Complete the Previous Month's Accounting Tasks

Step #1: Close Month

Step #2: Post Gross Profit Statement Journal Entries

1. JE #1: Product Revenue & AR
   

Total product sales for the month are recorded as a debit to an AR account and a credit to the product revenue account for each respective sales channel.

1. JE #2: Shipping Revenue & AR
   

Total shipping revenue for the month is recorded as a debit to an AR account and a credit to the shipping revenue account for each respective sales channel.

Product costs are recorded as a debit to the various product cost of goods sold (COGS) accounts with a corresponding credit to inventory.

COGS for shipping the month's orders are debited to various shipping COGS accounts with the corresponding credit going to an accounts payable (AP) shipping account. It is expected that the user will then apply all vendor payments for such shipping costs to this same AP shipping account to offset the liability of shipping cost payable recorded in this account with this JE.

All sales channel fees that can be attributed directly to invidual orders are included in this JE and recorded as a debit to Fees COGS for each sales channel. In addition, the user has the option under Settings > Fees to also allocate any indirect sales channel fees to the gross profit of individual orders and therefore also be included in this JE for Fees COGS. The corresponding credits for all fees are charged to the AR account of the respective sales channel to reduce the amount owed to the seller as these fees are paid by the sales channel and they reduce the amount owed to the user. If the user elects to have indirect fees, advertising costs or other expenses that are deducted from a marketplace payout recorded as operating expenses in their GL, they will still be included in this JE but the user should manually edit the GL account number in Settings > GL Account Settings to change it from the COGS account number to an operating expense account number. 

There are circumstances when balance sheet transactions are run through sales channels and adjust the amount of the payments made to the seller. This includes transasctions such as loans from Amazon to the seller, as well as related loan payments back to Amazon. MarginDriver identifies these transactions, includes them in this JE and then applies the sum to one common balance sheet account. The user will needs go into this account in the GL and allocate the entries to the appropriate balance sheet accounts. An exception are adjustments to inventory which are handled separately in JE #7.

1. JE #7: Inventory Adjustments & AR
   

Amazon's FBA program takes control of a seller's inventory and assumes responsiblity for fulfilling the seller's orders. If the inventory is lost, damaged or recovered by Amazon, adjustments to the Amazon payout to the seller may be in order. MarginDriver identifies these balance sheet transactions in the Amazon Settlement Reports and includes them in this JE as a debit or credit to inventory and AR.

1. JE #8: Sales Tax US and VAT AR
   

Sales tax and value-added tax (VAT) collected from the seller's customer (and included in the sales channel's payment to the seller) is the responsibility of the seller to remit to the appropriate taxing authority. This collected tax is the only sales tax and/or VAT that MarginDriver records in this JE and it is therefore recorded as a debit to the AR account to include it in the AR balance and a credit to a tax liability account. 

It is recommended that users review the Gross Profit Statement before sending it off to their general ledger.  To do so, users need to simply click on the box in the middle of Task #2 titled:   

  

Step #3: Complete AR Reconciliation

Reconciliation Differences

1. Timing: MarginDriver pulls data through APIs from various sales channels and payment processors to determine the amount due to the user for each order. The payments for these orders are pulled from the same sources to determine what has been paid and what remains unpaid at the end of each month. Sometimes the actual payment amount will differ from the original estimated amount due. In such cases, MarginDriver updates the original estimated amount due in AR Order Tracking to agree with the actual payment amounts. This adjustment is only available to orders from months that have not been closed for accounting purposes. If there are differences in orders from closed accounting months, they are considered "timing differences" and they show up in the following month's AR reconciliation. 
   
2. Currency Conversion Timing: This is similar to the Timing difference discussed above but it's the result of fluctuations in currency conversion rate rather than purely the timing of the payout. Estimated amounts due for orders placed using foreign currencies are calculated using the currency conversion rate in effect on the day the orders was placed. However, more often than not, the currency conversion rate in effect at the time of the payment is different. In such cases, MarginDriver will update the original estimated amount due in AR Order Tracking to reflect the change in currency conversion rate. Again, this only applies to orders in months that have not been closed for accounting purposes. If the month has been closed, the difference is designated as a currency conversion timing difference and it shows up in the following month's AR reconciliation. 
   
3. Undisclosed Deposit Adjustments: Most deposits from third parties require adjustments for various non-order-specific costs such as advertising, subscription fees, loans, etc. But there are instances where small unidentified (not itemized in the payment statement) adjustments occur which increase or decrease the deposit amount. MarginDriver runs these unidentified deposit adjustments through the the AR reconciliation difference.

AR Reconciliation Table

1. Account Transactions: The View boxes in this column can be clicked on to display all of the transactions for this AR account in the user's GL. This is designed to save the user considerable time going back and forth between the MarginDriver table and their GL software to review each AR account's activity. 
   
2. GL Account Name: self-explanatory
   
3. Account Identifier: GL account number
   

1. General Ledger Balance: The column displays the GL balance for each AR account at the end of the month. The transactions for the month that generated this balance can be viewed by clicking on the View button in the Account Transactions column.
   
2. Deposit in Transit (DIT): This column displays any deposits from third parties that were issued before the end of the month but did not appear in the user's GL until the following month. For example, if Amazon dates a payment on the last day of the month, it will be applied to the AR balance for that month. However, the deposit may not hit the user's bank account or GL until the first few days of the following month.  In such cases, the calculated amount due to the seller at the end of the month will be less than the AR amount in the user's GL by the amount of this deposit in transit. Therefore, this deposit becomes a reconciling item and is automatically identified as a DIT by MarginDriver and placed in the second column. The DIT automatically reduces the GL balance to facilitate proper reconciliation with the Third Party Balance. 
   
3. GL Balance Less DIT (1-2): This column displays the result of subtracting any DIT amount in column two from the GL balance in column one to arrive at a GL AR balance that has been adjusted for any deposits in transit. 
   
4. Third Party Balance: The amount due from each third party at the end of the month. MarginDriver calculates this balance itself relying on financial data retrieved directly from the third parties' APIs. These month-end third party AR balances can also be viewed on the respective Payment Reconcilation & AR Tracking pages along with the list of orders supporting the calculation of the balance. 
   
5. GL & Third Party Difference (4-3): This column displays the difference between column three (GL Balance Less DIT) and column four (Third Party Balance).
   
6. Journal Entry Amount: This column replicates the difference between columns four and three that is also displayed in column five. But the value in column five represent the amount by which the AR account will be adjusted through a journal entry. This JE is necessary to adjust the AR balance from column three to agree with the third party amount due in column four. 
   
7. GL Balance Adjusted To Equal Third Party: The last column displays the new GL AR account balance after the JE from column six has been posted. 
   

Step #4: Post AR Reconciliation Journal Entry