In the nascent days of the cannabis industry, accounting was considered almost an afterthought. Banks were not accessible, and cannabis businesses were left dealing with piles of cash and no systems with which they could manage their operations. The thought of accounting software with the ability to handle the intricacies of various cannabis business needs almost felt like the stuff of science fiction.
Mercifully, the industry has grown up since then. And while the industry is still chronically underbanked due to cannabis’s status as a federally prohibited substance, the world of cannabis accounting has developed exponentially.
At its roots, cannabis accounting operates on the same principles as standard business accounting. However, businesses that operate within the cannabis industry are subject to unique accounting challenges that simply cannot be handled by those without specific cannabis expertise. These cannabis industry-specific accounting needs might not be obvious, but are vital for the long term health and growth of your cannabusiness.
Weekly bookkeeping is an essential function of any business, cannabis or otherwise. Without this detailed and accurate recording of business transactions, expenses, and payroll, your business will suffer, unable to set appropriate goals, prepare taxes, budget, and provide necessary reports.
However, cannabis bookkeeping requires an additional level of accounting knowledge and expertise. Due to cannabis’s continued status as a federally prohibited substance, they are subject to the IRS tax code section 280E and prohibited from deducting large portions of business expenses from their gross income. Knowing which expenses fall under 280E and which don’t is just one piece of critical knowledge that can only come from experts in cannabis accounting services.
Weekly bookkeeping can give estimates of estimated tax payments while ensuring your cannabis business remains compliant. These services are especially critical in an industry where federal, state, and local regulations can shift – quite literally – overnight. And as the IRS has ramped up its audit efforts around cannabis companies, remaining compliant will help you avoid their audit attention. Real-time updates from experts in cannabis accounting will help you stay afloat both in the short and long-term.
Payroll has been one of the biggest pain points in cannabis accounting since the inception of the industry. Until very recently, almost all cannabis companies were operating entirely in cash, including payroll due to the banking limitations placed on cannabis businesses. Over time this system has proven unsustainable and, thankfully, no longer necessary. Cannabis accounting services have found ways to eliminate the need for all-cash payrolls as well as how to maintain records for taxes, benefits, expenses, and more.
When cannabis companies leverage cannabis accounting services for payroll, they can easily manage:
Maintaining accurate payroll is one of the most pivotal functions for any business, and cannabusinesses are no exception. Leveraging cannabis accounting services for payroll allows your cannabis business to avoid human errors, access live records and reports, saves time, all while keeping your business compliant with any and all federal, state and local regulations.
The early days of the cannabis industry were almost like the wild west. People tell stories of paying vendors with literal duffel bags of cash because there weren’t just limited banking options, there were no banking options. Obviously, “duffel bags of cash” will never be found on a list of best accounting practices, which is why it is essential for cannabusiness owners to leverage accounting solutions specifically made for cannabis businesses.
Payable and receivable management involves:
Finding yourself unable to reliably pay vendors or receive payments in a timely manner can deal a fatal blow to your cannabusiness. And a cannabis accounting service for payables and receivables that also ensures you remain compliant in the industry will shield you from future headaches, audits, and potential violations.
Nimble is the name of the game in any emerging industry, but this is especially true for cannabis. Between regulation shifts, production, supplies, retail businesses headaches and more, cannabusiness owners must have an accurate pulse on their business conditions. Good cannabis accounting services will provide internal auditing services that can help alleviate – if not prevent entirely – many of these issues.
Internal audit processes include:
When cannabis business owners – be it retailers, transporters, manufacturers, or cultivators – work with cannabis accountants, they are able to make critical business decisions with more accuracy and efficiency. Accountants with experience in the industry are also experts on how to ensure all aspects of the business remain within the ever-shifting landscape of cannabis regulations and can help find solutions for any problems that may emerge.
Contact Us Today To Learn More
