Running the account: metrics, money, returns

Selling is the interesting part; operating is the part that determines whether you are still here next year. An account is closed not because of one catastrophe but because four numbers drifted while somebody was busy sourcing. This lesson is about noticing.

The numbers Amazon watches

Amazon publishes performance targets in the Account Health section of Seller Central, alongside an Account Health Rating that summarises policy compliance. The targets sellers are measured against are: order defect rate below 1%, late shipment rate below 4%, pre-fulfilment cancellation rate below 2.5%, and valid tracking rate above 95%.¹

Three observations that save accounts. First, these are rates, so a small seller's single bad order moves the number far more than a large seller's does — early months are the fragile ones. Second, cancelling your own orders because you oversold is entirely within your control and entirely visible. Third, if you use Amazon's fulfilment, most of these are Amazon's problem; if you ship yourself, they are yours, which is the real cost of that choice from lesson 10.

Returns and A-to-z claims

Returns are a cost of selling, not a sign of failure, and the useful response is to read them. A cluster of “not as described” returns is a listing problem you can fix in an afternoon. A cluster of damage returns is a packaging problem. A cluster of “no longer needed” is usually nothing at all.

An A-to-z Guarantee claim is different: a customer asking Amazon to intervene. Claims can affect your order defect rate, and the way to keep them rare is unglamorous — answer messages quickly, ship when you said you would, and resolve the obvious cases yourself before the customer escalates. A refund you grant is cheaper than a claim you lose.

Reconciling the money

Amazon does not pay you per order. It pays a settlement: a period's sales, minus referral fees, fulfilment fees, storage, refunds, advertising and adjustments. The number that lands in your bank account has been through a dozen deductions, and if you never open the settlement report you are running the business on a feeling.

1. Download every settlement report and keep them where your accountant can reach them.
2. Match the deposit to the report, then the report's fee lines to what you expected from lesson 1's unit economics. Disagreements between the two are where your model is wrong.
3. Watch the reserve. Amazon can hold a portion of funds; a deposit that seems small is often a reserve, not an error.
4. Treat inventory as an asset, not an expense. Money spent on goods you have not sold is not a cost this month, and treating it as one makes a profitable business look like a failing one.
5. Reconcile monthly, not annually. Twelve small reconciliations take less time in total than one large archaeological dig.

Insurance, when the threshold arrives

Amazon's Business Solutions Agreement requires sellers to carry commercial general liability insurance once monthly gross proceeds pass the threshold stated in the agreement, with minimum coverage limits and Amazon named as an additional insured. The exact threshold, the coverage limits and the time you have to put the policy in place are in the agreement itself, in Seller Central.² Read it there rather than in a summary, including this one — the agreement is what your account is held to.

Two practical notes. Insurers who deal with marketplace sellers know the requirement and can issue a certificate naming Amazon correctly, which matters because a policy that does not name them correctly does not satisfy the requirement. And the certificate needs to be uploaded, not merely purchased.

Bookkeeping that survives a year end

• One account for the business, from lesson 4, so the statement is the record.
• A file per month: settlement reports, supplier invoices, freight and customs documents, advertising invoices.
• Inventory counted, because your tax position depends on what you hold, not only on what you spent.
• Software that connects to the marketplace if the volume justifies it; a spreadsheet is fine while it is not.
• A CPA who has seen a marketplace seller before, from lesson 5, and the Form 5472 deadline from lesson 2 in the calendar.

Mistakes that end accounts quietly

• Not looking at account health for a month. Rates drift, and the warning arrives after the damage.
• Cancelling orders because you oversold. Entirely self-inflicted and entirely measured.
• Shipping without valid tracking. It is a metric of its own.
• Ignoring buyer messages. Slow replies turn small problems into claims.
• Never opening a settlement report. Your margin is a guess until you match it to one.
• Treating inventory as an expense. It distorts every decision you make from the numbers.
• Buying insurance but not uploading the certificate, or one that does not name Amazon as required.

Next

Lesson 13 is growth: what to delegate, what to automate, how to add products without running out of cash, and when private label starts to make sense.