5 Tips to Calculate Amazon FBA Profit Accurately

Growing Amazon business is a fantastic opportunity, and the more it grows, the more closely you must watch its profitability. If you want to earn real money, your fight for big sales numbers must not ultimately end up getting the wrong end of the stick.

If you suddenly realize that your sales grow, but your profits don’t, that may be a warning sign. If that’s the case, it’s time to improve your profitability by analyzing your expenses and operations to identify areas where you can reduce costs or increase efficiency. This post gives you five tips on accurately calculating your Amazon FBA profit.

1. Understand FBA Fees and Costs

One of the most important factors to consider when calculating your FBA profit is understanding the fees and costs associated with using Amazon's fulfillment service. Amazon charges a variety of fees, in total, over 70 different ones. 

These fees include referral fees, fulfillment fees, and storage fees. Referral fees are a percentage of the sale price of your item, and fulfillment fees are charged based on the weight and size of the item being sold. Storage fees are charged monthly for items held in Amazon's warehouses for an extended period. To accurately calculate your FBA profit, it's essential to take into account all of these fees and costs. That is necessary to understand your true profitability.

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How to calculate FBA Fees and Costs?

When you accurately calculate your Amazon FBA profit, you'll better understand how much money you're actually making from each sale. To precisely account for all the numerous Amazon fees, you can use the FBA calculator tool, which will give you an estimate of the fees associated with selling a particular product. 

‍Tip. A popular tool to calculate FBA fees and costs is Seller Assistant App’s FBA&FBM Calculator. This browser extension appears on your Amazon product page and immediately shows all parameters you need to see. With this tool, you can account for all Amazon fees based on your Cost of Goods, sales tax on Cost of Goods, Amazon referral fees, FBA fees, VAT, monthly storage costs, and third-party logistics costs. You can calculate ROI and Profit Margin and estimate product sales. In addition, this extension allows exporting analyzed information to Google Sheets in one click. It can help you make informed decisions about pricing, inventory management, and other critical business decisions.

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2. Factor in Prep and Shipping Costs

In addition to FBA fees, you'll need to factor in the cost of prepping and shipping your products to Amazon's warehouses. Though FBA is a great solution that relieves sellers from a big part of the fulfillment hassle, you still must deliver them to the Amazon fulfillment center. Before you can send products to Amazon, you must prepare and package your products according to Amazon's requirements. If that’s not done, Amazon may return the shipment or repackage your product and charge you for that. After you’ve prepared and labeled your products, you must select a shipping carrier and send your products to the Amazon fulfillment center. All these services come with a cost. 

If you sell a few products, you can label and package orders on your own. However, you must ensure everything is done per Amazon’s prep standards. But if you sell many products and want to scale your sales, preparing your inventory will take essential time and effort. That is why many sellers use FBA prep centers to streamline their business. The cost of their services must be accounted for.

Also, you must not forget the cost of shipping your products to Amazon’s fulfillment center. It will depend on various factors, including the weight and size of your products, the distance they need to be shipped, and the shipping carrier you use.

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How to calculate Prep and Shipping Costs?

To accurately calculate your FBA profit, be sure to factor in the cost of prepping and shipping your products to Amazon. That can be done with the Amazon logistics calculator. 

‍Tip. You can use Seller Assistant App’s Amazon Fees and Logistics expenses calculator to do that. It helps calculate third-party logistics costs (shipping costs and preparation expenses, including extra costs on fragile products) and estimate the product’s profit, margin, and ROI. Logistics costs can be configured in the settings.

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3. Keep Track of Inventory Costs

Another critical factor to consider when calculating your FBA profit is the cost of your inventory. That includes the cost of purchasing the products you're selling and any additional costs associated with storing and managing your inventory. 

Effective inventory management reduces costs by optimizing stock and adequately managing inventory levels. You can avoid such problems as extra storage costs due to overstocking or lost sales opportunities related to understocking products. Managing your stock also helps identify stranded inventory — products in Amazon’s warehouse that lost connection with an active listing that customers can’t buy. Since Amazon charges you for their storage, detecting them is essential. In addition, you must remember to track and remove from Amazon fulfillment centers aged inventory remaining in stock for an extended period without selling because Amazon charges additional storage fees.

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How to effectively manage your inventory?

To accurately calculate your inventory costs, you can use inventory management tools. A reliable Amazon inventory management system ensures demand forecasting, alerts you when you run high or low on stock, enables barcode scanning, and tracks all necessary product information.

‍Tip. We recommend using SoStocked. It’s a fully customizable Amazon inventory management and forecasting software that applies a new forecast algorithm. With SoStocked, you can control your main Amazon inventory management forecasting seller pains: over-ordering, under-ordering, ordering late, transferring late, tracking orders and payment, juggling spreadsheets, managing bundles, following up on purchase orders, multiple marketplaces, and avoiding costly warehouse recounts.

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4. Deal with Amazon Returns

Amazon returns can significantly impact an Amazon seller's profitability, as returns can result in increased costs, decreased revenue, and reduced customer satisfaction. Increased costs due to the returns are generated because when a customer returns a product, the seller is responsible for covering the cost of return shipping and any restocking fees charged by Amazon. Also, the seller loses out on the revenue from the sale. Additionally, if the product is damaged or cannot be resold, the seller may have to dispose of it, resulting in a complete loss of revenue.

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How to deal with Amazon returns?

Sellers must closely keep track of Amazon returns and try to minimize the return rate to avoid extra costs negatively affecting profitability.

Methods to keep track of the returns:

• Use the Amazon Seller Central dashboard to monitor returns and refunds;
• Set up notifications to receive alerts when a return is requested or initiated;
• Use software tools designed to help sellers manage returns and automate the process;
• Regularly review customer feedback and ratings to identify any issues with products or services that may be contributing to returns;
• Keep detailed records of all returns and ask for reimbursement on eligible products.

Methods to reduce Amazon Return Rate

• Optimize product description to avoid misinformed purchases or false expectations leading to returns;
• Show products from all angles; add multiple high-quality pictures to a listing;
• Use product videos to familiarize buyers with the product better;
• Deliver orders on-time since late delivery is one of the significant return reasons;
• Properly package products to avoid damage; 
• Track product reviews to know the reasons for returns and correct them.

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5. Get Reimbursed for Amazon FBA Errors

As an Amazon FBA seller, you may occasionally encounter errors or discrepancies in your inventory or shipping that result in financial losses. Sometimes, Amazon may be responsible for these errors, and you may be eligible for reimbursement. You must keep an eye on these errors to maintain your profitability.

To get reimbursed for FBA errors, identify the error, and file a claim with Amazon's Seller Support team. You can do this by navigating to the "Contact us" page in your seller account, selecting "Fulfillment by Amazon" as the issue type, and then provide details of the error and any supporting documentation. After filing a claim, if you don't receive a response or resolution within a reasonable timeframe, follow up for an update.

What are the typical Amazon FBA errors?

• Products charged at a higher dimension or weight;
• Items lost or damaged in the Amazon warehouse;
• The customer received a refund for more units than returned;
• Missing inventory after a return;
• Restocking fee not credited;
• Customer refunds for items that were never returned;
• Overcharged fees for commission categories.

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Final Thoughts

Selling on Amazon can be a profitable business venture, but understanding the fees associated with Amazon's FBA program is crucial to calculate your profits accurately. FBA fees can include storage, handling, and shipping costs, so it's essential to calculate your Amazon FBA profit accurately.

‍Seller Assistant Аpp will help you with this task. This all-in-one extension incorporates all features vital for product research. Seller Assistant App shows your product’s profit, margin, and ROI. It also helps you immediately see if a product has any sales restrictions or has previously previously triggered problems with account health. It is an all-in-one extension incorporating features vital for product research. It combines an FBM&FBA profit calculator, Quick View, Stock Checker, and Restrictions Checker in one tool.