For Amazon sellers using Fulfillment by Amazon, the best accounting software comes with comprehensive reporting, easy-to-use features and integrations with useful e-commerce apps — for instance, ones that can help with inventory tracking. Here are our top picks.
QuickBooks Online: Best for robust reporting
QuickBooks Online offers standout reporting capabilities that can help you get a clear picture of your Amazon FBA business. With more than 2 million users worldwide, it's also supported by thousands of accountants and bookkeepers and uses double-entry accounting, which is the standard in accounting.
For access to the most useful reporting features, choose either QuickBooks Online Plus or Advanced instead of the less-expensive Essentials or Simple Start. QuickBooks Online Plus allows you to set up class and location tracking, which will help you determine what segments of your business are most profitable. You can also track inventory in QuickBooks Online Plus.
QuickBooks Online also integrates directly with dozens of apps commonly used by Amazon and other e-commerce businesses, making it an especially great accounting software for Amazon FBA sellers. Even if your app doesn’t integrate directly with QuickBooks Online, you can usually get reporting from it to make manual entries into your accounting software.
For many Amazon sellers, QuickBooks Online Advanced might be overkill. Most Amazon sellers won’t need the high user count or team training, although the unlimited class and location tracking fields could come in handy if you have a larger business. One reason to decide in favor of QuickBooks Online Advanced, though, is that it includes a subscription to Fathom, a powerful reporting and analytics software. Fathom’s customizable dashboards and projections can be enormously valuable for Amazon FBA sellers.
QuickBooks Online Plus pricing starts at $80 per month, and QuickBooks Online Advanced pricing starts at $180 per month.
Xero: Best for accounting novices
Xero is another outstanding accounting application, particularly for those who are new to bookkeeping. With over 2 million subscribers, it's rapidly gaining momentum. Amazon sellers love Xero for its ease of use and lack of accounting jargon. No debits or credits here: In Xero, everything is either “money in” or “money out,” so you don’t have to know accounting at all to make the correct entries into the software. Like QuickBooks, it uses double-entry accounting.
Another useful feature of Xero is its open application programming interface. As more people sell through Amazon FBA, the demand for new and better solutions for inventory management, sales tax compliance and selling will increase. An open API ensures Xero users will be able to integrate these new solutions quickly. However, if you choose to use Xero and a third-party app for your Amazon accounting needs, enlist the help of an accountant or bookkeeper to ensure your data is integrating properly.
Finding an accountant or bookkeeper who can use Xero is also relatively easy, though not quite as easy as finding support for QuickBooks Online. This makes Xero a close second choice to QuickBooks Online when it comes to the best accounting software for Amazon FBA sellers.
Xero has three pricing tiers, but few Amazon FBA sellers will be able to use the lowest tier of service. This means the software could run $16 or $31 per month. If you need payroll, Xero partners with Gusto, which starts at $39 per month plus $6 per employee or contractor per month.
Why double-entry accounting matters
Although inventory management is a critical component of your profitable Amazon business, it’s not the only thing you need to take into consideration when you choose accounting software. Many Amazon sellers stop their search for accounting software when they find an inventory management app with profit and loss reporting.
The problem? "These systems do not have a reconciliation feature, and they do not have a balance sheet," says Cyndi Thomason, author of “Profit First for Ecommerce Sellers” and president of Bookskeep, an accounting firm specializing in accounting and consulting for e-commerce businesses. "As a result, there is no validation back to financial institutions.”
Having a true double-entry accounting system in place with balance sheets and reconciliation capabilities leaves less room for error.
To explain further: In a single-entry accounting system, your transactions are only recorded once by you, and there’s no communication with a financial institution to ensure you’re balancing your books correctly. Double-entry accounting, however, makes it almost impossible to either omit or double-record transactions that are run through the business’s bank or credit card accounts. That means your books are more likely to be correct. And some applications don't allow for this.
Such applications "can be great to facilitate listings and show profitability by SKU, but unless they are validated against a ‘true’ accounting system, their data can be flawed,” Thomason says. “This occurs because (the) product costs are entered and forgotten. As costs change for products or shipping … the system must be updated or the results will be incorrect.”
Before you settle on accounting software for tracking sales on Amazon, make sure it is a true double-entry accounting system, like the options above.
A2X: Helpful add-on for automated deposits
In addition to QuickBooks Online or Xero, Amazon sellers also benefit from using A2X, a software that automatically fetches your Amazon settlements and will post summarized transactions to QuickBooks Online or Xero, including data on inventory and the cost of goods sold.
“One reason we love A2X is the entries into the accounting software are done on an accrual basis," Thomason says.
As with double-entry accounting, accrual basis accounting improves accuracy. Instead of cash basis accounting, which looks at your finances as cash comes in, accrual basis accounting focuses on revenue and expenses as they are billed. This might sound strange to some small-business owners, but this accounting method can help give you a clearer picture of your Amazon business’s profitability. Reporting your numbers on an accrual basis is particularly important to Amazon sellers, who must adhere to Amazon’s pay schedule.
Since the typical payout from Amazon is every other week, doing deposits on a cash basis causes certain months to look more revenue-heavy than they actually are, Thomason explains.
In this example, cash basis accounting might cause you to make poor business decisions based on cash flow timing, but it can also hinder the sale of your business as an Amazon FBA seller. “Brokers that position Amazon businesses for sale require the books (to) be presented using the accrual method for income and inventory,” Thomason says.
In short, accrual basis accounting can give you a more straightforward look at your finances and help you sell your Amazon business. With A2X’s focus on accrual basis, you won’t have to worry about making misguided decisions based on cash basis accounting, making this a smart choice for your Amazon business.
A2X pricing starts at $19 per month for very small sellers and scales up from there. Larger Amazon FBA sellers can contact A2X for a customized quote.
Avalara and TaxJar: Helpful add-ons for sales tax calculations
One of the biggest benefits of being an Amazon seller is that you can sell your product across the country, or even around the world. This benefit also causes a huge headache: sales tax compliance. Recent Supreme Court sales tax compliance decisions have created even more confusion around what sales taxes online sellers have to pay for shipments outside their state.
Although most accounting programs include a sales tax module, these modules only calculate the sales tax due based on information entered by the user. They do not manage sales tax compliance or filing sales tax returns.
How can you alleviate the sales tax compliance headache? Choosing a sales tax automation program like Avalara or TaxJar takes the hassle of managing the 10,000+ sales tax jurisdictions in the U.S. off your plate, saving you countless hours and dollars. These programs connect directly to your online selling platform and, for a small fee each month, will file and remit all necessary sales tax returns and payments due for you.
Pricing varies based on the size of your business, but even if you need to subscribe to one of their larger plans, the upfront cost might be worth the peace of mind.
Bookkeeping and accounting software
GoDaddy Bookkeeping $4.99 per month and up.
Sage 50cloud $47.25 per month and up.
Wave Financial Free (add-ons available).
Xero $11 per month and up.
Zoho Books $0 per month and up.
A version of this article was first published on Fundera, a subsidiary of NerdWallet.