Best Accounting Practices for Amazon Seller + QuickBooks

Overview

You’ve finally decided what products to sell and now you’ve joined the millions of third party sellers on the Amazon Marketplace. Worldwide you are generating more than 50% of Amazon’s total sales! But how much does it cost you to sell on Amazon? It’s imperative that you leverage the most advanced technology and best accounting practices to save time and money. Tracking your product sales and costs per sale can give you clear insight into your revenue and actual operating costs. But most selling platforms have hidden fees that are "netted out" from your product sales. Those are operating costs that need to be on your books.

There are just a few concepts to master in order to maintain your Amazon Seller accounting like a pro with QuickBooks. To make it as easy and accurate as possible, we've spent years perfecting our Amazon Seller integration for you. The following best practices will help you get setup with Amazon Seller Central, Greenback, and QuickBooks.

Let's clarify what we know. The most important thing to remember is that Amazon Seller holds funds on your behalf. You already understand that when you sell an item (with Amazon Seller Payments), Amazon Seller will take payment from the customer, then deposit the funds to a holding account on your behalf. This is your balance of funds. Amazon Seller will then transfer these funds to your actual bank account on a periodic basis.

You also know that Amazon withdraws funds from your payout balance (ie: Amazon Seller funds) to pay for various expenses such as referral fees, refunds, and some bill payments. Thus, (and this is key!) the transfers Amazon will periodically make to your actual bank account will not reflect all the credits and/or debits behind the scenes. That's where Greenback provides outstanding support. Our platform will sync and generate (if necessary) all the transactions that affect your Amazon Seller balance. And our platform also helps get all of them into QuickBooks as sales and expenses.

Here are the best practices we are going to go over. Make sure that you’ve already signed up for a Greenback account, then connect QuickBooks, and your Amazon Seller Central account. You’re going to customize your Chart of Accounts by creating an informal Amazon Seller Bank Account, and an Expense Account. Then you’ll teach Greenback the mappings by exporting a sale, an expense, and a refund.

IMPORTANT: Per Amazon, only sellers with a Pro Seller subscription and super-admin access may connect an app to their Amazon Marketplace or Amazon Handmade. On Greenback you can add collaborators, etc.

Fun Fact: For eligible sellers, Amazon will waive the current monthly Professional selling plan subscription fee of $39.99 until December 31, 2019.

Connect QuickBooks and Amazon Seller in Greenback

On the Greenback dashboard, click “Connect” in the left nav, choose "Accounting", find QuickBooks and then click on "Connect +". Click on "Connect to QuickBooks". You'll be redirected to QuickBooks where you can follow the steps to authorize Greenback to connect to your account eg: Allow Access. Once you've completed that, you'll be redirected back to Greenback where an initial sync will complete.

Next you are going to "Authorize New Developer" (e.g. Greenback) in order to securely connect to each of your Amazon Marketplaces. You'll use your merchant token (seller ID) and your auth token for each one. Here's an overview on how to do it using an Amazon.com U.S. marketplace as the example.

See the How to Sync Your Amazon Seller Central Data blog article which goes into more detail with a step by step. You'll connect your marketplace(s) by region/country. Greenback supports: North America: U.S., Canada, Mexico, Europe: Germany, United Kingdom, Italy, France, Spain, and Australia.You may add as many as you need to your Greenback account. Currently marketplaces must be in the English language only.

To finish connecting, just go to your Greenback dashboard and paste them in. Your initial sync will show your completed sales "orders", referral fees, monthly subscription, refunds, etc. if/when the data is available.

Pro-Tip: Free users have access to a limited amount of historical transactions on Greenback. Paid users can request a "Catch Me Up" support ticket to get more historical data synced to Greenback. View our Pricing Plans for more info.

Add a Bank Account in QuickBooks

Since Amazon maintains a balance of funds on their platform for your products/shop, they act like any other bank account for your business. As a best accounting practice, you'll want to create a new bank account in QuickBooks to reflect the funds Amazon holds. When Amazon transfers funds to your actual bank account, you'll simply "transfer" those funds in QuickBooks from your Amazon Seller bank account to your actual bank account.

Rather than have a dedicated account in your Chart of Accounts for Amazon Seller as Undeposited Funds -- we recommend having a dedicated account that is a Bank -> Checking Account instead. The reasoning is two-fold: 1) you pay some expenses from it in our system (e.g. referral fees, monthly subscription, etc.) and 2) QuickBooks allows some transactions, but not others based on the kind of account you create. Since you'll be paying expenses, issuing refunds, getting reimbursed fees, etc. all from this specific account, it acts more like a real bank account than simply a place undeposited funds are held.

Greenback will note where funds come from and go to on every transaction. So if you make the occasional bill payment from your credit card (most common) rather than your Amazon Seller Balance, you'll need to pick the right account in QuickBooks. This is something we run thru during a training session, but the Greenback UI (user interface) does provide hints and selects defaults based on the account we know you paid from or deposited to.

In your QuickBooks dashboard, you'll click on Accounting>Chart of Accounts>New. Next you’ll add a new account to your Chart of Accounts. The Account Type is “Bank”, Detail Type is "Checking" and the bank account can be named "Amazon Seller Funds" or something similar. Make sure to also select the currency that mirrors the currency Amazon Seller maintains for your shop. For example, if you do business with Amazon Seller in USD or GBP, then make sure to select that. Click Save and Close.

IMPORTANT: Input your (local) currency that Amazon Seller has on file for your shop’s bank account. It should match. If you sell internationally, make sure that your settings in QuickBooks are for home and multi-currency.

Add an Expense Account in QuickBooks

Most online marketplaces charge you various fees for doing business on their platform. (Amazon Seller has selling fees such as subscription, referral, variable closing, etc.). For example, when you sell an item, Amazon Seller will charge (and auto-deduct) a referral (commission) fee for each sale. To simplify accounting for these fees, Greenback recommends the best practice of also adding a new account to your Chart of Accounts with an "operating expense" account category to represent these Marketplace (Seller) Fees.

On your QuickBooks dashboard, go to Accounting> Chart of Accounts> New. The Account Type is "Expenses", the Detail Type is “Other Business Expenses” or possibly “Bank Charges” etc. and the Account Name is "Marketplace Fees" or something similar, then click Save and Close. You can leave the Description blank. Greenback has special per-transaction handling of sales taxes and VAT.

As a best practice, Greenback recommends you treat referral fees, variable closing fees, and many other Amazon Seller fees as operating expenses and simply lump them together as Marketplace Fees. Some businesses will account for some of these as a Cost of Goods Sold COGS or Cost of Sales COS, but most accounting professionals we surveyed recommended that they get treated as a standard Operating Expense OPEX.

Add a Credit Card Account in QuickBooks

Pro-Tip: When you register as a seller, you need to provide an internationally chargeable credit card in case you ever have a negative balance of funds. Amazon makes deposits to your bank account associated with your seller account when you have a positive balance but you can not have payout funds sent to your credit card or other payment systems.

Amazon requires you to periodically make bill payments for accrued charges such as subscription fees, pay-per-click fees if they weren’t already deducted, and more. What's a little tricky about these transactions is that your payment may come from your credit card, or your Amazon Seller balance depending on your available payout balance. To accurately account for these payments, it's very important to know which method was used. For example, if you make a bill payment using your Amazon Seller funds, then you'll want to record an expense in QuickBooks against the Amazon Seller bank account we setup in step 2. However, if you make bill payments in Amazon Seller with a credit card, then you'll want to record that expense in a different account in QuickBooks -- one that represents your credit card. Greenback helps detect the payment method and provides a hint for you in the Export Wizard. So let's create a new account in your Chart of Accounts if one doesn't exist yet.

On your QuickBooks dashboard, you'll click on Accounting> Chart of Accounts> New. Next, add a new account to your Chart of Accounts with the Account Type “Credit Card” and the Detail Type “Credit Card”, and the bank Account Name of your credit card (input the one that's on file on Amazon Seller, e.g. Visa 1234). Click Save and Close.

Export a Sale to QuickBooks

You are now ready to export your first Amazon Seller sale to QuickBooks! Greenback learns the correct export settings and mappings as you do them. So you'll only need to export a few different types of transactions (e.g. sales receipt, referral (commission) fee, refund) and Greenback will begin to pick the right defaults every time. After you do your initial mapping, you can export per transaction, Bulk Export (100 at a time), and auto-export (a new feature coming soon for extremely repetitive exports). After you see how the export process works, then you may want to use the Bulk Export tool. It was designed to allow you to quickly export many transactions at a time yet still retain the ability to review them before exporting them to your books.

On the Greenback dashboard, click on your Amazon Seller account on the left nav. Now select a sales transaction that represents an item you’ve sold (immediate payment) on Amazon Seller (e.g. Amazon.com U.S.) and click on the white “Export” button. Greenback will refresh your settings from QuickBooks and search for possible matches/duplicate transactions. We are fanatical about protecting your books. Next, click on “Create a New Sale” since the transaction doesn’t exist in QuickBooks yet and click Next. When you select this option, Greenback will add a new transaction to QuickBooks after the next 2 steps are completed.

For the Customer field, we haven't done any exports yet and the actual Amazon Seller customer is not on your existing customer list yet, so let’s add Amazon Seller as a new customer eg: add "Amazon.com-Sales” or something similar. Greenback will add the “customer” you input here (marketplace/seller platform, or customer name if available) to your list for you in QuickBooks and remember it the next time. The Deposit To field is where the deposit should be applied to. Select the bank/asset account “Amazon Seller Funds” that we already set up in Step 2. For the Product/Service field, you can choose a “Sales” income account from your Chart of Accounts in QuickBooks.

You may or may not be dealing with sales tax, VAT/GST/HST/PST, etc. Greenback detects when Amazon Seller has automatically added sales taxes i.e. Auto-Tax (Economic Nexus laws where applicable) and we include it as a line item. The sales tax will display as “0.00” under the Subtotal too. Click "Export" and you're finished.

Pro-Tip: If you need to convert or enhance your transactions into a desired, consistent format, (e.g. Summary vs Itemized, Shipping, etc) you can set your preferences by clicking on QuickBooks on the left nav. Check out Customize Your Accounting Data Exports for more detail. Or if you need powerful rule building (e.g. if you need your exports to show VAT Inclusive, the tax rate, and the reverse calculated VAT amount, or if you have multiple shops on one seller platform and you need the shop name, state, etc.) then find out more at Transforms by Greenback.

Greenback creates a sales receipt transaction in QuickBooks with the details of what you've sold. Greenback also makes a deposit to your Amazon Seller Funds account in QuickBooks. Remember, there’s no need for an invoice in QuickBooks when the sale is immediately paid. Now let's take a look at your posted transaction.

To see it in your register, go to Accounting, Chart of Accounts. Then Amazon Seller Funds, and click on view Register.

Export a Referral Fee to QuickBooks

There are Amazon selling fees like Referral Fees (commissions), and Variable Closing Fees. When you have a Pro Seller monthly subscription, there's no Per Item fee. As you know, other fees like shipping and gift wrap are paid for by the customer and not deducted from your sale.

For fees that are typically deducted right from your sale and not itemized on your monthly bill/statements, Greenback creates an ancillary transaction. They are unique to Greenback and the way we help get sales-associated fees correctly on your books. While Amazon Seller simply deducts these out on their platform, Greenback creates a second transaction.

On your dashboard, choose the fee transaction, then click the white "Export" button. Next select "Create New Expense" and click "Next". Since you've already exported a sale in Step 5, notice how Greenback defaulted to Amazon Seller as the “Payee”. To indicate the payment method used to pay for the expense, choose Amazon Seller Funds (ie: the “bank account” you created in Step 2) as the “Bank/Credit Account” (ie: the “Payment Account” in QuickBooks). Now you just need to pick the Marketplace Fees item we created in Step 3 for the Line Item account. Click Export.

Now let's take a look at your purchase in QuickBooks. Go to Expenses, and click on Expenses. Greenback created a purchase in QuickBooks with the details of what you expensed. Greenback also creates a payment for the purchase and withdraws funds from your Amazon Seller Funds account in QuickBooks to pay for it.

Let's take a look at how the transaction posted in QuickBooks. Go to Expenses, Vendors, Amazon Seller-Expenses and check out the total.

Now let's go to Reports, choose Profit and Loss and look at the “Marketplace Fees” and Sales ie: “Income”.

Export a Refund and a Reimbursement to QuickBooks

If you sell enough on Amazon Seller, you'll eventually need to issue full or partial refunds. So let's go through an example of one to show you how it works. For every “discount/refund” you issue on Amazon Seller, you'll be credited back some of the fees you originally paid. Thus, Greenback will create two transactions for every refund for you! One will represent the "negative" sale and the other will represent the "negative" expense or the reimbursement of your Marketplace fees operating expense account.

On your dashboard, choose a Refund transaction, then click the white "Export" button. Next select "Create New Refund" and click "Next". Greenback defaults to “Amazon Seller-Sales” as the Customer. The Deposit to bank/asset account is “Amazon Seller Funds” (the “bank account” you created in Step 2). For the Product/Service field, select the “Sales” income account. Click Next.

Now choose the related ancillary Reimbursement transaction on your dashboard and click the white "Export" button. Next, select “Create New Reimbursement”, and click “Next”. Choose the Payee (Vendor) ie: Amazon Seller. Select the Bank/Credit account (Bank/Credit card) ie: “Amazon Seller Funds” ("Hint: Funds Deposited to Amazon Balance Funds x-A1PBU9PM9LZK_USD"). Select the Line Item account (Expense account) ie: Marketplace Fees (Expense). Then click Export. On the next screen, click Close.

Let's take a look at a couple of your reports in QuickBooks after these transactions now. Go to Expenses on the left nav and click on Vendors. Then look at the Total column for Amazon Seller-Expenses and see your debits and credits.

Next go to Reports. Go to the Profit and Loss and look at your Marketplace Fees and your Sales ie: “Income”.

Export a Bill Payment

Amazon Seller will accrue charges for you as you sell, and require you to make periodic bill payments. It's critical that you know what you paid with when exporting these to QuickBooks. Greenback will provide a hint (when available) to help you. Ex: “You paid with Amazon Seller Funds-Acme Soap x-1200400", etc. means that you paid from your available Amazon Seller funds. If your available balance isn't enough to cover the bill payment ie: funds not held back for chargebacks etc., then it will be paid with your credit card on file eg: “You paid with Visa ****1234.

On your dashboard, choose the Marketplace Fees Expense transaction, then click the white "Export" button. Next select “Create New Expense”, and click Next. Select the Payee (Vendor) ie: Amazon Seller. Select the Bank/Credit account (Bank/Credit card) eg: Amazon Seller Funds, eg: Visa ****1234. Select the Line Item account (Expense account) ie: Marketplace Fees (Expense) and then click “Export”. Click Close. In this example the video is showing a Bill Payment for an Etsy Seller but it's all done the same way.

In our example, we paid with a credit card and selected the account we setup in Step 4. Let's take a look at a couple reports in QuickBooks after this transaction…

Since we paid with a credit card, you'll notice in our Chart of Accounts that the Amazon Seller Funds balance remains the same with $.88, while the Visa 1234 account has a “negative” balance of $0.65.

Go to Accounting, Chart of Accounts, find your Amazon Seller funds (bank account) balance and find the credit card that you paid the Amazon Seller bill with. Now go to Reports on the left nav, then find the Profit and Loss report and take a look at your Marketplace Fees. You’ll see that everything added up ie: the reimbursement, the payment made with your credit card, and the expense paid for with your shop fund balance. If Greenback didn't surface the fees for you with ancillary transactions, your books wouldn't reconcile and your true operating expenses wouldn't be reflected.

If you have any fees not mentioned, for example Amazon Marketing Services that you need to track, please contact us at ping@greenback.com. We may already have a solution that we are working on for sellers just like you!

Reconciling Payouts and Handling Deposits on Your Bank Feed

Amazon Seller Central, and Amazon Handmade holds funds on your behalf (and periodically transfers payouts to your bank account). It's important to remember it's a revolving balance of cash and not always a clear cut batch of settled transactions. There could be sales, holdbacks/reserves, miscellaneous credits/debits, time zones, cut-off times etc. For example, a sale occurring at 1:00 PM may not be included with a payout initiated at 1:02 PM.

Payouts are simply cash transfers from one account to another. Not a batch of transactions. It's the same as transferring cash from one personal bank account to another. You are transferring money. Payouts from Amazon are just transfers of money from one account to another too. But how do you reconcile the transfers and feel confident you've accounted for everything?

The best practice is to reconcile overall balances and net-profits. If Greenback's total sales, total expenses, and net-profits match your Amazon Seller statement, then you've reconciled that the Amazon Seller-> to Greenback data is 100% accurate. When you export all of your transactions, then you've reconciled the Greenback -> to your Accounting Package data is also 100% accurate. Therefore, Amazon Seller -> Greenback -> Accounting Package is reconciled. Additionally, if you've setup an Amazon Seller Shop funds account in your Chart of Accounts, then the balance in your Amazon Seller account should match it. The only exception would be a payout currently in-flight (since bank transfers can take a few days).

If you have bank feeds setup in your accounting package, you'll have transactions (deposits) appear that represent the payouts from your selling platform. You may notice that Greenback doesn't create any transfer types of transactions on our platform or export any to your accounting package either. In order to simplify the processing of your bank feed, we chose not to track the transfers.

Here's why. First, if you sync and import your bank feed before exporting your data from Greenback, we would need to find a match during the export. Otherwise you'd have a possible duplicate transfer. Second, in the reverse direction, if you export from Greenback first and then import your bank feed, you'd need to hope your accounting package finds a match. Based on our product research, rather than introduce this scenario, we decided it's best to let your bank feed be the authoritative source of transfers.

Since Greenback exports the sales & expense data--while we leave the transfers to your bank feed--every deposit in your bank feed can be simply marked as a transfer on your books. Your accounting package may either remember you did this after the first time, or you can setup a rule to have it do that every time. Here's a demo on how to transfer the funds from your clearing account to your real bank account and then set up a transfer rule in QuickBooks so that it is automated. Then all you will need to do is click "Transfer" the next time.