E-Commerce businesses that expand to marketplaces like Amazon often find it very difficult to come up with a reasonable way to handle the expenses and fees that are incurred by using such a service, especially when compared to privately run channels.
The following is a list of best practices for configuring and utilizing Unify Enterprise for Amazon settlement reports.
Setting up QuickBooks to be Prepared for Amazon
Due to the nature of Amazon's payout schedule, the typical methods of dealing with revenue, returns, fees, and the other pieces of an order on a privately run channel or offline sales channel means that first-time Amazon sellers are not likely to have their QuickBooks accounts set up in an "Amazon-Friendly" way.
In order to prepare to use Unify Enterprise with Amazon there are a couple advisable choices to make within QuickBooks:
- Use an Amazon Clearing account: This is a necessity. Because Amazon transactions are not deposited into your checking account daily, it is inadvisable to use something like Undeposited Funds to record transaction revenue.
- Set up an Amazon Fees expense account: This Cost of Goods Sold account is typically either a distinct Amazon account (Like "Amazon Seller Fees") or a general COGS account like "Merchant Account Fees".
- Amazon Customer & Vendor: We also need both a customer and vendor set up for Amazon to handle the back and forth that happens with fees and returns as processed by Amazon.
Setting up Expenses and Fees within Unify Enterprise
The next step is to take the new accounts and names you have created in QuickBooks to set up how to record the fees from Unify Enterprise. This can by found in the File >> Configure Store Menu.
The comprehensive document to setting up the fees can be found here, however the following are best-practice guidelines for the ideology behind how they are set up.
Paid Bills should be written for all transaction expenses FROM the Clearing Account TO the Amazon Vendor using the Merchant Account Fees COGS account.
This signifies Amazon automatically removing this money (from the holding area that is the clearing account) before they ever deposit it to your real bank account.
Check/Deposits should be written for all refund transactions to do with an order. The Checks should be written from the Clearing Account back to Amazon and using the expense detail for the Merchant Account Fees.
The Deposit should be written into your Clearing Account being received from Amazon, again under the detail of Merchant Account Fees.
The check sends money back to Amazon from your holding area (clearing account) which they took back for things like returned item price or other fees associated with restocking the item if it is FBA. The deposit covers Amazon's fee forgiveness for fees that have been refunded to you when a customer makes a refund.
**NOTE** Due to the volume of fee transactions that can be created, it is also recommended on this fee setup page to select to post all fees consolidated. Later, when we post the fees to QuickBooks, this will cause them to go in as one unified transaction per settlement report which mimics the overall totals displayed on a settlement report.
Downloading your settlement reports
Now that everything is configured, we have to go retrieve the settlement reports from Amazon to post to QuickBooks. The article covering this can be found here.
Keep in mind that although Unify can be forced to post fees for orders it has not downloaded, it will not allow you to do that by default.
Posting the Fees to QuickBooks
The final step of this process is to post the existing fees to QuickBooks, removing the revenue from the clearing account, before depositing the final income to the real bank account.
The article regarding the process of posting can be found here. However, in general there is one best-practice way to post the fees. If you are downloading and posting your Amazon orders on a daily basis (whether that is entering the transactions individually, daily consolidated posts, or weekly consolidated posts) then at the end of a settlement report period we can batch and enter all the fees for the settlement.
To do this, go to the Orders >> Amazon Settlement Report area. In that area navigate to the Settled Amazon Orders tab at the top, select the settlement report you need to post and select all fees, then post them together.
Repeat the process if you have FBA orders, or switch to FBA if you do not have any Merchant Fulfilled orders.
Finally, you can post the "Other Transactions" which are fees not associated to one particular order, and these can also be posted per settlement ID.