Understand your Amazon Inventory Adjustment Report

Many Amazon FBA sellers never look at their inventory adjustment report. While Amazon’s automated system does a pretty good job at keeping inventory reconciled, it’s not a perfect system. If you ignore the report, then you could be giving up a lot of money.

Handling fulfillment for millions of sellers is no easy task. Even small businesses sometimes have trouble keeping track of their inventory. So it’s no surprise that some inventory gets lost or damaged because of Amazon’s size and processes.

Most FBA sellers understand how to reconcile their inbound shipments with what Amazon receives. But many sellers ignore the inventory movements that take place once Amazon has received the inventory.

If you’ve never taken a look at your inventory adjustments, then consider taking some time to look through at least one report on a popular SKU to make sure that Amazon has reimbursed you for all of the items they’ve damaged or lost.

To access this report, go to Reports > Fulfillment > Inventory Adjustment.

Below is an example of an inventory report. Notice the various movements.

Understanding Amazon's FBA Inventory Reconciliation Report

Let’s go over what this report means. The first column shows quantity into or out of your stock. So a -1 means one unit out of your inventory. Conversely, a 1 means one unit into your inventory.

The second column provides a description of the adjustment.

The third column tells you the disposition of the unit. The image above is fairly simple in that there aren’t any complex issues.

Looking at the report above, you should notice that there are -4 units out of your stock for “Inventory misplaced” and +3 units for “Inventory found.”

Let’s assume that this report is complete. This report shows that Amazon lost 4 units but only found 3. The result is that Amazon owes you 1 unit or the cash value of that 1 unit.

While this reimbursement is usually automatic, there are likely instances where Amazon has failed to reimburse you. You can find reimbursements on your fulfillment reports. This report will tell you whether you’ve been reimbursed with a unit or with cash. Search for the Merchant SKU using a wider date range to capture late reimbursements.

Reimbursements for warehouse lost or damaged units can take anywhere from a few days to a few weeks since lost units may be found a week later.

In the image below, we see that Amazon has reimbursed the seller with cash. These reimbursements usually take place 30-45 days after the inventory has been lost or damaged by Amazon.

In instances where Amazon reimburses sellers with cash, they may claw back that cash reimbursement and instead return a unit. These reversals show up on the settlement as clawbacks or reimbursement reversals.

Amazon to QuickBooks Online Accounting: Recording Reimbursements

You can reconcile your inventory by counting the number of units misplaced and compare that to the number of units found. Then take a look at your reimbursement report to see if Amazon has reimbursed you for the discrepancy. If not, then you should open a claim for reimbursement with the proof you’ve gathered.

Make sure that the date ranges are accurate, and avoid requesting reimbursements for recently lost items since those may be found soon. Doing so will only increase your work for no gain since Amazon will likely reverse the cash reimbursement.

But your inventory reports are not going to be as “clean” or simple as the one provided above. You’ll likely see various descriptions and dispositions on the report, making reconciling your Amazon inventory that much more difficult.

See the image below for a more complex report.

Understanding Amazon's FBA Inventory Reconciliation Report

In this new image, we see a much more complex inventory report. In the third column, we now see Unsellable, Customer Damaged, and Warehouse Damaged.

Here’s a link to Amazon’s page for understanding the various codes on your Inventory Adjustment report.

In this more complex report, there are 2 units misplaced, but only 1 is found, resulting in -1 change to your inventory. If Amazon hasn’t already reimbursed you for it, you could open a claim for the 1 missing inventory.

There are also a few different Dispositions in the report. Unsellable means that inventory is likely placed back into your unfulfillable inventory. This is the inventory that you either remove or dispose of—if you do nothing, then Amazon automatically disposes of the inventory after 30 days.

Customer damaged returns can be problematic if you’re selling large-ticket items like furniture or consumer electronics. That’s because some customers may swap out, damage, or even “rent” their purchases for a few weeks.

In the past, Amazon was pretty good about reimbursing sellers for returns that were damaged by customers. But that’s not the case today. Now, sellers are responsible for charging restocking fees, and many reimbursements have to be dealt with through SAFE-T claims.

Sometimes, customers will mark that their purchases are defective in order to get free return shipping and avoid restocking fees. When this happens, you may see “Defective” as the reason, but upon receipt, the warehouse worker may mark the unit as Sellable, returning the unit to your Sellable inventory.

That’s great news except when the unit was actually defective, or the unit was carefully swapped out with a lower quality, model, or counterfeit unit. Then the next customer who purchases your item will also be a victim of fraud.

Customers who receive defective items or obviously used or fraudulent items are more likely to leave negative seller feedback and product reviews. Since most customers don’t leave reviews, even one negative feedback or review can really impact sales.

What can you do to improve your bottom line for your Amazon business?

  • Have all returns for complex products sent back to you instead of being inspected by an Amazon fulfillment worker—only you know how your product should look and work
  • Set automatic removals for your seller account so that you can inspect all returns
  • Include a periodic review of your inventory adjustment reports, inbound shipment reports, and reimbursement reports to understand what’s going on with your inventory at the fulfillment centers
  • Reconcile your inventory and open any claims for units that were lost or damaged by Amazon and not reimbursed
  • Look into writing a restocking fee into your seller policies so that you can minimize fraud
  • File SAFE-T claims for eligible cases—even if it may not be worthwhile, a valid SAFE-T claim against a customer may allow Amazon to track serial scammers

Anyone can create an individual selling account and sell on Amazon. And many people can even start selling professionally but to be successful on Amazon, you’ll have to be more efficient than other sellers to give yourself that competitive edge.

That means you’re streamlining your business processes and making sure that you hold Amazon accountable for any inventory they’ve lost or damaged. After all, that’s what part of your fees are for.

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