If you are thinking about starting an Amazon business, you need to start here
Currently ranking at the top in the list of the largest internet companies by revenue in the world, Amazon currently dominates the e-commerce industry of the 21st century. Along with google, facebook, and Apple, Amazon is considered as one of the four big technology companies in the world.
Amazon is an American multinational company with its headquarters based in Seattle, Washington. It primarily focuses on e-commerce, digital streaming, artificial intelligence, and cloud computing. The Amazon platform offers a diverse range of products through a number of its subsidiaries such as Amazon Prime Video, Amazon Web Services, Amazon Studios, and Amazon Publishing.
Amazon provides a global platform for individuals seeking to self employ themselves by starting a business.
How do I start an Amazon Business?
Before you proceed with the setup of your amazon business, it is advisable to decide what you want to sell. After deciding what to sell, you need to understand about the pricing plans. Amazon offers two plans through which you can sell your products, the first is a basic plan that allows you to ‘sell a little’ that is fewer than 35 items per month and the second is a professional plan that allows you to ‘sell a lot’ with more than 35 items per month.
There is no monthly subscription fee for the basic plan and you pay £0.75 plus additional fees on each item sold. The key benefit is that you only get paid when you sell something.
For the professional plan, there is a monthly subscription fee of £25 that is exclusive of VAT, you pay additional fees as selling fees on the actual sales. The key plan benefits of selling as a professional are that you receive the best value for volume sales.
Finally, you need to register yourself at Amazon Seller central. Sign up by providing your name, email id, and password, after which a verification email will be sent to your email address. After verification, seller central will demand details about your business and contact address, your mobile or telephone address, your credit card details, and your identity details. While providing your business information, you have to provide the location of your business and its working structure (for instance as an individual, sole proprietor, privately owned business, etc).
After you have successfully registered, you can then add your products to the Amazon Marketplace catalog one by one. You can add large batches of products using bulk tools if you subscribed to the professional selling plan. After you sell a product, your payment is deposited into your bank account with Amazon seller fees deducted and Amazon notifies you by sending an email.
You will also be notified when a customer places an order, leaving you with two shipping options to choose to deliver your product to the customer. Either you can use Fulfilment by Amazon (FBA) Or Fulfilment by Merchant (FBM).
Payments will be deposited into your bank account regularly by Amazon along with the notification that the payment has been sent.
Do I need to manage my taxes if I run an Amazon Business?
Yes, you need to manage your taxes if you are running an Amazon business. Amazon sellers based in the UK who are making profits are bound to pay income tax. There are however two ways you can manage your taxes.
- You manage your taxes yourself using the inbuilt reporting structure in amazon
- You may hire an Amazon accountant or a tax accountant to manage your taxes
Key financial complications for an Amazon trader
An Amazon trader might come across a number of financial complications, such as the VAT rates to apply on their products, the correct treatment of returned items or refunds and VAT & tax implications when using special selling schemes set up by Amazon such as FBA (Fulfilled by Amazon).
Fulfilled by Amazon has been set up by Amazon to help sellers grow quickly, this is where amazon does all the heavy lifting by taking care of storing and delivering of the items across Europe, therefore helping sellers reach a bigger customer base quickly. However there is a catch, as Amazon is now selling products over a bigger market, the tax, VAT and accounting rules can get complicated. It is advisable to speak to an accountant who has a global reach to help you set up your financials if you are thinking about using FBA.
Using the seller central account for business reporting can get very complicated whilst conducting business using the Amazon Marketplace, this may be due to insufficient knowledge on the use of their platform, on the reports required for compliance in a certain jurisdiction or because of the sheer size of the reporting platform on amazon.
It is always recommended to hire an accountant or an accounting firm that is fluent in the use of the Amazon reporting portal and working with Amazon clients. You could try searching for an accountant nearby or an amazon accountant if you do not have one.
Difference between Amazon and eBay
Whilst Amazon and eBay might sound as businesses of similar nature, there are a number of differences between Amazon and eBay.
Amazon operates as a retailer, a retailer sells a product at a reasonable price to a wide customer base whilst eBay which is a wholesaler, sells merchandise to the retailers by offering the lowest price possible. This automatically implies that Amazon is a platform that offers higher profits for the sellers as compared to eBay even though Amazon takes a cut out of the sale price.
Tracking your sales and items is easy in Amazon as most of its features are highly automated which means that selling on Amazon will consume less time as sellers will have to pay attention to only a few basic tasks before they sell their product. Whilst eBay is not primarily automated, sellers have to pay attention to a number of tasks, thus consuming a lot of time.
Amazon currently serves a very broad customer base whilst on the other hand eBay targets small but specialized markets. eBay is an auction site and caters to those individuals who express a strong interest in a specific product such as resellers or hobbyists whilst Amazon serves ordinary consumers.
When the fee is taken into account, Amazon lets the seller list for free but cuts a proportion from the sale whilst eBay charges seller a monthly rate for listings.
Delivery methods also differ significantly between the two, as Amazon offers two options for sellers to deliver their products, Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM).
With FBA, sellers are required to deliver their products directly to the Amazon warehouse where the responsibility of further shipping to the customer is fulfilled by Amazon. FBM is where sellers are required to deliver the product to their customers personally or through drop shipping whilst on eBay sellers only have the option of delivering the product themselves.
Why Amazon and not my own e-commerce shop?
If you have followed the guidelines provided by Amazon and listed your products according to their rules and regulations, then Amazon can promise you a guaranteed an increase in your sales and profits. With millions of users visiting Amazon’s web on a regular basis, it is hard to ignore the benefits associated with such a huge market exposure for your product.
Amazon is a trusted international brand, providing countless growth opportunities for businesses seeking to expand the reach of their products into different markets. It provides an opportunity for businessmen in the UK to sell their products beyond national boundaries and to different markets around the globe, where a huge number of customers might be waiting to get their hands on a UK product. However, this is not the case when you are running your own e-commerce shop, as you will be focusing primarily on your website, you would be missing out on a huge target market of millions not just locally but internationally. Therefore, losing the opportunity to generate countless sales.
The sale of your products is directly proportional to the credibility of your business or brand. Amazon is a well-reputed international brand and is also trusted by many sellers, vendors and retailers around the globe, hence there is a good chance that customers will buy your product on a trusted marketplace. Amazon also has very strict policies on customer feedback and complaints, as a result, customers will most likely buy from amazon because if they find any fault in the product, they know that Amazon will always take action in their favor.
Whilst if you manage your e-commerce shop, much of your time will be spent on building its credibility and reputation, leaving the customers with no option but to shop from somewhere else.
VAT for Amazon traders
Amazon sellers need to make sure that they are VAT-compliant and are advised to seek professional advice if they don’t know how to stay compliant with the rules and regulations. You may speak to a competitive accounting firm, an Amazon Accountant or tax accountants to get guidance on how to register for VAT and stay compliant with it, whilst you carry your business on Amazon.
If your Amazon business is established in the UK then you need to register for VAT if the following conditions apply:
- Your annual turnover exceeds the VAT threshold £85000
- Your goods are stored in the UK
- Your customers or consumers are based in the UK
Individuals can register for VAT either by themselves or can let a capable Amazon Accountant assist them in the process.
If you choose to register for VAT personally then you need to submit an application form to HMRC. Once you register for VAT, a VAT number will be provided to you. This number can be used for filing VAT tax returns, issuing VAT invoices and claiming money back on your business expenses.
Financial tools for Amazon sellers
In order to make your business journey on Amazon worthwhile, you can utilize a number of Amazon seller tools to provide an extra boost to your new or existing products and increase the volume of sales.
Financial tools for faster payments
Usually, sellers get paid by Amazon every two weeks but by utilizing Amazon seller tools for faster payments, sellers can get paid on a daily basis depending on the sales total, thus improving their cash flow. More control over your cash flow means you get to pay your bills on schedule. This service may also be referred to as factoring. Payability is such a tool specifically developed for Amazon which can help in sending payments on a daily basis to sellers regardless of their size.
Financial tools for price management and repricing
Businesses can utilize financial tools that allow them to monitor listings and the strategies of their competitors. This helps in adjusting product prices whilst taking the price set by your competitors into account. Repricing tools do all the work 24/7 after sellers set limitations according to ‘Buy Box pricing targets’ and profit strategies.
It becomes a bit of a hassle when you have a list of products to sell, have to monitor the pricing strategies of your competitors and have to adjust the prices in seller central all at once.
Repricing tools are extremely beneficial in keeping you at the top of the pricing game, by taking care of everything that is price related and prevent you from adopting poor pricing strategies that can lead your profits to sink very fast.
Tools for shipping management
Cost-effective tools for shipping management provide sellers with the opportunity to compare the shipping rates among carriers and help them get a hold of print labels quickly in order to meet the shipping requirements set by Amazon. These tools offer more shipping options and reasonable rates as compared to the Seller Central dashboard
Shipping easy, Ordoro, apathy, and ship work are some of the seller tools you can utilize for effective shipping management.
Tools for managing Expenses and Accounting
If you want to keep track of standard business expenses and manage your budget, you can get your hands on Amazon seller tools that allow effective accounting and expense management. In addition, there are expense management tools that allows sellers to spot errors, keep track of Amazon seller fees and recover money for any resulting discrepancies like damaged returns, shipment issues or facing inventory shortages from FBA.
Wave, Expensify and Refund retriever are some of the expense management tools that sellers can successfully utilize to effectively manage the monetary elements of your Amazon business. Speak to an Accountant or an Accounting firm before setting up or selecting accounting software.
Tools for Legal, Tax and Insurance requirements
Amazon sellers can use tools that can assist them in keeping track of their business accounts and thus improve the general performance of their business. Amazon pro sellers are required to get commercial insurance, thus Insurance agencies that are Amazon focused may help them cover the process.
There are Amazon focused lawyers as well, these lawyers help sellers resolve any legal dispute regarding their business accounts. It is critical for the sellers to understand their payment responsibilities, the tax structure and the importance of sales tax collection, for this purpose seller may utilize sales tax tools that can make the collection of taxes and other payment tasks more efficient.
LegalZoom, AMZ liability insurance and Amazon Sellers’ Lawyer are some of the seller tools that can help sellers meet their legal, tax and insurance obligations correctly and in a timely manner.
Key FAQ’s for Amazon seller might need to ask?
- What report do I run to see my total sales?
- How much VAT have I collected by region?
- How much fee have I paid amazon on total on my sales?
- Do I need to register for VAT or not?
- What is my profit margin by-product?
- What is my most profitable product?
- Are my shipping costs eating away at my contribution margin?
- What are the charges to start Amazon FBA?
- What is the procedure of adding inventory?
- What is the shipping cost of the items I sell?
- What is the mechanism of FBA?
The post How To Start An Amazon Business And Manage Its Financials? appeared first on Tweak Your Biz.
source https://tweakyourbiz.com/growth/entrepreneurship/start-amazon-business
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