Streamline Bookkeeping. Maximize Tax Savings. An Accountant’s Insight on Building and Selling an Amazon Business.
As an accounting firm specializing in ecommerce, we understand the unique challenges and opportunities that arise in this industry. If you run an Amazon business that has already experienced growth, you require efficient bookkeeping practices and strategic tax planning. In this blog post, we will explore the importance of bookkeeping for Amazon sellers, highlight the benefits of accounting integrations, and shed light on tax strategies that can lead to substantial savings.
Streamline Bookkeeping with Accounting Integrations
For Amazon sellers, accurate and timely bookkeeping is crucial for making informed business decisions. However, the manual data entry process can be time-consuming and prone to errors. This is where accounting integrations come into play.
By leveraging accounting integrations, such as A2X and Parex, ecommerce businesses can streamline their bookkeeping workflows - automatically importing and categorizing sales, cost of goods sold, and FBA fees directly from Amazon Seller Central. This automation allows accountants to focus their expertise on ensuring financial reporting accuracy and providing valuable insights.
Furthermore, FP&A integrations, such as Liveplan or Jirav, connect to your accounting platform (we love Quickbooks Online) and allow you to efficiently forecast cashflow so that you can plan your timing and volume of inventory purchases, budget ad spend, and hire employees without running out of cash.
With these accounting integrations automating recurring data entry tasks, accountants can allocate their time to the high impact tasks such as improved financial reporting and analysis. At Monthly Controller, we provide Amazon clients with accurate Seller's Discretionary Income (SDI) financial reports every month. These reports help Amazon sellers assess their monthly valuation internally as they move closer to a potential acquisition. Accurate accrual accounting and SDI calculations are essential in determining the value of the business and maximizing your sale price.
Tax Strategies for Canadian Amazon Sellers
Tax planning plays a crucial role in maximizing profitability for Amazon sellers.
From an operational perspective, ensuring HST/GST (sales tax) is identified on import duties and certain FBA fees is critical to maximizing the refund on your sales tax return. This improves cash flow and increases your overall profit margin. Should you enter your HST business number into your Canadian Amazon tax settings? The answer depends on the extent to which you incur Canadian expenses with GST/HST.
When it comes time to sell your business, the lifetime capital gains exemption (LTCGE) is a powerful tax election that allows business owners to shelter a significant portion of their capital gains on the sale. In the case of an Amazon ecommerce business, if ownership is appropriately structured, you can save up to ~$250,000 in tax when selling a $1 million Amazon business. You can sell an Amazon business for up to $971,000 absolutely tax free if you structure your ownership, and the terms of the sale, properly.
In Summary
Efficient bookkeeping practices and strategic tax planning are essential for the success of Amazon ecommerce businesses. Accounting integrations streamline the data entry aspect of bookkeeping, allowing accountants to focus on ensuring financial reporting accuracy and providing valuable controller insights. Tax expertise surrounding ecommerce HST and strategies such as the lifetime capital gains exemption can result in substantial tax savings when operating and eventually selling your business. Monthly Controller is here to support you. Contact us today to optimize your accounting and tax.