When setting up your first QuickBooks file, create a master chart of accounts in a worksheet outside of the system. Consult with your accountant to properly tailor it to fit the needs of your business. It is fine to have certain accounts that are only applicable to one QuickBooks file.
Final thoughts on bookkeeping for the cannabis industry
- Our applications services group provides strategic direction to help with the entire cannabis license application process.
- The mandated tracking software Cannabis companies are required to use (METRC, BioTrackTHC, Leaf Data Systems, Trace) varies by state, so do specific reporting requirements.
- Cannabis businesses risk losing inventory when not many banks let them open a business account.
- All cannabis business owners who want to thrive in this highly regulated industry must go over the state-specific sets of laws and regulations that govern their operations, including accounting tasks.
- Substances in this schedule have no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.
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. Many marijuana businesses go cash-only if they can’t find a online bookkeeping bank, putting their finances at risk. In this digital age, accounting and finance software helps your business save time and money. It allows you to input financial information, create financial documents and improve cash flow management. Sometimes, authorities at the local, state and federal levels all take different stances. Marijuana accounting needs to stay in touch with all these evolving realities to help keep your business financially and legally secure.
Inventory Management
They are specifically not part of a Cost of Goods Sold expense because they do not contribute to the making of or purchasing of inventory. According to Gallup,two-thirds of Americans support the country-wide legalization of cannabis, a product that garnered over $25 billion in revenue in 2021. With steady growth across the cannabis industry, net sales are projected to boom over the next five years. Whether you’re a bookkeeper looking to find your niche or a cannabis enthusiast starting a business, it’s important to understand the differences between the recreational and medical marijuana industries. Another big headache for cannabis bookkeepers and accountants is the buggy seed-to-sale software requested by local regulations.
Office of Cannabis Management
Accountants should establish a consistent line of communication with warehousing teams, collaborating closely to ensure that inventory numbers stay aligned with real-world quantities. Regular reconciliation of physical stock with recorded data is essential to detect any discrepancies and rectify them promptly. Due to the federal status of cannabis, many banks are hesitant to offer services to cannabis businesses. This results in unique financial management challenges, from cash handling to securing loans. Medical marijuana businesses must comply with strict regulations, unique taxation provisions, and reporting requirements while dealing with discrepancies between federal and state laws. This can impact operating and maintenance costs, employee wages, and overall profitability, which can make or break a company’s success.
- Brad is a nationally certified bookkeeper and has a Masters in Accounting and Finance.
- If you work with an industry-smart marijuana bookkeeper, they can help you find the best solutions to keep and grow your money.
- Under each main category, transactions are further itemized into smaller categories.
- Accounting is essential for all companies, but it’s especially important for those operating in the cannabis industry.
- Cost of Goods Sold, specifically, is the cost of what was purchased to resell (flower, edibles, etc…).
However, with the right approach, tools, and expert guidance, beginner farmers can navigate cannabis accounting the world of medical marijuana accounting with confidence and precision. • Cannabis Accounting Education and Training—Provides seminars, workshops, whitepapers, and templates guiding bookkeeping professionals and business owners in operating their cannabis businesses compliantly. For example, ordinary business expenses often include rent, utilities, and wages.
And remember that many tools, such as Distru, can streamline medical marijuana accounting. Our software is equipped with finance-oriented features and integrations that can help you save time, guarantee accuracy, and ensure compliance. The right accounting method can significantly impact your medical marijuana business’s tax liability. If you need to make sure your financial reporting is accurate, accrual accounting may be the best technique for your company. Let’s dive into the tax implications for medical marijuana businesses, some strategies to minimize liabilities, and best practices to ensure IRS compliance. This provision Law Firm Accounts Receivable Management makes it more challenging for cannabis businesses to remain compliant with IRS regulations.
- A budtender could take product and then reduce the amount of inventory to reflect a reduction in product and thereby hide the theft.
- Cash-only businesses can be challenging to manage, and those in the cannabis business are no exception.
- With the right accounting support and expertise in your corner, you can put the processes in place to properly manage your tax liability, safeguard cash and product, and make better, more informed decisions going forward.
- This not only aids in financial reporting but also in compliance with state regulations.
- You must understand the financial health of your business and make informed decisions.
Therefore, finding a person with the necessary skill set to keep good records for your cannabis business is important in several ways. Cannabis accounting processes, as a result, must implement complete record-keeping to ensure a compliant inventory environment. Shoeboxed is an expense & receipt tracking app that helps you get reimbursed quickly, maximize tax deductions, and reduce the hassle of doing accounting. Contemplate industry-related regulatory requirements when customizing your chart of accounts. This article assumes you are currently using, or plan to use QuickBooks as your marijuana business accounting system, but the topics covered are also generally applicable to other accounting systems.