The payout is booked as revenue
A single Amazon deposit contains charges, refunds, referral fees, FBA fees, storage, advertising, chargebacks, and reserve movements. Booked as one line, the month is unreconcilable by construction.
ERP by industry
Ecommerce is the industry where reported revenue and actual contribution diverge most, because a marketplace payout is a net figure containing a dozen deductions and almost everyone books it as one line.
Send a month of settlement files and your product costs. We will show you contribution after every deduction.
The problems
Every one of these is a consequence of settlement arriving as a net number and cost arriving as an invoice price.
A single Amazon deposit contains charges, refunds, referral fees, FBA fees, storage, advertising, chargebacks, and reserve movements. Booked as one line, the month is unreconcilable by construction.
The most common accounting error we find. It understates revenue and cost simultaneously and distorts gross margin in a way acquirers notice immediately in diligence.
A nine percent category return rate can contain a SKU at thirty-four percent that loses money on every unit shipped. The aggregate hides it indefinitely.
Marketplace advertising is functionally a cost of sale for the products it promotes and is nearly always booked in aggregate, which flatters every SKU equally.
Shopify, Amazon, wholesale, and TikTok each reading on-hand rather than available. The same unit gets sold twice and somebody finds out at fulfilment.
Marketplace settlement arrives on its own schedule, so the month cannot close until the last payout lands and somebody has decomposed it.
Where the money goes
A representative shape for a DTC and marketplace brand between $10M and $50M. Only one of these deductions is on the invoice.
Channel fees scale with the channel, so the channel taking the most out of each sale looks the cheapest when nothing is decomposed. That is exactly backwards, and it is why sellers routinely discover that their highest-volume marketplace is their lowest-margin one — usually during a diligence process rather than during a planning cycle.
Your stack
Shopify, Amazon, and your 3PL keep running. What changes is that the numbers behind them stop being assembled by hand.
Benchmarks
Drawn from our own engagements with ecommerce brands between $10M and $50M. The bar is a typical erp.io customer after two quarters; the marker is the segment median.
Almost every finance problem an ecommerce brand has traces back to settlement being booked as a net figure. Revenue is wrong, cost is wrong, gross margin is wrong, and none of it is wrong by enough to be obvious — it is wrong by fifteen or twenty points in a way that looks plausible.
Breaking each payout into charges, refunds, disputes, fees, adjustments, and reserves, and matching each back to the order that produced it, is the foundation everything else needs. It is tedious, entirely mechanical, and it is the work.
Aggregate return rate is close to useless. A category at nine percent can contain products at thirty-four, and those products are frequently the ones with the strongest revenue growth, because a heavily promoted product that does not match its listing sells and comes back.
Matching returns to the original order and SKU, with reason codes where the channel supplies them, is usually the first thing customers act on after a decomposition. It is also the finding most likely to change a merchandising decision rather than an accounting one.
For most DTC brands, advertising is the largest single deduction after cost of goods and it sits in marketing expense as one number. Attributing it to the products it promoted — where the channel reports at campaign or SKU level — changes the contribution ranking substantially.
The uncomfortable version of this finding is that the products with the best gross margin are frequently the ones absorbing the most advertising to move, and their contribution ranking is considerably worse than their gross margin ranking suggests.
If you need a warehouse management system as your system of record, or you manufacture your own products with multi-level bills of material, we are not it. Brands operating in many countries with local VAT registration and filing obligations should look at NetSuite. We handle the financial side of ecommerce well and we do not pretend to handle the operational side.
Questions
Send a month of settlement. We will decompose it and show you contribution after every deduction.