I've written about A2X in the past, but you'll hear me bring them up so often because they are the perfect example of identifying the main challenges of ecommerce accounting and creating a solution to fix them. Amazon used to be our most challenging sales channel to work with, and now it's the easiest.
Watch this video to hear more about it.
In January 2012 when we started working with our first Amazon seller, we began with the Amazon Settlement Statement like most accountants do. It seemed to have everything we needed; most notably, the net amount matched the amount showing up in the bank account which made us feel all warm and fuzzy inside.
However, when we had a bit more time to think about it, we realized that there were several problems with using Amazon’s statement. The first problem was that it didn’t show us the amount of sales tax that had been collected by Amazon that was due to be remitted to the states.
The second problem was that each summary statement batched the orders without respect to one particular month. January sales were commingled with February sales, and February sales were commingled with March sales, and so on throughout the year.
We also knew that because our client had “cash basis” financials, and because the orders were all paid with credit cards, the income should be reported as sales as soon as they were paid - not two or more weeks later when the accumulated net amounts were finally transferred from Amazon to our client’s bank account.
It quickly became clear to us that we needed the actual, individual orders if we were going to record the transactions correctly.
We began with the newly launched accounting software, Xero, which we had recently fallen in love with. It was so easy to get information into Xero, and we began doing just that. We downloaded the individual orders with a third party tool, imported them straight into Xero, and we were off to the races.
A few days and thousands of transactions later, we came to three realizations: 1) this was taking a really long time, 2) we were overwhelming the system which was not designed to be a limitless database, and 3) this monstrosity was going to be impossible to reconcile against what actually got deposited into the bank. Simply put, this was not scalable in any way shape or form.
So on we moved to Plan C. Being that we are quite tech savvy, we began developing a Microsoft Access database to start tracking all the individual orders. Our plan was to summarize the details and then enter the information in summary format into our accounting system. I will admit, that it worked fairly well. We downloaded the orders from Amazon, then we imported them into our database. Invariably, there were new SKUs or new Amazon fees, so we had to manually add those into the system each time before running our reports. Once we had the reports, we would manually type our summary invoices into Xero, and we were good to go. It typically took about an hour each day for each client, and we didn’t always match exactly to what ended up getting deposited, but usually, we were able to get pretty close.
But then came A2X. This was the answer to our prayers. With the best system we could come up with, we were still spending hours and hours every month just to get something workable into our accounting system. Now, Amazon is the fastest and easiest ecommerce channel we work with. Invoices automatically show up in Xero, and when a new deposit hits the bank, all we do is approve the invoice and click “ok” to reconcile the bank and the invoice. And it ties to the penny every single time. From hours every month for every client to five minutes per month per client. It’s amazing.
If you want more information about A2X, please check out our blog post, Useful Tools Series | A2X.