Direct answer: Sales, gross profit, channel contribution and cash are different measures. Growth can require more advertising, fulfillment, returns handling and inventory funding. Connecting costs with working capital is essential to evaluating whether more growth supports the business.
Net platform deposits are not a substitute for revenue or profit. Start by reconciling settlements and accounting records — see reconciling Amazon, Shopify and Stripe settlements.
Define the profitability measure
Gross profit generally deducts cost of sales from net revenue. A management-defined channel contribution measure then deducts specified channel costs such as platform fees, fulfillment, advertising and returns handling. Definitions vary, so document them and do not label contribution as company net income.
This fictional monthly example, in USD, excludes collected sales tax. Cost categories do not overlap; returns handling does not repeat the sales refunds.
| Item | Amount | Note |
|---|---|---|
| Sales before refunds | 100,000 | No other discounts assumed |
| Less: sales refunds | (5,000) | Not deducted again in later lines |
| Net revenue | 95,000 | Denominator for this example |
| Less: cost of sales | (38,000) | Product cost under this example's definition |
| Gross profit | 57,000 | Gross margin 60% |
| Less: platform fees | (10,000) | Excludes ads and fulfillment |
| Less: fulfillment | (7,000) | Excluded from cost of sales here |
| Less: advertising | (20,000) | Separate from platform fees |
| Less: returns handling | (2,000) | Warehouse handling, not refunded sales |
| Channel contribution | 18,000 | Contribution margin ≈ 18.9% |
The 18,000 still precedes shared corporate overhead, interest, income taxes and other items outside this example, so it is not company net income. Maintain a reconciliation from management analysis to the financial statements under the applicable accounting policies.
Connect advertising to the full cost picture
ROAS compares attributed sales with advertising spend. It does not automatically deduct purchasing costs, refunds, platform fees, fulfillment or fixed costs, and attribution windows differ across platforms. Align periods, order scope and attribution definitions before assessing whether incremental advertising creates sufficient additional contribution.
Then consider when profit becomes cash
Deposits, production payments, freight and inventory consume cash before platform settlements or wholesale collections arrive. Positive contribution on individual sales does not eliminate the working capital required for expansion; reserves and refunds can further change settlement timing.
Connect channel reporting with inventory plans, receivables, payables and a 13-week cash forecast. Current-period cost of sales and future purchasing payments should not be treated as the same measure.
Divide the work clearly
Controller support validates reconciled revenue, costs and inventory, avoiding net-deposit revenue, duplicated costs or missing returns. CFO support then compares products, channels and scenarios to understand how pricing, advertising and inventory decisions affect both profit and cash. Marketplace-collected sales tax and nexus obligations are a separate workstream — see the e-commerce sellers solution.
