We are a small manufacturer and our inventory costs are high. As our end product contained oem components that have "no return" policies we require new customers to prepay 50% of our Bill of Materials costs. In June 2017 we invoiced a customer for $ 20K (50%) of the BoM to be used in a purchase order. We purchased the full BoM, $ 40K, but our customer's end customer delayed their order until Jan 2018. We sat on $ 40K in inventory for five months.
Our accounting method is CASH so this is tricky. Do I report the $ 20K as "income" in 2017 or can I report this "income" in 2018 where we shipped, billed and were paid in full?