Getting your costs right when importing goods into the EU
As Accountants for Amazon Sellers and Ecommerce Businesses, one of the biggest mistakes that we see new businesses, especially overseas sellers importing goods into the EU, make, is that they do not calculate their costs properly before shipping their goods into Amazon’s FBA warehouses.
This guide will break down each of the things that you should consider, when shipping a product into Amazon, in order to try to give you a better understanding of which taxes and costs will go into each product based on your final sales price.
We have a basic calculator, created in association with Online Seller UK, that can be used to help calculate your costs. If you are based in the UK and looking to learn more about ecommerce then make sure you check out Online Seller UK today.
You can find the calculator HERE.
Accountants for Amazon Sellers
If you are an Amazon Seller or a drop shipper and are looking for an accountant, whether it is to register for VAT, form a UK limited company or something else, then you should get in touch with us today.
The Product Cost
This is probably the most obvious cost that goes into a product, but we’re including it here as it’s the first thing that goes into column B/C of the calculator… The actual cost of each unit itself.
Put the cost per unit into column C.
When you import goods into a country you will usually pay some form of import duty.
Amazon FBA Fees
This is a big one that has changed a lot recently (since Amazon introduced their monthly, rather than bi-annual, FBA fees). If you aren’t aware of how FBA fees work, these are totally dependant on the size and weight of the goods (including packaging). For a full breakdown of how much you could be charged, you can look at Amazon’s FBA fee breakdown here.
Put this figure in column I.
Amazon Sales Commission
Not only does Amazon charge their FBA fee, but they also charge sales commission as a percentage of your sales price. This percentage is usually 15%, however, can range from between 6% and a whopping 45%!
They make it a little difficult to find, but you can see a full breakdown of their referral percentages.
Figure out which category your product should be listed in and then put the percentage in cell H7 and then the cells below that will automatically calculate how much Amazon will charge you per sale, based on their commission and your final sales price.
VAT (also known as Sales Tax)
Each country within the EU has its own rate of sales tax. We have provided a breakdown of the VAT rates on the VAT Rate sheet/tab of the calculator.
Locate the rate that you need from this list and then put that figure in cell F7, this should automatically update any formulae on the sheet.
Amazon Sponsored Ads (PPC)
If you want to sell on Amazon then you know that you need to be aware of Amazon PPC. Some people kid themselves into thinking that they are profitable because their sales are soaring, however since the PPC costs are deducted separately and data can be delayed, sometimes they can be completely wrong.
Calculating the exact cost per product sold is probably an article worth discussing in itself, but for now, ensure you aren’t ignoring Amazon PPC and put in your estimated PPC cost in column J.
Shipping and Delivery to Amazon’s FBA warehouses
Another crucial part of valuing your goods is actually getting them to Amazon’s warehouses. This can be a tough cost to calculate if you are at the very early stages of product selection.
If you are at the early stages we suggest putting something slightly overpriced in here, it is better to think that a product will have a worse profit margin and be pleasantly surprised later, than vice versa!
If you are at the later stages of product selection then we would recommend speaking to your supplier and getting them to give you an estimate as it is likely they have shipped to Amazon FBA before.
Put these figures in column K.
Once you have put these figures into the calculator, your calculation will be complete. If you scroll along to column P you should see the estimated profit per unit (after taking all of these costs/taxes into account).
Amazon FBA Accountants
We appreciate that this is only a basic tool, but hopefully, it will help new sellers who are reading this avoid making costly mistakes by not considering everything that goes into the final sales price on Amazon.
We are accountants who specialise in working with Amazon FBA Sellers. If you are an Amazon Seller and are looking for an accountant, or if you have any accounting questions, such as about VAT or on Limited Companies then please be sure to get in touch and find out how we can help you.
P.S If you want to learn more about Ecommerce then you should definitely check out Online Seller UK. They run courses all around the UK that focus on helping online and ecommerce businesses get off the ground.