In most cases, you cannot use the cash method if your business involves inventory. However, there is an exception for small businesses with inventories that may allow you to use the cash method.
As per IRS Pub 538, a small business taxpayer with an average annual gross receipts of less than $29 million in 2023, adjusted for inflation, can opt not to maintain inventory in the book, providing a welcome relief from this requirement.
However, if you choose not to keep an inventory, you must still use an accounting method that clearly reflects your income (IRS Pub 538).
