Your profit and loss says March was terrible and June was excellent. Both are wrong.

Key takeaways

• Cash accounting records a cost when money leaves and revenue when it arrives. For an inventory business those two events are months apart, which makes monthly margin meaningless.
• Accrual accounting matches the cost of a unit to the month that unit sold. That is the only basis on which a per-SKU margin figure means anything.
• Reporting describes buyers in seven-figure diligence expecting accrual accounts, and cash-basis accounting as creating valuation disputes during negotiations.
• The transition is reported to take three to six months of parallel record-keeping. It cannot be done retrospectively during a sale, which is why it belongs on the operating calendar rather than the exit calendar.
• DD+7 widened the gap between the money and the sale, which makes a cash-basis P&L less informative in 2026 than it was in 2024.

Ask a marketplace seller how last month went and you get a number from a bank account. For a business that buys inventory in large lumps and sells it in small ones, that number describes when money moved rather than whether the business worked.

This is not an accounting lecture. It is about why per-SKU margin decisions made on cash-basis figures are made on noise.

01The two bases, in one example

A seller pays $30,000 for a container in March. The goods arrive in April and sell evenly from May to October at $60,000 total.

Cash basis:

Month	Recorded cost	Recorded revenue	Apparent profit
March	$30,000	$0	−$30,000
April	$0	$0	$0
May–Oct	$0	$10,000/month	+$10,000/month

March looks catastrophic. Every month after looks like a 100% margin business.

Accrual basis:

Month	Cost of goods sold	Revenue	Profit
March–April	$0	$0	$0
May–Oct	$5,000/month	$10,000/month	$5,000/month

The second table describes the business. The first describes a bank statement.

02Why this got worse in 2026

Two changes widened the gap between the money and the transaction.

DD+7. Funds are released seven days after the customer receives the order, plus the disbursement cycle — reported at 14 to 27 days from order to bank for FBA. See the DD+7 guide. On a cash-basis P&L, a sale made on 28 December can land in January.

The returns processing fee. Deducted between the 7th and 15th of the third month following shipment, as the returns guide covers. On cash basis it appears in a month with no connection to the product that caused it.

So a cash-basis December shows revenue that belongs to November, no cost for the goods sold, and a returns fee for September. There is no decision that number supports.

03What accrual actually requires

Three things, and only the third is real work.

1. Recognise revenue when the sale happens, not when Amazon pays you. The settlement report tells you both dates.

2. Recognise fees in the period they relate to. Referral and fulfilment fees belong to the sale. Storage belongs to the month it was charged for. The returns fee belongs to the shipment that generated the return, not to the month of deduction.

3. Hold inventory as an asset until it sells, then release it as cost of goods sold.

That third one is the whole exercise. It requires knowing the landed cost per unit — the landed cost guide builds it — and tracking how many units of which purchase batch remain.

04The COGS problem specific to FBA

Reporting names this as a failure point in acquisitions, and it is a failure point in ordinary management long before that.

An FBA catalogue with multiple SKUs and varying reorder cycles means several purchase batches of the same SKU, bought at different landed costs, sitting in inventory together. Freight rates move. Duty rates moved considerably across 2025 and 2026. A unit from the March container and a unit from the August container are not the same cost.

Buyers reconcile COGS against inventory levels and supplier invoices. Reporting states that where these do not track cleanly, a deal either fails in diligence or is repriced downward.

The same reconciliation is what tells you, as an operator, whether a SKU is profitable at all.

The practical minimum: landed cost recorded per purchase batch, units received per batch, and a consistent method for deciding which batch a sold unit came from. Most small sellers use a weighted average across batches, which is simpler than tracking individual lots and adequate for management purposes. What matters is choosing one method and applying it consistently.

05What you can only see on accrual

Four things a cash-basis P&L cannot tell you:

Which SKUs actually make money. The dominant question in the business, and it requires cost matched to the sale.

Whether a fee change hurt you. The 2026 fee changes are covered across this site. Measuring their effect requires margin per unit in comparable periods — which cash accounting does not produce.

Whether a price change worked. Revenue moved; so did fulfilment cost if you crossed a price band. Only accrual shows the net.

What your inventory is worth. On cash basis it is not on the books at all. It is frequently the largest asset the business owns.

06Cash flow is a separate report, and you need both

One clarification, because this trips people up.

Moving to accrual does not mean ignoring cash. They answer different questions. Accrual tells you whether the business is profitable. Cash tells you whether you can pay for the next container. A business can be profitable and insolvent, and in a season where storage triples and payouts are delayed, that is not hypothetical — see the peak season guide.

Run the P&L on accrual for decisions and a cash forecast alongside it for survival. The cash flow planner covers the second.

07Making the transition

Reporting puts the transition at three to six months of parallel record-keeping to establish credible historical comparisons, with 36 months of statements typically compiled for diligence.

A workable order:

1. Separate business and personal accounts completely, if that is not already true. Reporting on valuations states that mixing them produces a significant haircut, and it also makes every step below harder.
2. Establish landed cost per unit, per purchase batch. This is the input everything else needs.
3. Choose an inventory costing method and write it down.
4. Map fees to the periods they belong to, using the SKU-level reports rather than the settlement summary.
5. Run both bases in parallel for three to six months.
6. Get an accountant who has worked with inventory businesses. Marketplace accounting is a specialism, and the difference between an accountant who has seen it and one who has not is substantial.

Note the tax point. Cash basis is described as acceptable for tax purposes. Moving your management accounts to accrual is a decision about information quality, and whether your tax filing basis should also change is a question for an accountant with sight of your circumstances. This site does not give tax advice.

Frequently asked

What is the difference between cash and accrual accounting?

Cash records transactions when money moves. Accrual records them when the underlying event happens — revenue when the sale occurs, and the cost of a unit in the month that unit sold rather than the month you paid for it.

Why does it matter for an inventory business?

Because the payment and the sale are months apart. A container bought in March and sold from May to October shows a catastrophic March and six months of apparent 100% margin on cash basis. Neither describes the business.

Do buyers require accrual accounts?

Reporting describes seven-figure diligence as expecting accrual accounting, detailed inventory tracking and documented add-backs, and cash-basis accounting as creating valuation disputes during negotiations.

How long does it take to switch?

Reporting puts it at three to six months of parallel record-keeping to establish credible historical comparisons. That is why it belongs on the operating calendar rather than being attempted during a sale.

Which inventory costing method should I use?

Most small sellers use a weighted average across purchase batches, which is simpler than tracking individual lots and adequate for management purposes. Consistency matters more than the choice. Confirm the tax treatment with an accountant.

Do I still need a cash flow forecast?

Yes, and it is a separate report. Accrual tells you whether the business is profitable; cash tells you whether you can pay for the next container. A business can be profitable and unable to restock.

Sources

1. Sell Amazon business: 2026 exit guide (buyers expecting accrual-based accounting, detailed inventory tracking and CPA-proof add-backs; cash-basis accounting creating valuation disputes; three to six months of parallel record-keeping; 36 months of statements), Titan Network accessed 2026-08-08
2. How to sell an Amazon FBA business in 2026 (buyers reconciling COGS against inventory levels and supplier invoices; deals failing or being repriced where these do not track; inventory accounting difficulty with multiple SKUs and varying reorder cycles), EcomSwap accessed 2026-08-08
3. Amazon seller tax accounting: compliance guide for 2026 (federal filing by business structure; deductible expense categories; IRS record retention of at least three years with seven recommended), Nova Analytics accessed 2026-08-08
4. Sell Amazon FBA business: valuation and exit planning (personal spending mixed into business accounts producing a significant haircut; SDE add-back documentation), Titan Network accessed 2026-08-08
5. Amazon returns processing fees: 2026 rate card (fee deducted between the 7th and 15th of the third month following shipment; SKU Economics Report), Feedvisor accessed 2026-08-08
6. Amazon’s new DD+7 payout policy (14–27 days from order to bank deposit for FBA), SlopePay accessed 2026-08-08