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15
MINUTE READ TIME
Published
March 28, 2024
|
Karen Balbuena
|

5 Expert Strategies to Conduct FBA Audits for Sellers, Agencies, and Aggregators

5 Expert Strategies to Conduct FBA Audits for Sellers, Agencies, and Aggregators

Table of Contents

As an Amazon seller, auditing your entire FBA business is crucial for achieving sustained growth, maximizing profitability, and ensuring operational efficiency. Conducting a comprehensive FBA audit allows you to identify areas of improvement, optimize processes, and address any inefficiencies that may be hindering your success on Amazon.

Whether you’re a seasoned seller or just starting out, regularly reviewing your FBA business can uncover valuable insights into your performance, inventory management, pricing strategies, and customer satisfaction.

By diving into your business's internal processes, you can make informed decisions to enhance your overall performance and stay competitive on Amazon. 

In this guide, we’ll explore the importance of FBA auditing and provide actionable steps to help you run a thorough assessment of your Amazon business for long-term success.

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What is a Business Audit?

Auditing your Amazon FBA business involves conducting a comprehensive review and analysis of various aspects of your operations to ensure accuracy, efficiency, and compliance. This process includes examining financial records, inventory management practices, sales performance, customer feedback, and adherence to Amazon’s policies and guidelines.

By auditing your FBA business, you can identify aspects needing refinement, uncover potential issues or discrepancies, optimize processes, and make data-driven decisions to take your ecommerce game to a higher level.

Additionally, auditing helps ensure that your business is operating in line with Amazon’s requirements, minimizing the risk of penalties or account suspensions. Overall, auditing your Amazon FBA business is essential for maintaining a healthy and successful ecommerce operation.

RELATED: 7 Top Amazon Metrics Sellers Should Track

5 Categories of FBA Audit

Person using macbook pro

Knowing the categories of an FBA audit is vital for you to evaluate different areas of your business operations systematically. These different audits can help identify issues in inventory, seller fees, shipping, returns, and compliance, enabling targeted improvements.

  1. Financial Audit: Reviewing financial records, transactions, and expenses to ensure accuracy, identify discrepancies, and assess overall financial health.
  2. Inventory Audit: Examining inventory levels, stock movements, and storage fees to optimize inventory management, prevent stockouts or overstocking, and minimize storage costs.
  3. Operational Audit: Assessing operational processes, including purchase ordering, customer order fulfillment, shipping, customer service, and returns management, to identify inefficiencies and streamline operations.
  4. Compliance Audit: Ensuring compliance with Amazon’s policies, guidelines, and performance metrics to prevent account suspensions or penalties and maintain good standing on the platform.
  5. Performance Audit: Analyzing sales performance, product metrics, ad spend, customer feedback, and competitor analysis to identify opportunities for growth, improve product listings, and enhance overall performance on Amazon.
RELATED: Amazon Inventory Risks + 5 Tips to Mitigate Them

Amazon Audit Checklist

When running an FBA business audit, pay attention to several major areas known for errors or discrepancies, including:

  • FBA Fee Errors: Check for incorrect or overcharged fees, such as fulfillment fees, referral fees, storage fees, or subscription fees.
  • Inventory Discrepancies: Look for discrepancies in inventory levels, including missing, damaged, or lost inventory, discrepancies between physical and reported inventory, or inaccurate inventory counts. 
  • Unclaimed Amazon Reimbursements: Amazon frequently makes errors that result in owed reimbursements to sellers like you, encompassing various issues such as lost or damaged inventory, customer-damaged returns, overcharged fees, fulfillment center errors, and mishandled promotional credits. Despite Amazon’s automated detection processes for some of these issues, it’s imperative for you to take a proactive approach in claiming all eligible reimbursements to avoid potential financial losses.
  • Order Fulfillment Issues: Identify errors in order fulfillment, such as late shipments, missing items, incorrect orders, or shipping errors.
  • Account Health Metrics: Review account health metrics provided by Amazon, such as performance metrics, policy violations, or customer feedback, to ensure compliance and identify areas for improvement.
  • Financial Records: Analyze financial records, including sales data, transaction records, and expense reports, to identify any discrepancies, irregularities, or unauthorized charges.
  • Product Listing Errors: Check for inaccuracies or issues with product listings, including incorrect product information, missing details, or violations of Amazon’s listing policies.
  • Customer Service Complaints: Review customer feedback, reviews, and complaints to identify any recurring issues, patterns, or areas for improvement in customer service.

By identifying and addressing these errors or discrepancies during an Amazon business audit, you can improve operational efficiency, ensure compliance, and optimize profitability.

RELATED: Freight Forwarder Fees Checklist

How to Audit Your FBA Business

Here’s a step-by-step guide to auditing your FBA business across key areas: FBA Reimbursement Audit, FBA Rankings Audit, FBA Ad Spend, FBA Inventory Audit, and FBA Audits Using Machine Learning.

These audits might seem overwhelming, but it doesn’t have to be if you start with audits that bring immediate impact to your profits - FBA Reimbursement, FBA Ranking Audits, and FBA Ad Spend. Carbon6 recently added a 3-part audit for customers that cover these areas. Sign in or Sign up for a free Carbon6 account, and your personalized audit results will be ready under the "Audits" menu.

PRO TIP

1. FBA Reimbursement Audit

Ensure you’re not leaving money on the table with unclaimed reimbursements. Key areas to focus on include lost or damaged inventory, customer return issues, overcharged fees, fulfillment center errors, destroyed inventory fees, and unapplied promotional credits. Use Amazon’s reimbursement reports and consider using automated tools like Seller Investigators (SI) to streamline the process.SI covers the following Amazon reimbursement cases:

  • Inbound Shipments: Identify and claim reimbursements for canceled shipments, receiving discrepancy, and inbound shipment damaged by carrier.
  • Lost Items: Lost in transit, lost in the warehouse, and unfair reimbursement (you’re not adequately compensated for lost or damaged inventory due to errors in Amazon’s fulfillment processes).
  • Damaged Items: Damaged item in the warehouse, any item mistakenly disposed of by Amazon, and unfair reimbursement.
  • Customer Returns: Refunded orders (not returned within 60 days), customer refunded more than paid, wrong item returned, chargeback not refunded.
  • Overages and Discrepancies: Removal Orders, incorrect weights and dimensions, and overcharged orders.

Get your free audit today!

2. FBA Rankings Audit

Evaluate the performance of your product listings in Amazon’s search results by following these tips:

Keyword Analysis

Identify the keywords relevant to your products and check their ranking positions in Amazon search results. Use tools like Amazon’s search bar autocomplete, third-party keyword research tools, or Amazon’s advertising platform to gather data on keyword performance.

Competitor Analysis

Analyze the ranking positions of your competitors for the same keywords. Note their strategies, such as product titles, descriptions, and pricing, to understand how they are achieving higher rankings.

Product Listing Optimization

Review your product listings and ensure they are optimized for relevant keywords. Optimize product titles, bullet points, descriptions, and backend keywords to improve search visibility.

Highly effective brands on Amazon often thrive beyond the platform, typically by maintaining a strong social media presence. If you’re active on social media, use ContentPlus by Carbon6 to repurpose your content for Amazon posts. These offer broader organic exposure and provide flexibility in content creation. Moreover, you can streamline your efforts by scheduling Amazon posts, seamlessly integrating them into your selling strategy on the platform.

PRO TIP

Reviews and Ratings

Monitor your product reviews and ratings. Positive reviews can boost your ranking and credibility, while negative reviews can have the opposite effect. Address any customer concerns promptly to maintain a positive reputation.

RELATED: How to Get Customer Reviews on Amazon

Sponsored Ads

Consider running sponsored ads campaigns to increase visibility for your products, on and off Amazon. Consider using external Amazon ad platform PixelMe for monitoring the performance of your ads, adjusting bidding strategies and (re)targeting options to maximize ROI.

if you are driving external traffic to Amazon, Carbon6’s 3-part audits will help you identify ASINs with high ROI. Sign in or Sign up for a free Carbon6 account to get started.

PRO TIP

Monitor Changes

Regularly monitor changes in your product rankings and adjust your strategies accordingly. Amazon’s algorithm and competitor landscape are dynamic, so staying proactive is essential for maintaining and improving your rankings over time.

3. FBA Ad Spend

Conducting an FBA Ad Spend Audit is crucial for optimizing your advertising efforts on Amazon. One key aspect is calculating your Advertising Cost of Sales (ACoS), which measures the ratio of ad spend to attributed sales.

(Total ad spend / Total sales) * 100 = ACoS

A lower ACoS indicates more efficient ad spending. For instance, if you spent $100 on ads and generated $500 in sales, your ACoS would be 20%.

Additionally, assessing Return on Ad Spend (ROaS) is vital. ROaS quantifies the revenue generated for every dollar spent on advertising. A higher ROaS signifies better ad performance. 

AdSpend / RevenuefromAds = ROaS

For example, if you spent $100 on ads and generated $500 in revenue, your ROaS would be 5x.

RELATED: How To Optimize Amazon Attribution – the Secret to Off-Amazon Marketing

To perform an FBA Ad Spend Audit, start by gathering data on your ad spend and sales attributed to advertising campaigns. Then, determine your ACoS and calculate return on ad spend for each campaign. Compare these metrics to industry benchmarks and your own targets to identify areas for improvement. Adjust your advertising strategy accordingly to maximize profitability and optimize your ROI from Amazon ads.

Regularly monitoring and refining your ad spend ensures that you allocate resources effectively and drive sustainable growth on the platform. Use Amazon PPC manager, PPC Entourage, for a more streamlined ad spend tracking and optimization process. Simply access the PPC Entourage dashboard and navigate to the reporting section. You can then choose the time frame for which you want to track ad spend. Review the data provided by the software, including total ad spend, ACoS, ROaS, and other relevant metrics.

Analyze the performance of your advertising campaigns based on the data provided. Then, use the insights gained to optimize your campaigns, adjust bids, keywords, and targeting settings to improve performance and ROI. Finally, monitor the impact of your optimizations over time and continue refining your strategies based on ongoing performance data provided by PPC Entourage.

4. FBA Inventory Audit

Men standing in a warehouse talking

Take stock of your inventory management practices to prevent stockouts and excess inventory. Calculate your Inventory Performance Index (IPI) to gauge your inventory health. Monitor your sales velocity and reorder points to ensure timely restocking.

Leverage advanced inventory forecasting tools like SoStocked to predict demand and optimize inventory levels and/or use Amazon’s inventory reports to assess the accuracy of your available inventory at FBA. Pay attention to details such as units in stock, reserved inventory, stranded inventory, and any discrepancies between your records and Amazon’s records.

Other inventory metrics to keep an eye on include:

  • Inventory Turnover Ratio (ITR): Inventory turnover measures how quickly inventory is sold and replaced. It’s calculated by dividing the cost of goods sold by average inventory value. While the industry standard is based on a 365-day period, the ideal turnover rate varies by sector. For example, a ratio of 5 might be high for discount retailers but low for car manufacturers. Generally, aim for a turnover rate between 5 and 10, indicating inventory turnover every 30 to 60 days. Adjustments may be necessary based on industry specifics and business goals.
  • Days Sales of Inventory (DSI): Days Sales of Inventory varies in interpretation but often signifies the average time taken by a business to sell its inventory. It’s pivotal in calculating a company’s cash conversion cycle, indicating the days needed to convert assets into cash. Additionally, DSI mirrors inventory liquidity, showing how long current stock will last. A lower DSI is preferable, suggesting quicker inventory turnover and sales conversion.
  • Storage Costs: Evaluate your storage fees to ensure they align with your inventory levels and storage duration. Look for any discrepancies or unexpected charges that may indicate errors in Amazon’s calculations. To improve profitability, look into product size optimization, which is integral to inventory audits for several reasons.

Firstly, it enhances storage efficiency by minimizing wasted space and maximizing storage density, thereby reducing storage costs. Additionally, smaller product sizes often result in lower shipping and handling costs, leading to overall cost reduction. Moreover, optimized product and carton sizes streamline inventory management processes, enabling more accurate forecasting and improving inventory turnover rates. Overall, product size optimization is essential for increasing operational efficiency and lowering costs, making it a crucial aspect of FBA inventory audits.

Run our size tier optimizer across your entire client base to save thousands on FBA fees!

PRO TIP

In sum, use the insights gained from the FBA audit to optimize your inventory management practices. This may involve implementing better inventory tracking systems, adjusting stocking levels, or optimizing your restocking strategies to minimize storage fees and maximize sales opportunities.

RELATED: Amazon Profitability Calculator

5. FBA Audits Using AI and Machine Learning

Using AI and machine learning in FBA audits offers numerous advantages for sellers, agencies, and aggregators. These technologies enable efficient processing of large volumes of data from various sources, including sales metrics, inventory levels, and customer behavior, allowing sellers to uncover valuable insights and trends.

Machine learning models can forecast future trends and outcomes, automate repetitive tasks, and provide personalized recommendations tailored to each seller's unique needs. Additionally, AI-driven dashboards like D8aDriven enable real-time monitoring of key performance metrics, facilitating timely interventions and adjustments to optimize business outcomes. Inside D8aDriven, you can explore various analytics modules, such as sales analytics, inventory analytics, advertising analytics, and customer analytics. These modules provide in-depth insights into different aspects of your FBA business.

Generate custom reports tailored to your specific audit objectives. You can customize the metrics, time periods, and filters to focus on the areas of interest. Don’t skip on using the platform’s trend analysis tools to track changes in key metrics over time. This can help you identify seasonal patterns, sales trends, and areas for improvement.

It’s also crucial to leverage D8aDriven’s optimization recommendations to identify opportunities for improving your FBA business performance. These recommendations may include adjusting pricing strategies, optimizing advertising campaigns, or refining inventory management practices. Make sure to collaborate with team members by sharing reports and insights generated through the software. This can facilitate decision-making and alignment across your organization.

Overall, by leveraging AI and machine learning techniques, you can gain valuable insights into your business performance and identify opportunities for growth and optimization more effectively than traditional FBA audit methods.

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Maximizing Efficiency and Profitability with FBA Audit

Regularly auditing your FBA business across key areas such as reimbursements, rankings, ad spend, and inventory is crucial for success on Amazon. By understanding the importance of each FBA audit category, leveraging relevant metrics and formulas, utilizing appropriate tools, and implementing actionable insights, sellers can optimize their operations, increase profitability, and stay competitive on Amazon.

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