If you have ever spent time manually reconciling individual sales within Amazon Seller Central, then you know how time-consuming and inefficient this process can be.
With the way that Amazon handles settlements, this means you have to go line-by-line to match sales, fees, taxes, etc with your chart of accounts.
Today, with the help of software like A2X Accounting, FBA sellers and accounting firms no longer have to do the tedious work of manually reconciling marketplace sales, fees, cost of goods, and inventory tracking.
A2X works by syncing your Amazon Seller Central account with your accounting software like Quickbooks or Xero.
In this post, we’re going to take a closer look at A2X, including:
Key benefits of using A2X Accounting
If you are using accrual accounting already (or want to start), there are many advantages of using a tool like A2X Accounting.
Cut down on errors from manual processes
Whenever you are going through a settlement file line by line and adding it to Xero or worse a spreadsheet, errors are bound to occur. As the business grows, these errors can add up and trigger everything from inventory issues to sales tax and VAT tax penalties.
Save time on accounting tasks each month
This is a major benefit for accounting firms who might have dozens of FBA sellers as clients. Instead of manually reconciling each seller’s account every month, you can set up A2X for each seller once. Then, it runs on autopilot without having to think about it.
It is also customizable so that you can pre-configure it based on product type, sales tax, country, etc to fit within your current setup.
Support multiple countries and currencies
If you sell on multiple Amazon marketplaces (for example, in the U.S., Canada, Germany, and the U.K.,) it works with all currencies and existing Amazon marketplaces. This allows you to track sales and inventory all in one place with increased confidence.
Match FBA sales to inventory costs
Your FBA business will live or die based on how good you are at managing inventory levels. It is crucial to have up-to-date inventory numbers, including what’s been sold, returns, damaged inventory, and the value of inventory sitting unsold at any given time.
Get accurate gross margin data
This also allows you to monitor your gross margins in near real-time. When you know sales along with your profit margins, you can make better decisions faster based on real data.
Forecast future Amazon sales based on historical data
Once you have been using it for a little while, you’ll have detailed reports of your historical transactions and the cost of goods. You can analyze these reports for patterns and trends, which you can leverage to create sophisticated sales forecasts for upcoming months, quarters, etc.
How does A2X work?
It all starts when a customer places an order on Amazon. Amazon captures all of the payment details and information. Then, every two weeks, they send all of the sales minus their fees to the FBA seller in a settlement file.
Each Amazon settlement can contain hundreds - if not thousands- of transactions and often span months or even years (if the settlement is in December or January). This can be problematic for your accounting records, which are monthly.
A2X comes in and automatically fetches new Amazon settlements - pulling in all of the transactions, fees, refunds, and sales and VAT tax info. If a settlement spans a couple of months, it will automatically split it into two files. (Note: These files are called invoices in A2X). Then, it will be synced with your chart of accounts in Xero.
In essence, A2X enables Amazon sellers and accountants to do accrual accounting, which becomes a necessity as companies grow in order to comply with tax regulations (both varying U.S. state sales tax and country-specific VAT tax regulations). It also makes it easier to keep track of inventory and cost of goods.
Pro Tip: A2X also fully supports Shopify. So if you use both platforms, it is even more convenient.
How A2X works for Amazon Seller Accounting
Why account for settlements instead of individual transactions?
When you are just starting out or if you only have a handful of sales each day, it is easier to keep track of what’s happening. You can record sales, cost of goods, taxes, and fees individually.
As you get a larger volume of transactions and/or multiple sales per checkout, pulling individual transaction data directly from Amazon and Shopify no longer scales. It is more efficient and accurate to go off of Amazon settlements.
Connecting A2X to Xero
The process of setting up A2X takes only a few minutes. After you sign up, you need to give A2X permission to Xero and your Seller Central account.
Pro Tip: A2X offers a limited free trial. Their paid plans start at $19/per month for one seller account with up to 200 orders.
Then within A2X, you can configure your account by SKU, product type, country, or group all sales together. You can also set up your tax rates - both US state sales taxes and VAT taxes.
Once this is done, A2X will automatically fetch new Amazon settlements as they happen and sync them with your chart of accounts in Xero, ensuring that all transaction, fee, and cost of goods data is accurate.
Conclusion
In sum, A2X makes it easy for FBA sellers and accounting firms to use accrual accounting. This ensures that you always have accurate sales data, cost of goods information, and stay compliant with all tax regulations.
Author Bio: Wayne Richard is Partner and Chief Operating Officer at Bean Ninjas a forward-thinking bookkeeping, reporting, and financial education company, specializing in online businesses including coaches/consultants, bloggers, freelancers, agencies, SaaS and eCommerce companies.
Bean Ninjas Mission: To create freedom of time and location as well as financial freedom for our clients, our team and our community.