5 Reasons InventoryLab Is Not A Complete Bookkeeping Solution
I want to preface this post by saying that I think InventoryLab is an excellent tool for Amazon Seller Bookkeeping. I highly recommend as part of a complete Amazon Seller accounting system, but it is only one piece of a complete system.
As an Amazon Seller whether you are selling FBA or FBM, you might be using InventoryLab as your only bookkeeping system. That is completely understandable given the ease of use and the wealth of information that InventoryLab gives you. It's easy to set up and very easy to use. It give you a very good idea of your unit level profitability and ROI on products after account for cost of goods sold (COGS) and associated selling fees. Despite its great benefits and features, it is not a complete accounting system and here are the top 5 reasons why.
1. It does not show you the total profit and loss of your business. While it gives you great insight into unit level profitability and your gross profit, it does not do a great job of tracking operating expenses. You can enter "other expenses" manually, but the feature is rather clunky. Manually entering all operating expenses each month could be a very time consuming task which could be automated. Without proper automation of this task, it is very easy to miss a number of expenses. Think, supplies, contractor payments, interest on credit cards, bank fees, rent. Without ensuring complete accounting of operating expenses, you don't have an accurate view of your bottom line.
2. It does not have a balance sheet report. The balance sheet shows your business assets, liabilities, and total equity. Why is that important? Well, in an ecommerce business, your biggest asset is your inventory. At any given time you'll want to know what the value of that inventory is. InventoryLab does a great job of returning this value, but the software does not give you information about anything else on the balance sheet. What's most important is it doesn't tell you about how that value and other current assets such as cash and gift cards compare to your current liabilities i.e. working capital. In an ecommerce business, you should always know what your working capital position is.
3. You cannot produce professional looking reports for management or outside parties. Undoubtedly you'll need to produce reports from time to time which include profit & loss, balance sheet, and statement of cash flows. The only one of these you'll be able to produce from InventoryLab is the profit & loss report and as I said, unless you are entering a ton of manual expenses, it won't show your true bottom line. Produce these reports will be important for management, but will be essential come tax time, when you are requesting financing, or looking to sell your business.
4. You cannot track profit & loss across multiple channels. Many Amazon sellers have sales across multiple channels that include your own website, eBay, or other 3rd party platforms. While this may not compose a large portion of your sales, to get a complete picture of your bottom line, you should track the sales and associated costs on these channels. Not tracking them or only tracking them partial leaves you with a less than complete picture which may result in paying more or less income taxes than you should be.
5. You cannot automate accounting for business operating expenses. As I mentioned in the first bullet point, you would have to manually enter any transactions not related to sales, COGS, and associated fees on Amazon. Your goal should be to automate the import of all transactions for your business. This requires a solution that allows you to link an pull information for all your transaction accounts. You can then automate the bookkeeping by setting rules. You'll then be able to rest assured that all your income and expenses are accounted for.
How to Set Up a Complete Amazon Bookkeeping System
If some of the previous bullet points made you start wondering how well you know your business profitability, you are not alone. Many Amazon Sellers ask themselves the question "Am I really making money?". If that's the case, its time to start getting serious about setting up a highly automated solution for your business.
Setting up such a system is well within reach, but each seller has different nuances that have to be accounted for to ensure a set that meets their needs. Depending whether you are doing Retail Arbitrage (RA), Online Arbitrage (OA), wholesale, private label, multi-channel, or any combination of these, we can set up a custom solution for you.
Please contact us to find out.
Share
