Amazon FBA inventory costs can quietly make or break your profits if you are not tracking them correctly. From landed costs and storage fees to lost or damaged units, small gaps in tracking quickly turn into distorted margins and bad decisions. This article breaks down how to track inventory costs the right way, so you always know what each sale is earning you.
Why Accurate Inventory Cost Tracking Matters for Profitability
Accurate inventory cost tracking directly affects how profitable your Amazon business really is. If you do not know your true cost per unit, you cannot price products with confidence or plan growth correctly. Many sellers focus only on sales revenue and ignore the expenses tied to inventory.
This is why Amazon sellers’ accounting becomes critical for clear financial decisions. Inventory costs include product cost, shipping, duties, storage fees, and Amazon fulfillment charges.
When these costs are incomplete or outdated, your profit reports become misleading. You may think a product is performing well when it is slowly losing money. When you track inventory costs accurately, you gain control over margins, forecasting, and long-term profitability.
How to Calculate Landed Cost Per Unit
To calculate landed cost per unit, you need to account for every cost required to get your product ready for sale. This includes the supplier price, shipping from the manufacturer, customs duties, freight, and prep costs. Add all these expenses together to get the total shipment cost.
Then divide that number by the total units received. This final number is your landed cost per unit. If you skip even one expense, your margins will be inaccurate. Businesses rely on this number to price products correctly and plan reorders. Accurate landed costs protect your profit and cash flow.
How Amazon FBA Fees Impact Inventory Costs
Amazon FBA fees have a direct impact on your inventory costs and your true profit. These fees include fulfillment, storage, removal, and long-term storage charges. If you ignore them, your cost per unit will look lower than it really is. As a business owner, you need to treat FBA fees as part of inventory, not just selling expenses.
Fees change based on product size, weight, and season. This means your costs can increase without warning. When you track FBA fees accurately, you can price products correctly, avoid margin erosion, and make smarter restocking decisions.
How to Track Inventory Costs Across Shipments and Restocks
Tracking inventory costs across shipments and restocks requires consistency and clear records. Each shipment often has different product costs, shipping rates, and fees. If you average everything together, your numbers quickly become inaccurate. You should track costs by shipment, not by product alone.
Record unit cost, freight, duties, and prep fees for every restock. Then update your cost per unit as inventory sells through. This helps you see which batches are profitable and which are not. Accurate tracking across shipments protects margins and improves purchasing decisions.
How to Account for Storage, Removal, and Disposal Fees
Storage, removal, and disposal fees are often overlooked but directly affect your inventory costs. Amazon charges monthly storage fees and higher rates during peak seasons. Removal and disposal fees apply when you pull slow-moving or unsellable inventory from FBA.
If you do not track these costs, your profit reports will be incomplete. It is your job to assign these fees to the inventory they relate to. This gives you a clearer cost per unit. Accurate tracking helps you spot aging inventory, reduce waste, and make better restocking and pricing decisions.
How Returns, Lost, and Damaged Inventory Affect Costs
Returns, lost units, and damaged inventory quietly increase your true costs. When a product is returned, you often pay fulfillment and processing fees again. Lost or damaged inventory reduces sellable units but keeps the original costs intact.
If you ignore these events, your profit numbers will be overstated. You need to track these losses separately and assign them back to inventory costs. This shows which products carry a higher risk. Clear tracking helps you adjust pricing, improve sourcing decisions, and protect your margins over time.
How to Track Inventory Costs Using Spreadsheets or Accounting Software
You can track inventory costs using spreadsheets or accounting software, depending on the size of your business. Spreadsheets work well when you have a small catalog and few shipments. You manually record unit cost, shipping, fees, and adjustments. This gives you full control but takes time and discipline.
As your business grows, accounting software becomes more reliable and scalable. This is where Amazon sellers’ accounting plays a key role in keeping data accurate across inventory, sales, and fees. Software reduces errors, saves time, and improves reporting.
The most important thing is consistency. When your data is clean and updated, you can trust your profit numbers and make better decisions.
How to Build a Reliable Inventory Cost Tracking System
Building a reliable inventory cost tracking system starts with consistency and discipline. You need a clear process for recording every cost tied to your inventory. This includes product cost, shipping, Amazon fees, storage, returns, and losses.
Track costs by shipment, not by estimates or averages. Use the same method every month so your data stays comparable. Choose tools that match your business size and update them regularly. Review your numbers often, not just at tax time.
When something looks off, investigate it early. A reliable system gives you confidence in your pricing and restocking decisions. It also helps you protect cash flow and avoid hidden losses.
As a business owner, accurate inventory tracking is not optional. It is the foundation for understanding real profitability, scaling safely, and running your Amazon business with control instead of guesswork.
