What's really happening in Cloud Marketplace Accounting (+ Podcast Launch!)
When identical companies to report different margins, and dummy invoicing feels like the best workaround for system shortcomings
Hey there 👋,
Welcome back to Field Notes — I've been quietly working on something new, and I'm excited to finally share it.
This issue tackles a topic that's come up again and again in Gaapsavvy conversations - how to account for revenue and fees when selling through cloud marketplaces like AWS, GCP, and Azure.
From the outside, it might look like outsourcing billing and collections would make things easier — but as most of us know by now, it's anything but. Principal vs. agent decisions, fee classification, reporting visibility gaps… it's an expensive gray zone. And with cloud infrastructure spending growing 25% year-over-year, more finance teams are wrestling with these decisions every quarter.
This also marks the launch of the new Gaapsavvy Podcast, co-hosted with Devon Coombs, former Google Cloud Marketplace Controller. Our first episode dives into marketplace accounting — including the conversations that never make it into the memo. (Linked at the end.)
Let's get into it.
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The Stakes Are Higher Than You Think
Cloud marketplace sales are exploding. An increasing share of SaaS revenue now flows through AWS, GCP, and Azure—the very platforms these companies are built on. But while engineering teams love the streamlined procurement, finance teams are discovering a mess of accounting complications.
The problem? These platforms do far more than process payments. They handle sales enablement, marketing exposure, contracting, billing, and collections.
This blended role has created a fundamental question that's dividing the accounting community. Here are some recent questions discussed in the community:
Q: Where Do Marketplace Fees Belong on the Income Statement - Sales & Marketing (Opex) or Cost of Sales (Margin)?
Your answer determines whether these fees hit your gross margin or stay below the line. And with marketplace fees typically running 3-8% of revenue, this decision could have material P&L impact.
This leads to a core accounting question:
If you view these fees like commissions, they may fall under ASC 340 as a Cost to Obtain a Contract, typically classified as Sales & Marketing (Opex).
If you analogize them to payment processing fees, they’re more often treated as a Cost of Sales (COS) — impacting margin directly.
What's Actually Happening
At a community share forum in January of 2024 with public and private SaaS companies audited by Big 4 firms, we ran a series of community polls to better understand how accounting teams are handling Cloud Provider Marketplace fees.
The responses showed just how divided — and judgment-heavy — this space still is:
What this means 
There is no consensus and vast diversity in practice. With a nearly perfect 50/50 split on both P&L classification (58% S&M to 42% COS) and capitalization (51% Capitalize to 49% Expense), marketplace fees accounting has become the "wild west" of revenue. This inconsistency makes comparability arguably meaningless—companies with identical economics can report vastly different gross margins purely due to accounting choices.
There's a Clear Preference Gap When asked for industry preference 69% of accountants responded that would prefer to classify these fees as Sales & Marketing. The data reveals a telling story: 58% currently classify marketplace fees in Sales & Marketing, but 69% want them there. This +11 percentage point gap suggests many companies feel pressured to use Cost of Sales classification despite preferring Sales & Marketing treatment.
Material P&L Impact Moving fees from Cost of Sales to Sales & Marketing shifts expenses "above the line," directly improving reported gross margins. Combined with the capitalization decision, these choices can significantly impact how investors and analysts evaluate company performance.
Bottom Line: The marketplace fee accounting landscape is ripe for standard-setting intervention. With strong industry support for standardization and clear preference for Sales & Marketing treatment, revenue leaders have both the opportunity and backing to advocate for consistent guidance—particularly for cloud marketplace fees. It reflects how many teams see these platforms — not just as infrastructure, but as distribution partners with a sales function.
Q: Do you create dummy invoices to operationalize marketplace accounting for AR and Collections? 
The Core Problem: Operational Nightmare
Software vendors typically conclude they're the principal in marketplace sales (recognizing revenue gross), which means they must maintain accounts receivable balances and track collections. But cloud marketplaces often conclude the end customer is their customer, sharing minimal details with software vendors about contracting, credit checks, billing, collections, payment processing.
What’s really happening: The Workaround
"We're not running full collections, but we still need to book AR balances and bad debt reserves. It's an ugly back-and-forth with the marketplace (tickets) to understand what's happening at each customer level."
Most Companies Resort to "Dummy" Invoices. 63% create dummy invoices for marketplace transactions—a telling sign that existing marketplace processes don't align with standard accounting workflows. Companies are essentially creating artificial paper trails to make marketplace transactions fit into their financial systems.
AR Classification: Although “real billing” is done by the Marketplace, most companies classify their “dummy invoices” as Trade AR. This was by far the most common answer, with three-quarters of companies booking marketplace balances here. A smaller group uses unbilled AR, while contract assets were almost non-existent. This aligns with technical guidance that SaaS marketplace arrangements rarely meet the contract asset definition.
Invoice Level Customer vs. Sales Order Split: Practices split nearly evenly between invoicing at the sales order level and at the customer level, with a smaller portion treating the marketplace provider itself as the customer. This reflects ERP system design and the granularity of marketplace reporting more than differences in GAAP interpretation.
Bottom Line: The prevalence of dummy invoices (63%) highlights a fundamental disconnect between how marketplaces operate and how finance teams need to account for the business. The near-universal use of Trade AR (78%) suggests companies are forcing marketplace transactions into traditional receivables frameworks rather than developing marketplace-specific accounting approaches.
The real question is: Are dummy invoices a necessary workaround or a sign that we need better integration between marketplace platforms and ERP systems? With 63% of companies using this approach, there's clearly a systematic gap between marketplace operations and financial reporting requirements.
The data suggests this is less about accounting preference and more about operational necessity—companies are creating these artificial processes because marketplaces don't provide the financial infrastructure that finance teams require.
🎧 Want to go deeper?
Devon Coombs (ex Google Cloud Marketplace Controller) and I break all the nuance of marketplace accounting in our the very first episode of the Gaapsavvy Podcast.  
We covered topics I hadn’t even thought about before 🤯
— now live!
Episode link:
Length: 1:03 minutes
Time-stamped highlights
00:00 Intro: Why you should care about Marketplace accounting
08:20 Software Vendor vs Cloud Marketplace Owner View
17:54 Marketplace fee Classification - Sales and Marketing or Cost of Revenue?
29:39 Community Polling: Classification Diversity (2021 vs. 2024)
32:15 Partner and End User Relationships: Marketing Benefits and Cost Offsets
37:45 The Real Strategy: Driving Cloud Consumption
44:50 Does the real strategy reveal a lean to Sales and Marketing classification?
51:10 Marketplace’s ability to connect sales and cost data
54:33 Will understanding Cloud Cost change our usage rev rec conclusions?
01:03 What's next - a deep dive into usage/consumption accounting 🥳
What’s Next
The next podcast episode will be on Usage & Consumption Technical Accounting.
And yes - this month we had the Klarity AI Summit in NYC. There is so much to cover in the world of AI! Stay tuned.
Upcoming Events:
Friday June 26: Next Gaapsavvy QTC Shareforum for industry accountant community members
Thanks again for being part of this community. Hit reply if something in here spark a thought, a question, or even a “we’re dealing with this too.” I’d love to hear from you.
A quick note: You're getting this because you’ve expressed interest in access to community content or joined a related Gaapsavvy program. While I have limited shareforum participation to practicing industry accountants only for now, I wanted start sharing these insights with everyone who's shown interest in what we're building.
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Disclaimer
The information shared in this newsletter comes from real lived experiences our community accounting professionals - and is intended for learning purposes only. Polling data reveal industry “leans” in an “it depends” world. Every company's situation is unique - always checking with your auditors and accounting team before implementing new approaches. Use these insights as starting points for your own research and discussions.





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