Office of Cannabis Management Office of Cannabis Management

Proper accounting procedures, combined with secure cash handling practices, are paramount for both financial accuracy and safety. From cultivation to sales, labor is a significant expense in the cannabis industry. Tracking labor costs, understanding overtime implications, and categorizing them correctly is essential for profitability analysis. In this guide, we’ll delve into the basics of medical marijuana accounting, offering insights for beginner farmers and highlighting the importance of expert guidance in this burgeoning field. Problems with bookkeeping in cannabis businesses are mostly due to the huge amount of cash being collected, which may lead to undesirable consequences ranging from careless mistakes to inaccuracies in bookkeeping to fraud.

“Shoeboxed makes it stupid simple to scan receipts…”

All receiving slips should be checked against the invoice and PO, so that any adjustments in price or corrections to delivery orders can be handled in a timely manner, rather than simply falling through the cracks. Many businesses pay costs through an operating account, not a general business account, and fund it once COGS has been assessed. This helps to protect the business’ capital, prevents overpayment to vendors, and mitigates theft or misappropriation since the operating account will have a limited amount of funds. Another significant advantage is the ability to manage your inventory effectively. Shoeboxed’s expense reporting feature is a huge help during tax season and gives businesses an overview of their expenses. QuickBooks Enterprise has built-in payroll, customizable reporting features, multi-level inventory and order management, and more.

Cash Handling and Security

• An outsourced CFO stays updated on the ever-changing landscape of regulations, ensuring that your business remains compliant and avoids costly penalties.
• The Chart of Accounts (COA) helps organize your finances, increases internal accountability, and gives investors, auditors, and shareholders a clear view of your business finances.
• Despite this tax limitation, professional accountants can help to legally reduce taxable income by allocating costs to inventory and the cost of goods sold, which is mandated by IRC 471.
• 365 Cannabis is one of the few software programs for cannabis entrepreneurs and any type of accounting professional in the cannabis space, including certified public accountants and bookkeepers.
• Institutions willing to lend may charge you higher holding fees and interest or have stricter requirements for your business to qualify for a loan in the first place.

For example, it requires adherence to specific accounting practices and meticulous recordkeeping. First, create a separate class for each normal balance physical location (dispensaries and cultivation facilities) within the QuickBooks file of each licensed marijuana entity. You may even have sub-classes within the dispensary and/or cultivation classes representing different departments within these locations.

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• While these capital injections can help your business succeed, they can also lead to unexpected complications with the IRS.
• Unannounced audits can act as a powerful deterrent that underscores the severe consequences of theft and its harmful effects.
• We are experts in developing bespoke tax strategies that factor in these unique challenges, ensuring full regulatory compliance while minimizing liabilities.
• If employees make purchases for the company, you can add them as users to your Shoeboxed account to upload images of the receipts they receive for business expenses.
• Establishes a robust social and economic equity program to actively encourage members from communities disproportionately impacted by the policies of prohibition to participate in the new industry.

One of the biggest challenges with cannabis accounting is when a company needs cannabis accounting to manage finances and sales across multiple stores. Inventory management, enterprise resource planning, and customer relationship management (CRM software) are all essential components for cannabis companies. Finally, adopting software can benefit cannabis companies by improving cash flow management.

Where is cannabis currently legal?

• On the other hand, despite the Schedule I classification, dispensaries have to report and pay taxes on their income from cannabis sales.
• Limiting the number of persons who can access certain areas can minimize the opportunity for theft or misappropriation.
• By complying with these reporting requirements, you can avoid penalties and scrutiny from regulatory authorities.
• DO NOT fall into the temptation to account for your legally separate entities as one, regardless of the level of common ownership between them.
• Implementing a regular process of review within your cannabis inventory accounting team is also a good idea, as is maintaining clear workflows before bottlenecks in the AP process build up and cause payment delays.
• Running a business involves managing multiple tasks, from finances and compliance to daily operations.

The tax laws governing the cannabis industry are complex and bring multiple challenges for medical marijuana businesses. Therefore, it’s always advisable to seek guidance from a qualified accounting professional. Medical marijuana businesses face challenges unlike many other industries, such as cash-heavy transactions, strict regulations, and a complicated tax code. Finding an accounting firm with expertise in cannabis accounting is crucial for ensuring compliance and accurate finances for your dispensary. Good bookkeeping for dispensaries follows the same key principles as other industries.

QuickBooks – Best for growing operations

Apply this practice to the other legal entity QuickBooks files, at any level you many want to allocate and capture costs. Your accounting system likely has a variety of standard reports by class (or department) that will be helpful in analyzing which locations and departments are profitable. Therefore, every transaction entered into the accounting system should be classified accordingly. QuickBooks includes helpful standard reports you can run any Food Truck Accounting time to check the diligence of your accounting team.