Amazon is a very popular marketplace where almost every e-commerce business lists its products. It gives a lot of exposure to sellers as Amazon has a large customer base which sellers otherwise might not be able to reach. This helps in driving more sales and increasing business revenue. Other benefits of selling on Amazon are that; it handles the payments, shipping and customer service thereby reducing the effort spent as a seller. Amazon is a trusted and reliable site that is beneficial in having a successful e-commerce business.
Why is it difficult to calculate profitability?
To sell your products on Amazon various fees are also supposed to be paid to Amazon. There are a number of charges levied by Amazon which makes it difficult to calculate the net profit received on each product. To get the net profit amount on each product, all the charges and other expenses have to be deducted from the payment amount.
The Fees charged by Amazon include:
- Shipping Fees
- Referral Fees
- Closing Fees
- Pick and Pack Fees
- Technology Fees
Given below is a rate card for Shipping fee. Using the given rate card Cointab Reconciliation calculates the shipping fee on each order. Similarly all the other charges are also calculated for every order. It is difficult to calculate all these charges as weight, region, rate percent etc have to be verified and then the correct fee amount is calculated.
Then the deductions have to be made from the selling price to get the profit for each order. As this process requires metacoulious calculations at various levels it will be too time-consuming and error-prone if done manually.
Difficulties faced
- Time-Consuming: Calculations for fees, profits, differences etc take a too much time and effort for sellers on Amazon as they have a large volume and variety of products.
- Errors-prone: Miscalculated profit will lead to an incorrect amount being carried forward in other books of accounts
- Complicated fee structure: The Amazon rate cards and fee structures are complicated which may change every now and then, this makes it difficult to track fees on each order.
How does Cointab Reconciliation’s Profitability Calculator help?
Our software automates the process of calculating profitability of Amazon marketplace by fetching invoice values from MTR report, payment values from Disbursement report and then subtracting all the fees levied by Amazon such as shipping fees, referral fees, closing fees, pick and pack fees, technology fees, and other expenses. This gives you your gross margin from Amazon per order.
You can then add your purchase price per SKU in our system to be deducted from your gross margin to arrive at net margin per order which gives you your true profitability.
Using this analysis you can evaluate your performance on Amazon marketplace and take data driven decisions to improve your profitability.
Summary View
Order-Level View
As shown above in the order level view, users can check the results of the profitability calculator. It displays the profit margin on each order by subtracting the Amazon Fees along with other expenses and the purchasing price from the selling price. The remaining amount is the in hand profit that is available on the sale of each order.
Having an inbuilt profitability calculator in Cointab Reconciliation is extremely useful for a business as it can save time and effort spent.
The profitability calculator helps get a more holistic view of your business revenue. When the profit in hand after all the deductions are known, managers can take better data based decisions rather than making gut-based decisions. This tool is useful for businesses that want to improve their financial management and increase the overall profitability of the business.
Benefits of using Cointab Reconciliation’s Profitability calculator
- Time Saving : The software does the complex calculations and generates the results accurately for a large volume of orders easily.
- Accuracy: The results produced are accurate without any human error.
- Macro View: With a profitability calculator, you have a better understanding of your business’ financial health.
- Better Decision Making: Sellers can take data driven decisions after SKU-level analysis of the revenue received.With Cointab Reconciliation’s Profitability calculator, managers can take data driven decisions to improve the overall revenue and profit of the business with accurate analysis.