Balance sheets, income statements, cash flow. To new business owners, financial reporting can seem like a foreign language. But until they understand the basics, new business owners cannot gauge the success of their new enterprise. If you aren’t keeping track of income and expenses, how can you know if your business is thriving or is headed for trouble?
At AIS Solutions, our new e-commerce clients usually arrive with limited knowledge about their business’s financial statements and how to read them. Most people create an e-commerce business because they have a passion for a product or service, or they see a problem and believe they have a solution customers will be willing to purchase. They envision a successful enterprise, where money flows in and out with ease, and profit is the final outcome. Unfortunately, many first-timers in the e-commerce space aren’t paying attention to their books, and that inattention can become a very costly mistake.
The truth is, money matters are confusing and intimidating, and just by scratching the surface, many e-commerce business owners quickly realize they are in over their heads. They do not know the difference between gross profit and net profit, for example. They may not understand the role of a balance sheet. Some have never even looked at their financial statements.
Thankfully, there are solutions. For e-commerce sellers using Amazon’s Seller Central, summary reports are available that can be used for bookkeeping and tax purposes. Unfortunately, those reports can be confusing, mainly because annual reports are no longer available. To get a yearly summary, e-commerce business owners must download a summary report every 180 days or each quarter, and then add those numbers up to get an annual sum.
While it is important to remember that these Amazon reports are not a substitute for an accounting system, these reports do provide information that can then be input into a spreadsheet or accounting software. For example, Amazon’s reports include an Account Activity page and a View Order Details page that provide information on an order’s status, including open, pending, charge pending, closed, completed, not charged, canceled, and suspended.
Settlement and Transaction Reports
When generating transaction reports, it is vital to create a document that’s easy to understand. Amazon’s transaction reports can be confusing, but failing to read them correctly can wreak havoc. Without accurate information on transactions and revenue streams, e-commerce business owners can lose faith in their accounting systems altogether as it becomes nearly impossible to get a precise assessment of their business’s financial health. On the other hand, a system that can quickly identify payments and provide a month reconciliation allows e-commerce businesses to map their revenue streams and determine where they are getting their greatest return (and channels, products, or services need extra attention).
For a lot of e-commerce business owners, bookkeeping and financial tracking is a necessary evil. They understand that without records, they risk losing out on profits or failing to catch unnecessary expenses. Without those same records, they could also run afoul of tax laws. But there is an even bigger reason to master the art of financial statements. Good financial records provide a snapshot of your business. They highlight what’s working and what needs attention. Knowing where your business stands, including assets, cash inventory, liabilities, payroll, and expenses, will provide you with a framework for building a successful enterprise.
Here at AIS Solutions we work with online companies and generate reports that help you make better decisions for the future of your business.
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How To Make Sense of Amazon Financial Reports
ABOUT THE AUTHOR
Steve is the co-owner of AIS Solutions and Co-founder of Kninja Knetwork. In 2017, his firm was named Intuit's Global Firm of the Future, the first time the title has ever been awarded to a firm outside of the United States. He has also has been named as one of the Top 10 Influencers in the Canadian Bookkeeping Industry. He has been a small business owner for over 30 years and has helped to develop a number of businesses including bookkeeping, online training, digital marketing, website development, e-commerce and retail. Steve passion is educating and supporting small business and when he is not creating online courses he is delivering workshops and webinars across North America and the Caribbean including presentations at QB Connect, Connected, IPBC, CPA The One and Scaling New Heights.