Chapter 4 Returns, Accounting & More Post-Sales Services

Return Management & Reverse Logistics Services

As the number of orders increases, so too will your number of returns. Those returns can be rather annoying to manage and often include the inspection, grading and testing, upgrading, repackaging, etc.

Given that customers rarely send back all of the product, warranty, instruction manual and packaging, there is likely to be additional work needed to attempt to convert a returned item to a re-sellable item (hopefully in “new” form again).

If you have more than one full-time employee working just on returns, it’s time to be asking questions to these solution providers to see if they can streamline this headache for you.

Key Issues to Consider

Returns can cost you money in return fees and repackaging, but they also cost a disproportionate amount of time to repair versus selling a unit newly sourced from your supplier. There is a size-able opportunity cost to managing returns, both in terms of time, and potentially the lack of expertise on how to maximize recovery rates on those returns. These solution providers know the in’s and out’s on how to make the returns process less painful and costly for you.

Accounting

Every company needs to keep track of its financial position, including expenses such as payroll and insurance, purchase orders, inventory value and margins. The following software programs are commonly used by online sellers to track these numbers.

Key Issues to Consider

While Amazon is not known for providing sales and revenue data that can be easily incorporated into accounting software, some of the companies below have developed API and conversion tools to absorb existing Amazon data into their tools. Further simplify your life by looking for accounting software that integrates into Amazon’s Seller Central.

Accounting and Bookkeeping Support

Long before you have a mountain of shoeboxes full of receipts, it is important to be tracking all of your income and costs. This way,  you can maintain a macro view of your financial position at any given moment, rather than waiting until year-end when taxes are due.

Face it; almost no one likes recording all of their financial data, but it’s necessary to know where you are doing well and where improvements are immediately needed. Rather than put unnecessary lags between paperwork coming in and you understanding how that paperwork reflects your true financial position, these solution providers offer you the ability to keep an eye on your financials without having to deal with the laborious task of sporadic, manual data entry.

Key Issues to Consider

These companies can offer basic book-keeping, or full-scale accounting (including income tax preparation and inventory reconciliation support). Depending on how complex your inventory and channels are, you may want to outsource more and more of this to focus on your skills sourcing profitable product.

Tax Calculation and Remittance

In which states do you owe sales tax? Are you collecting enough sales tax in enough states?

If you can’t answer these questions today, it’s time to look for support. And if you can answer these questions, and you’re required to pay in more than 2-3 states each quarter, you probably could benefit from the streamlined processes these companies will be able to provide you. No more manually filing papers to each required state. These companies will streamline all of that for you, and keep on top of ever-changing tax rules for each tax jurisdiction (state, county, city, etc.) in which you have tax nexus.

Key Issues to Consider

Whether you collect state tax or not on your online sales, you almost certainly are liable for paying the state taxes. Work with your tax attorney to confirm where you owe state taxes, and then consider using Amazon’s tax collection services to streamline the collection process, while using any of these solution providers to support the tax remittance process.

Profitability Analysis

If you understand your all-in-costs by SKU, you can figure out your profitability by SKU, which will guide your actions on inventory management, vendor negotiations, sourcing of new products and pricing. If you keep your total sales revenue and total gross margin each aggregated, then you have no visibility on specific product issues or opportunities which ultimately drive your overall profitability. Most sellers realize they need more granular profitability analysis when they experience YOY sales growth that is not matched by at least the same growth in YOY gross margins.

Key Issues to Consider

Rarely do all products in a seller’s catalog generate positive margins, once consideration for indirect and overhead costs are made. Only at the point that all costs have been allocated down to the individual SKU level can a seller take immediate necessary action to course-correct on product selection.

Please note that many of the inventory and order management tools have incorporated profitability analysis tools into their overall structure. These companies below are stand-alone applications.

Cash Management Tools / Financing Options

Most entrepreneurs think they need more capital. Depending on how well organized your accounting books are, there are plenty of organizations that will lend various amounts of money to build up your businesses.

Key Issues to Consider

Being an Amazon seller can be risky if you’re not paying attention to the road all the time. Bringing lenders into the equation adds more risk – risk that can be well managed if you are properly managing your overall business.

If you don’t know what you are doing as an Amazon seller, it’s probably best not to get too involved in using some else’s money.

As an FBA seller, you won’t be able to grant “first lien” rights to most lenders, as Amazon doesn’t allow anyone into their fulfillment centers to take control of inventory used as collateral in a loan. So be prepared to get very little funding based purely on the value of FBA inventory – other assets are required typically.