🌱 Traditional non-cannabis businesses, particularly small businesses, can successfully operate with a good monthly bookkeeping service and a knowledgeable CPA. Cannabis businesses cannot. Why? IRC 280E. Local/State/Federal compliance. Lack of access to banking. That’s why it’s so concerning that many (most?) Cannabis CEO's continue to try to “get by” with a monthly bookkeeping service and a CPA firm at year-end for annual tax filings. The issue with this approach? It’s what’s missing. Everything in between!
🌱 The bookkeeper to Tax CPA strategy leaves a huge gap and that gap is Cannabis Accounting.⠀ It’s the proper accounting to maximize cost of goods sold under IRC 280E, the monthly review of QuickBooks to correct any errors, a monthly financials package showing the auditors/investors/buyers consistent, professional financial management and the preparation of an annual budget and mid-year forecast for cash management, capital purchase planning and variance analysis. The bookkeeper builds the foundation by entering transactions, scanning/uploading documentation, invoicing and, in some cases, doing payroll and paying bills on a daily or weekly basis. The Tax CPA files business returns, advises on entity structure and (possibly) files quarterly payments. Some CPA’s will offer guidance on 280E, but this guidance is meaningless without documentation of cost accounting assumptions and recurring financials completed in accordance to GAAP. If you are not getting monthly financials (minimum P&L and Balance Sheet) you don’t have what you need to maximize COGS. If you’re not being asked about how people are spending their time, what your facility square footage is and whether or not you have a lease schedule you’re not getting what you need to maximize COGS.
🌱A properly trained cannabis accountant bridges the gap. We build the processes and tools, perform the necessary cost accounting and issue monthly financials. In addition to the technical accounting deliverables, many of us provide virtual controller/part-time CFO services. This is where we really add value, creating a sturdy, multi-lane bridge that mimics the internal “Accounting & Finance” department at larger, more established organizations. What are some of the value-adds? Reviewing your cash handling processes, creating employee training manuals, ensuring you are compliant with OSHA regulations and have sufficient worker’s compensation insurance, developing key metrics dashboard reporting and more. Without these things, a Cannabis CEO will likely get stuck in that gap, between their business and the fast moving path to growth, expansion or a successful exit.