Optimizing Amazon Vendor Agreements and Pricing
Transcription
Now that we are talking in accounting terms more than Amazon and vendor central terms, we can, again, look at a definition of a provision from your business’s point of view. A provision is the amount of an expense that a company elects to recognize. Now, before it has precise information about the exact amount of the expense for the Amazon provision for receivable.
show moreOr provision for missing actuals, you would need to record these provisions as sales allowances, marketing expenses, handing fees or inventory returns, a provision should be recognized as an expense when the occurrence of your related obligation is raised by Amazon. How would one normally then transact this provision from Amazon and their accounting software?
Normally, a provision is recorded in a liability account, which is typically classified on the balance sheet. As a current liability, the accounting staff should regularly review the status of all recognized provisions to see if there should be adjusted or reversed you as a vendor, knowing how and why Amazon calculates either provision.
Can also opt to transact these provisions in the account for which the agreement allowances or accruals for provision for receivables or your sales refunds for provision for missing actuals are normally transacted too, for example, if your agreement deductions with Amazon, for basic accrual damage allowance and freight allowance are normally allocated to the handling fees account, then place the provision for receivables here.
When the reversal of provision for receivables comes through on one of your Amazon remittances, you should then transact the reversal in the handling fees account as well. The two values should then cancel one another out.