Running a store online, like on Amazon, comes with comparatively more challenges than running a physical store. Amazon sellers deal with countless financial hurdles on a regular basis. They solely rely on their online accounting data to analyze errors and find growth opportunities. In order to manage all the financial issues efficiently, Amazon sellers need a simplified accounting system.
Reliance on spreadsheets may help with certain things, but they also have countless drawbacks. Whether you use a spreadsheet for inventory management or to calculate your profit or loss, it’s not a viable solution. This is because spreadsheets are prone to errors and irregularities that can further complicate your financial management. Along with this, spreadsheets are also time-consuming, which may prevent you from focusing on other aspects of your business.
Let’s dive deeper into the topic and explore all the accounting challenges faced by Amazon sellers in-depth.
5 Accounting Challenges Amazon Sellers Deal With
Amazon provides its sellers with a system to track their sales metrics data. However, this isn’t sufficient to manage finances efficiently or assess their complete financial health. From tracking transactions, handling sales and returns, and managing fees and expenses, all this can overwhelm Amazon sellers. In this article, you will learn more about these challenges and the possible solutions to overcome them.
Here are 5 major accounting challenges that Amazon store owners encounter.
1. Inventory Management
Efficient inventory management is the key to Amazon sellers’ success. Traditional methods lead to inaccurate sheets, making inventory management a daunting task. Keeping track of units in production vs. units en route further complicates this process.
Failing to manage all these processes efficiently can result in overstocking or understocking, which can drastically affect your growth. To address this problem, use an automated inventory management solution that keeps everything in order and simplifies everything. This is why Amazon sellers opt for the Xero accounting solution, which comes with advanced inventory management capabilities.
2. Inability to Handle Returns
This is another major challenge that every Amazon seller struggles with. Amazon is not only about buying and selling; the platform is more buyer-friendly. Therefore, it provides buyers with an option to return items for a refund whenever they want. While this option satisfies the buyers, it raises another accounting challenge for sellers to address.
Amazon returns are sorted in various formats, including sellable, damaged, defective, customer damaged, and carrier damaged. In this scenario, the sellable products should be replaced in the inventory to be sold. However, without an efficient accounting system, sellers end up mismanaging these returned items, which affects their revenue growth.
3. Creating Accurate Reports
While Amazon does provide a place to manage your finances, it’s not as advanced as it should be. Sellers rely on in-depth and accurate financial data to perform analysis and identify areas for improvement. This is only possible when you have accurate reports at your fingertips that provide financial data in a proper format.
Achieving this can be a challenge, specifically when you are using spreadsheets to create reports and assess your store’s financial health. This process can be full of errors as it is mostly managed by humans, who tend to make mistakes. In this scenario, an advanced accounting solution is required to accumulate accurate and real-time data to generate in-depth reports.
4. Currency Exchange
Currency exchange is also a challenge for Amazon sellers who sell internationally and deal with multiple currency exchange rates. Without an efficient solution, this can add another layer of complexity to the seller’s financial management. Converting a foreign currency into your local currency is essential to maintaining proper financial reporting.
Using outdated accounting methods for currency exchange will not only be error-prone but also very time-consuming. As a result, you will be tangled up in fixing currency-related errors before you proceed to other tasks. To solve this, use an accounting solution that comes with built-in currency exchange features to simplify your finance management.
5. Calculating Amazon Fees
Amazon sellers rely on opportunities to save more money to maximize their revenue. One factor that affects this is calculating Amazon fees. Amazon charges fees for three things, including FBA sales, sales commission, and ACOS (advertising cost of sales). The goal for sellers is to minimize these fees so they can generate better revenue.
Minimizing the fee depends on product size, category, and how long your product stays in the distribution center. Thus, to achieve profitability, sellers need to calculate the cost of goods sold and gross profit using Amazon’s fee structure. Managing all this in a traditional accounting system is nearly impossible. Therefore, to simplify this, you can acquire an ecommerce accounting solution to calculate everything effectively and find areas to focus on.
Address Amazon Accounting Challenges
An efficient and advanced accounting solution is essential for Amazon sellers to keep everything streamlined. You can harness the power of modern-day accounting solutions that come with powerful features. Contact professionals now and address all your Amazon accounting challenges with one solution.
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