The phrase "Sounds good" is the correct form. In this phrase, "sounds" is the verb in the third person singular form, which agrees with the subject "it" or the implied subject.
"Sound" without the "s" is used when referring to the plural form or when addressing multiple subjects. For example, you would say, "The birds sound beautiful" or "The cars sound loud."
However, when referring to a single subject, as in the phrase "Sounds good," the verb form "sounds" is used. It is a common idiomatic expression used to indicate agreement or approval.