12 Ways to Clean Up Your Amazon Profit and Loss for Increased Profits

Amazon Seller Frustrations

• Working hard but not much money left at end of month/quarter/year
• Don’t know where your money goes
• Don’t know if you should reorder products, what to buy. How much

What we Want from our Profit System 

• Clarity and guidance 
• Financially informed decisions 
• Overview of business
• Know what to do more and to stop
• Know what to costs to cut 

Profit and Loss Mistakes

• Having no accounting system
• Not integrating Amazon with the system 
• Not updating the system with accurate data
• Not acting on the insights you get 

Who this is for 

• Resellers using RA, OA, or wholesale sourcing
• Own brand sellers  (Private Label/custom products)

Using Amazon Profit and Loss is like a dashboard on a small plane 

“Instrument flying” is what pro pilots do to be able to fly in all weather conditions

With “instrument flying”  you are using accurate data to build a mental map of conditions. Everything you do has two aims:

• To get to the destination
• To stay safe while doing so

You need to monitor things like 

• Altitude above the ground 
• Attitude/orientation
• Air speed 
• Weather conditions 
• Other aircraft 

What Amazon profit seekers can learn from instrument flying

• Altitude – how far from zero profit are you? 
• Attitude/orientation
  • Are you at an aggressive approach angle relative to direction of travel 
• Environmental  conditions  – like shrinking markets, recessions 
• Other aircraft – competitors –  where they are, speed, how close 

How to Clean up your Amazon Profit and Loss

1. Choose an accountant that understands ecommerce/ your business
2. Use an accountant to set up your accounting systems
3. Use the system your accountant and book keepers are comfortable with
   • Xero is common.
   • QuickBooks is fine

3 . Identify the most important numbers to clean up for in your p and l – then work backwards from there 

The most important numbers in your p and l for management accounting are 

• gross profit
• Operating profit 
• Gross profit is your net revenue minus all your direct costs 
• It shows how profitable your product sales are. 
• It’s most helpful at the product by product level to help you decide what products to reorder and what to cull (listen to previous podcast). 
• Operating profit is gross profit  minus overheads. 
• If you’re not borrowing money, ie have no debt in your business , it’s more or less the same as your pre-tax profit. 
• It’s an important measure of overall management effectiveness 
• It also more or less drives the value of the business if you were to sell it. 

4. Differentiate between direct and indirect costs – then work backwards from there 

Drawing the distinction is critical to get a clean gross profit. 

Direct costs vary with revenue. 

My accountants’ rule of thumb for a direct cost is that it passes this test:

“if you hadn’t made a sale, you wouldn’t have a direct cost”

This in practise includes 

• COGS
• Variable sales costs

COGS

• Landed cost of goods
• Freight 
• Inbound costs to Amazon FC

Variable sales costs

• Amazon sales commission
• Amazon FBA costs

5. Set up your chart accounts in close conjunction with your accountant 

6. Use software to link Amazon and your software 

7. Employ a book keeper to update the accounts monthly

8. Double check allocation of costs to correct account 

9. Review the data – monthly!

• Annually is too late
• Quarterly minimum 
• Monthly is best
• if possible review with book keeper monthly
• At least quarterly review with and or coach  

10. Monitor Gross Profit trends closely 

What matters isn’t revenue 

It contributes NOTHING to your business if you’re a reseller!!

If you’re a brand-owner, it’s only justifiable if it’s a prelude to profit. 

• a sign of PMF
•  or a launch/market share grab metric
  1. Allow for seasonality
  2. Allow for launches

11. Monitor overheads closely 

• If they creep up out of sync with revenue investigate hard

12. Monitor operating profit as a % of revenue

What to do next to clean up your profit and loss  

Get a free Amazon profit audit

Get a free audit from me, Michael Veazey, personally. As long as you have at least $10K/€10K/£10K in monthly revenue. 

You can be a reseller or Private label/custom product brand owner  

Just click the link below, scroll down, click on “Amazon audit” and book in a time!

Free Audit! 

Get access to the best Amazon profit analytics system 

 – EVA

What you get with Eva (all included in one modest monthly subscription):

• Accurate Sales & Profit Analytics
• Advertising Analytics & Rule-Based Settings
• Aggregated Views
• Custom Reporting At Product, Store & Daily Sales Level
• Dynamic Pricing & Promotion Management
• Inventory Management & Replenishment Forecasting

Plus Reimbursement Recovery Fee for just 13% of Recovered Amounts

(industry standard is 20-25%)

To get this – with a free trial – go to www.amazingfba.com/analytics