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. 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.
Bookkeeping For Dispensaries: Basics of Managing Your Money
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. The stakes are high for cannabis CEOs, and the fate of their business rests in having an accounting team that understands what is necessary in order to keep their business compliant so that they aren’t penalized or shut down. Our goal is to provide tools and guidance to accounting professionals so that Cannabis and CBD/hemp businesses are being properly serviced and can thrive. With all of the opportunity that comes with Cannabis, let’s not forget CBD which we expect to be as big or bigger than Cannabis.
- Those that have been in business before are more likely to understand why you need information to support them, but those that haven’t may need some understanding and hand-holding to help them understand why it matters.
- Cannabis and CBD/hemp accounting professionals need to be aware of these challenges and must be able to help their clients navigate and find solutions so that they can properly operate their business.
- Track trends in the industry and adapt your services to remain competitive.
The Accountant as a Strategic Business Partner
Another significant tax issue to consider is the allocation of costs in a business that includes not only the production or sale of marijuana but also activities outside the scope of Sec. 280E. You can work with our cannabis accounting professionals to conduct all your cannabis accounting needs today. By implementing effective accounting practices, you can gain insights into your dispensary’s financial health, improve cash flow, increase profit margins, and avoid tax penalties.
DOPE CFO is a proud member of the National Cannabis Industry Association!
Compared to other verticals in the industry, such as cultivation and processing/manufacturing, dispensaries face even more hurdles. The IRS is especially strict with dispensaries, which makes it crucial for accounting professionals serving cannabis businesses to keep track of their clients’ inventories. Failure to do so could result in an IRS audit that could cause significant problems for the dispensary. Therefore, tracking inventories through weekly cycle counts and reconciling them to POS and seed-to-sale systems is essential.
Those that have been in business before are more likely to understand why you need information to support them, but those that haven’t may need some understanding and hand-holding to help them understand why it matters. Together, we can determine whether your written strategies are usable or not. If your plans are leading you down the wrong path, we can design something new that will help you achieve your short and long-term financial goals. Marketing, operational, and financial strategies must translate into actionable tasks that a designated team can reasonably carry out with ease within a given period. An accountant can help with cash handling procedures that protect their bottom line. It is a good approach to creating an action plan with your clients.
Setting Up Your Dispensary’s Bookkeeping System
The most important part is following the regulations in the links above, as well as the state laws where the Cannabis company resides as well as your own state laws. Also if you are a CPA or Enrolled Agent or other certification, make sure to check with your State Accountancy board and/or whatever agency regulates any license you have. Our Nationally Recognized Cannabis and CBD Accounting program has helped over 800+ accounting professionals get started quickly, and build their accounting practices past six figures in under 90 days. Bookkeeping for dispensaries is an extremely important aspect of your business.
As such, any business that distributes, owns, or processes cannabis products is technically “trafficking” it, regardless of the intent. Therefore, the options for reducing tax liability are greatly reduced for cannabis companies. It should be noted that the court in this case placed much weight on the fact that the company held discussion groups, regularly distributed food and hygiene supplies, and provided specific counselors and counseling services.
Especially in recent years, the cannabis industry is thriving fast and the need for expert bookkeepers and accountants is soaring. Although the cannabis business is illegal in numerous parts of the world, it is being increasingly announced legal in myriad states and countries around the world. Efficient inventory management aims to maximize gross profit by minimizing COGS and preventing write-downs.
In fact, many CPAs have chosen to not serve in this industry, meaning most Cannabis companies have bookkeepers doing the day to day books. There is a huge need for qualified (meaning educated in Cannabis and CBD/hemp accounting procedures) accountants and bookkeepers to serve this industry. 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…
With proper bookkeeping, you always have a clear picture of your business’s financial health. You know how much money you have coming in, where it’s going, and what your profit or loss is. Dext Precision – intelligent data cleanup, bookkeeping, and compliance tools designed for Xero and QuickBooks Online professionals. Identify mis-codings, track key liabilities, and spot unwanted changes to historical data. This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.
When inventory becomes obsolete or damaged, it needs to be written down in value on the income statement. COGS and inventory management practices directly affect gross profit, too. Effective inventory management helps maintain an optimal level of inventory. Consider using specialized inventory management software designed for the medical industry.
