Accounting for Amazon settlement reports
Amazon pays out on a settlement cycle, usually every 14 days. The amount that reaches your bank is the end of a long calculation, and booking only that number hides most of what happened in the period.
What a settlement contains
- Product sales and shipping charged to customers
- Referral fees and FBA fulfilment fees
- Storage fees and other service fees
- Refunds and the fees Amazon returns or keeps on them
- Reimbursements for lost or damaged inventory
- Advertising costs, if they are deducted from the balance
- Reserve amounts held back and released
Each of these belongs in its own account. Fees are cost of sales or selling expenses, reimbursements are other income or a reduction of inventory loss, and reserves are a receivable from Amazon until they are released.
Settlements that cross month end
A settlement from 25 March to 8 April contains sales from two months. If the whole settlement is booked on 8 April, March sales are understated and April is overstated. On an accrual basis, split the settlement by transaction date so that each month carries its own sales and fees. A2X does this split automatically.
Several marketplaces and currencies
Amazon.com, Amazon.co.uk and the EU marketplaces each produce their own settlements in their own currency. Keep a separate clearing account per marketplace and per currency, and book FX differences when the payout is converted into your bank currency.
Inventory held at Amazon
Stock in FBA warehouses is still your inventory. Count it at month end from the inventory report, value it at landed cost and include it in your inventory balance. Cost of goods sold should come from units sold, not from purchases.
Month-end checklist
- Each settlement agrees with the amount received in the bank
- Settlements crossing month end are split by date
- Reserve balance agrees with the latest settlement
- FBA stock is included in inventory at landed cost
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