The Ultimate Amazon Sellers Checklist For Year-End Accounting
As Christmas is fast approaching, you may be too busy preparing for the final peak months of your Amazon/E-commerce business for the year.
After that, comes year-end, and there are very important things you should do to make your year-end as smooth as possible to prepare for the year coming and the tax season.
Year-end, it’s a very busy time for both business owners, accountants, and bookkeepers.
Year end is a combination of a month end, a quarter-end, and the year-end closing!
It’s the period when all financial transactions are completed, financial statements prepared, and all accounts are reconciled.
The Core Checklist for Amazon/E-commerce Sellers
1. Plan ahead and set reminders
Nothing beats being prepared, for all tasks you need to complete at year-end, put them into list and track.
2. Get updated with your bookkeeping and accounting
If you don’t have the time to update your books, now is the time to get it done. Find a professional who knows Amazon/E-commerce accounting to help you. Doing so will give you ample time to prepare for the tax season and bring better plans to the table for the next coming year.
3. Make sure to do year-end inventory count and confirmation
Year-end inventory count and verification will enable you to adjust the ending inventory to the actual inventory on hand. This makes the ending balance a true value corresponding to the physical inventory present in your warehouses and other locations.
Correct ending inventory will make cost of goods sold more accurate. Thus, making it a very important part of your year-end financial information.
4. Reconcile your 1099K to QBO
Watch out for your 1099K coming from Amazon, Shopify, Walmart, Etsy, and eBay.
You need to reconcile your 1099K to the amounts posted in your books
5. Avoid the most common mistakes Amazon/E-commerce Sellers make
Amazon and E-commerce sellers alike commonly make the following mistakes:
- Relying on free software – free accounting apps like Wave, or even Excel and spreadsheets are not cut-out designed for Amazon and E-commerce sellers alike
- DIY your bookkeeping – we get it, you’re good on selling, but usually, not on bookkeeping and organizing accounting stuff. You may think you can save time and money doing it yourself, but it can have serious consequences. We recommend you do what you are good at, and ask help from the E-commerce experts to do your books.
- Not accounting for Amazon fees – a lot of Amazon sellers or Shopify sellers who come to me for help has classified the bank deposits as Sales or Income. That is flat-out wrong, there are a lot of fees and other accounts getting deducted from your Amazon Sales. Using A2X can help a lot to simplify this.
- Not tracking Cost of Goods Sold – for some Amazon sellers, I often see inventory costs or purchases treated directly as cost of goods sold. This is another common mistake, the cost of goods sold is the cost of sold units…not your purchases or manufacturing costs. This makes the profit and loss inaccurate, and the basis for tax computation also inaccurate.
- Mixing business and personal accounts/spending – not only Amazon Sellers or E-commerce sellers, a lot of other businesses do this too. Sometimes, you will buy inventory using your personal card, or you pay for your personal meals, travel or entertainment using business card. It’s easy to do this, but makes bookkeeping messy. Please don’t do this, this will cost you later when your books get updated or when you need to file your taxes.
Additional Checklist for Other Businesses
- Gather all outstanding invoices, bills, and receipts
- Review fixed assets, prepayments, and intangible assets
- Close out uncollectible receivables as bad debts
- Accrue income already provided but not yet invoiced/received.
- Review loans, mortgage, and amortizations
- Review accounts payable and stay updated on payments
- Collect past due invoices
- Reconcile all banks, credit cards, and clearing accounts
- Clean up the books of duplicates, floating entries, and invalid checks
- Analyze financial reports and plan ahead for tax time.
Don’t let year-end challenges catch you off guard! It can be challenging for both the business owner and his accountant / bookkeeper but it’s a very important part of every business’ financial record keeping, planning, and tax strategies.
The above checklist will help you simplify your year-end.
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