During the last 3 years, A2X has been an indispensable tool that we have used to simplify the bookkeeping process for many of our ecommerce clients. Through this partnership, we have helped sellers make more money, pay less tax, have a precise understanding of their finances, and focus on higher-value tasks instead of manual data entry.
In this post, we take a closer look at what A2X does, the key benefits that it provides, how it compares to other alternatives and why we trust A2X to simplify ecommerce accounting for our clients.
What is A2X?
A2X is an accounting connector that integrates your Amazon Seller Central and Shopify accounts with your cloud accounting software. In doing so, it automates the data entry side of your ecommerce bookkeeping to avoid human error and make it easier to get the correct financials with minimal effort.
What Problem Does A2X Solve?
When customers purchase products from your online store or marketplace seller account, payments are usually made with a credit card and processed by the platform’s built-in payment processor (such as Amazon Pay or Shop Pay).
From here, the money received is transferred to your bank account (minus fees). However, instead of paying out every single sale as an individual transaction, these platforms batch all of your sales over a set period of time into a single payout to make it more practical to manage.
For example, Amazon pays settlements every two weeks and Shopify usually pays settlements every 5-7 days.
So, What’s the Big Deal?
While this arrangement may be suitable from a cashflow perspective, recording these settlement payouts correctly in your accounting system is another story…
Many of the sellers we onboard run into issues here by accounting for their settlements in one of the following ways:
- Recording the net amounts received in each payout as sales revenue, which doesn’t take fees and returns into account.
- Recording every single sale as a separate journal entry - either creating an extremely large amount of invoices with an app that claims to help, or manually entering every transaction on its own (which increases the workload and introduces the potential for human error).
- Using a spreadsheet to match up each transaction to the relevant payout, which is not scalable.
If you’re doing one of these things, it’s important to remember that there is a better way – by using A2X.
How Does A2X Work?
When Amazon or Shopify pays a settlement to your bank account, the platforms automatically create a file that details all the transactions such as sales, returns and fees that make up the total payment amount. A2X takes this file, crunches the data in their secure system, rearranges the information to suit your bookkeeping needs, and posts it into your cloud accounting system as an invoice or a journal entry. When the payment arrives in your bank account, you can then easily reconcile the money received with the A2X settlement entry with just a few clicks.
Key Benefits of Using A2X
By organizing your financial information in this way, A2X ensures that your accounts are accurate, reconciled down to the cent, and easy to manage. Here are some of the main reasons why we love to work with A2X:
Uses the Accrual Accounting Method
In the world of bookkeeping, there are two ways of recording transactions: cash and accrual. The cash accounting approach records transactions when money changes hands, whereas the accrual method recognizes the same transactions when value is transferred. In a business where every transaction is paid upfront and no credit is given or granted, the method of accounting doesn’t really matter. However, once you need to factor in payment timeframes, accrual accounting becomes much more important.
While the accounting method that you use has a range of implications, one of the main benefits of accrual accounting is that it tends to increase the company valuation of ecommerce businesses.
“Compared to the accrual accounting method, cash accounting tends to under-represent profit levels in an FBA business, thus reducing the valuation offered to potential buyers.” Click here to read more from A2X.
In addition to this, having a clear set of accounts increases trust with potential buyers. We recently helped an Amazon merchant to sell their business for top dollar by using A2X to backdate the books and create a precise set of financial records. Click here to read the case study.
Allows Your Sales Data to Be Compared Across Channels and Time Periods
When settlement payments cover transactions from two different months, A2X splits the money received into two separate journal entries to ensure that transactions are recorded in the month when the income or expense was generated. This, combined with the use of the accrual accounting method, means that when you use A2X, you can accurately compare the performance of your Amazon or Shopify sales channel with other income streams in your business. In doing so, you can clearly understand whether you’re moving forwards or backwards, and how much each sales channel is contributing to the bottom line.
Ensures That You Pay the Right Amount of Sales Tax in Each State
Alongside helping to understand the number and value of sales you have made into each state, A2X also comes with a tool called WhereStock. This function gives you an accurate map of the inventory you have sitting in FBA warehouses in each state. By combining the amount of distance sales you’ve made into each state with the locations where your stock is sitting, you can gain a clear understanding of where your business has economic nexus.
In doing so, this provides the information you need to know in order to register for sales tax and pay the correct amounts over. We have found that other Amazon accounting connectors don’t usually offer this function, and the ones that claim to help with sales tax or VAT sometimes even result in businesses paying too much tax!
No matter whether you’re doing 10 transactions per month or 10,000 per day, the process of recording your marketplace activity with A2X is the same regardless of how big your business is.
Because A2X records each settlement as one (or two) journal entries, you don’t need to worry about workload increasing as your sales grow.
Offers a Reliable Team of Experts
Over the last 3 years, the team at A2X has been a dream to work with. Whenever we have experienced challenges or difficulties, they have been straight on our case and ready to help when we need it. And while prompt communication is a virtue in any business, what makes A2X unique is the caliber of their people. Their customer support staff is not only helpful at looking after technical queries, but most of them are also trained accountants, with plenty of bookkeeping and tax experience. As a result, they can help us provide the best possible service to our clients by giving accurate feedback and support whenever it’s required.
In addition, A2X invests in their product to ensure it continues to meet the ever-changing platforms software. At bookskeep, we have had the privilege to get to know the A2X founders at tradeshows we have attended. It is very important to us that our partners share our values. Honesty and data-driven behaviors are at the top of our list and we see this demonstrated in all of our interactions with A2X.
A Problem for One Company Creates a Solution for Many
Before A2X was a thing, the founders were running another company called ExportX (which they still operate today). This business represents New Zealand and Australian brands on Amazon marketplaces throughout the world.
At the time, they were experiencing challenges with accurately recording the sales transactions and settlement payouts in their accounting system. To solve their problem, they created a simple internal tool that pulled their Amazon Seller Central transaction data into their accounting system. One thing led to another, and after a range of extra developments, they decided to launch this new tool to the world in 2016 as A2X.
A2X vs. Other Alternatives
Competition is the lifeblood of business, and the ecommerce accounting space is no different. When A2X launched in 2016, they were in many ways, the pioneers of the accounting connector industry. As they grew larger and the opportunity to compete increased, other apps gradually made their way into the space.
Today, there are a wide range of accounting connectors that claim to accurately record your marketplace or online store sales in your accounting system. And while many of them are useful for specific groups of sellers, we have decided to stick with A2X for our clients.
- Many of the other apps on the market enter each transaction as a separate data entry, which isn’t scalable and can create accounting issues as you grow.
- Some of the apps we have encountered are known to result in clients paying too much tax (which is something that nobody wants).
- Most other accounting connectors are suited for only one platform or designed to meet the needs of just one marketplace or made for a specific type or size of seller. A2X is versatile and can be configured to practically any merchant’s needs - from small retailers to large international, omni-channel brands.
- A2X is a member of the Amazon Marketplace Developer Council, which means that they have the ability to help influence the future development priorities of Amazon’s Marketplace APIs.
At the end of the day, our job is to help online sellers succeed, and that means having accurate financials to work with. In this way, A2X takes care of the data entry so that we can focus on creating higher value outcomes for our clients.
How is Your Ecommerce Business Performing?
As ecommerce accountants, we understand what it’s like to be at the helm of an online business. You only have 24 hours each day, and there are more than enough tasks to keep you busy. From marketing to customer service and product development to sourcing, it can often be difficult to find the time to manage your accounts properly. And while finances are not necessarily an urgent task most of the time, they are certainly very important to get right.
bookskeep – Ecommerce Financial Solutions
That’s where we come in. If you’re ready to uplevel your ecommerce business by spending more time focusing on the work that actually moves the needle, then we may be able to help by looking after your bookkeeping. If you are struggling with cashflow and knowing how you’ll pay for your next inventory order, let us help you tame that cash-eating monster.
Click here to start the conversation if you would like to explore whether we might be a good fit for working together.
Interested in Profit First?
If your ecommerce business isn’t where you’d like it to be in terms of profitability, check out my book, Profit First for Ecommerce Sellers. It answers important questions about how to implement Profit First in an ecommerce business. Take control of your money and your business, and put Profit First to work for you!
You can also sign up for the Profit First for Ecommerce Sellers Online Course. As a Mastery Level, Certified Profit First Professional, I will teach you why Profit First works so well for ecommerce businesses and the particular challenges for businesses that have physical products requiring inventory management. You will learn how your behavior drives your money management habits for your business and how you can set up your business bank accounts to work with your habits.