The Challenges of Accounting for Cannabis Dispensaries Cannabis CPA, CFO, Bookkeeping & Accounting Firm
Cannabis dispensaries and growing facilities have unique business models which require precise accounting and bookkeeping needs. During this webinar you will learn cannabis terminology, state regulations, software stack needed to support these businesses and marketing and educational options. Units Consulting Ltd. provides professional multi-lingual accounting, bookkeeping and payroll services (English, Ukrainian, Russian) to the companies, foreign representative offices and NGOs that operate various businesses. Effective management of financial affairs requires timely and accurate information, extensive knowledge, organization, and constant vigilance.
- Set aside some cash reserves to cover unexpected expenses or fluctuations in income.
- The IRS is more aware now than ever of the games and tactics being used to try to circumnavigate it.
- This also covers what activities those working and volunteering at dispensaries can perform, like dispensing medications, providing counseling, and administering immunizations.
The Challenges of Accounting for Cannabis Dispensaries
ERP software is more complex than Quickbooks because it’s more than just accounting software; it manages many aspects of your business as well, including management, customer relationships, commerce, and human resources. To help ensure your business is running smoothly (and legally), your lawyer and CPA need to be knowledgeable about the cannabis industry. It sounds simple, we know, but cannabis is still a largely new frontier, so the spread of education is still fairly narrow. A good legal and finance team should know what entities are permissible or normally used in this industry, and they must be familiar with the laws of your particular state.
What are the long-term financial planning considerations for dispensary owners?
The information you enter into the seed-to-sale system is separate from your company, and it doesn’t let you use the software to determine the analytics of your business. Knowing your inventory information and sales numbers is important when making financial decisions about your dispensary’s future, and it’s also vital when trying to sway investors. Providing cannabis business clients with real value requires implementing specific processes, including annual, quarterly, monthly, and daily procedures for dispensary accounting that accord with 280E. In cannabis accounting, the only way to correctly minimize tax liability is the hard way. Many dispensary owners use Enterprise Resource Planning (ERP) software to manage their entire operation, including tracking their inventory and expenses.
AICPA & CIMA Cannabis Industry Conference Leadership
Working with Greenbooks means that you will have a cannabis accounting firm at your side entirely dedicated to cannabis. If you choose to skimp on the quality of your accounting, you are sure to run into problems at some point. Consequences include paying way more in taxes then you should have, going through painful audits with IRS and state governments as well as fundamentally misunderstanding the profitability of your business. Xero is often considered easier to use and more powerful once mastered over Quickbooks making this the second most popular bookkeeping software for those in the marijuana industry. We can perform a one-time set up for this software to fit your specific business needs. In addition, we can provide training to you and your staff or, if you would like to outsource this tedious task entirely, we are happy to provide monthly services for all your Xero needs.
Cannabis businesses aren’t able to take deductions like most businesses can, which means that they are not legally able to take advantage of tax benefits for incurring expenses like… Payroll / Labor Office Expenses Advertising Interest Expense Depreciation Research and Development and Legal Fees. Bookkeeping for dispensaries is an extremely important aspect of your business.
See What Other Cannabis Accountants Have to Say…
For example, some states require cannabis businesses to be run as non-profits or cooperatives, other states have no such requirement. BGM is one of the first accounting and advisory firms in the world to focus solely on the cannabis industry. Since 2009, our practice has expanded to over 600 cannabis and hemp clients nationwide. BGM works with all types of organizations that provide legal recreational cannabis, medical marijuana, low-THC and high-CBD products, hemp farming, and ancillary services. Our applications services group provides strategic direction to help with the entire cannabis license application process.
Set minimum stock levels for all products so you always have enough inventory to meet patient demand. Categorize your inventory by product type, or any other relevant criteria for easier organization and locating specific items. Establish designated storage areas for different inventory categories. This ensures proper storage conditions for various products and facilitates cycle counts.
Many cannabis dispensary owners don’t like handling these complex financial parts of their business. In that case, you might have more success in outsourcing the responsibilities and hiring a cannabis accountant. You’ll need to learn about the federal, state, and local laws in your area regarding cannabis bookkeeping. Remaining compliant with these regulations should be your top priority to avoid fines.
Utilize your CPA to help direct your business to cannabis-friendly providers, including merchant processing, payroll, and insurance. The more knowledgeable your network is about your industry, the more secure your business is in ensuring it’s being run smoothly and legally. Note that the burden of proof with respect to the inventory writedown from cost rests with the taxpayer, and adequate records must be maintained to establish the values. Cannabis businesses are becoming increasingly popular across the United States as more and more states legalize its use for medical and recreational purposes. However, with the growth of the industry comes unique challenges for accounting professionals, particularly for those working with cannabis dispensaries. Inventory management can indirectly impact cash flow by affecting inventory purchase timing.
Although this is slowly changing, local licensing authorities hold dispensary owners accountable for creating and maintaining adequate security measures to prevent theft. Higher inventory turnover indicates efficient use of inventory, potentially improving cash flow. Accurate inventory valuation ensures financial statements reflect the true financial position of the company. Accurate inventory tracking ensures the balance sheet value reflects reality. Inconsistencies between physical inventory and accounting records can distort the company’s financial health. Dispensaries need to record all sales accurately to ensure they are paying the correct amount of state and local taxes.
