoming an online retailer. But even though it can be an excellent way to build your own business, you shouldn’t ignore the important money management aspects of online retail.
There are various accounting basics you need to take care of. Here are our top 6 accountancy tips for Amazon sellers.
1. Treat Your Business Like a Business
The temptation might be for you to see Amazon selling as a nifty side-line and therefore to make no distinction between what goes on in your personal bank account and your business dealings.
This is a mistake. Don’t confuse your personal with your business affairs. Set up a dedicated business account for your Amazon enterprise and be very clear about what income and expenses are attached to it.
You need to keep accurate records, and having separate business and personal accounts is the best way of doing this. It’s also helpful when it comes to managing your tax, which we’ll come to later.
2. Don’t Put Off Essential Accounting Tasks
Once you’ve got your business up and running, you need to stay on top of it. This means solid, timely bookkeeping and regular monitoring of cash flow.
Put clear systems in place for invoicing and, where necessary, chasing late payment.
Getting organised from the start will help prevent any cash-flow issues, and help you keep a close eye on how your business develops.
3. Keep on Top of Your Expenses
Make sure you record any purchases you make for your business and ongoing expenses.
Certain costs come with the territory of an Amazon seller, including:
- Your selling plan
- FBA fees
- Amazon Selling Fees
- VAT
- Sponsored ads
- Storage fees
- Fulfilment fees.
You might incur other costs from other suppliers such as cost of goods, fulfilment, stock preparation and import charges
4. Understand Your Tax Position
Whether you set up as a sole trader or a limited company, there will be tax implications when you become an Amazon seller.
First things first, you only need to register with HMRC as a sole trader if you earn more than £1,000 a year from selling on Amazon.
In an ideal world, once you’d earned your first £1,000 you could then decide whether to register as a sole trader or limited company. But in fact, you need to decide on which business path to take when you first register with Amazon.
Why? Because Amazon will first ask you for either your unique tax reference number (UTR) or your company registration number if you’re a limited company. There are pros and cons to being either a sole trader or a limited company, and it makes sense to seek professional advice about this before taking the plunge. Remember, most people go limited company and changing from sole trader to limited company on Amazon can result in a lengthy suspension while they review the change.
There’s also the issue of Amazon FBA VAT. Registering as a limited company does not mean you’re automatically registering for VAT. In fact, you can register for VAT as a sole trader too. We are happy to advise on VAT for Amazon sellers as required.
It’s something you have to do if your VAT taxable turnover exceeds £85,000, or you’re expecting it to do this.
5. Monitor Your Financial Health
Looking after the health of your Amazon selling enterprise is no different from looking after your own health.
You need to keep a watchful eye for any changes or potentially harmful developments.
Where you identify an area of concern, act on it. Don’t wait for it to get worse, and don’t turn a blind eye.
You should be factoring in Amazon fees for your business model, and you should know how much you need to sell, and at what price, to become profitable.
Understand what the key metrics are for your business, and get used to looking at your figures regularly.
6. Don’t Rely on DIY Accountancy
When you’re weighing up how to get started as an Amazon seller, understandably, you want to control your costs. But doing your own accounting may turn out to be much less economical than you bargained for.
Even fairly simple business set-ups can benefit from good accountancy advice. This isn’t the sort of advice you can just click online for. You want to be sure that it’s relevant to your business, and is in line with your business objectives and ambitions. Informal advice from friends and well-wishers has its limitations too.
What you spend on professional accountancy advice you more than get back in terms of guidance and insight, and an independent perspective.
Look again at item number 4, about your tax position. Is that really something you want to tackle on your own, or would it be better to get good professional advice and help, leaving you free to focus on growing your Amazon selling business?
Dedicated Accountancy for Amazon Sellers
We specialise in online accountancy services for Amazon sellers and other ecommerce enterprises.
Whether you’re looking for cloud accounting or help with your VAT, we can give you the support you need, all within a fixed, monthly fee.
For more details, please contact us for a free, no-obligation consultation.
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