The cannabis industry is expanding, but with this growth comes problems. As demand for the plant continues to rise and new legislation allows more states to legalize the use of marijuana, accounting has become a massive challenge in this sector.
Whether you’re feeling limited in your access to traditional banking services or running into costly infractions like inventory management, it’s crucial to handle these issues promptly. Mistakes left unresolved can destroy everything you’ve earned up until today.
Keep these common accounting problems in mind as you handle the day-to-day of your cannabis business.
Problem #1: Difficulties in Getting Banking Service
The cannabis industry is booming, but it’s still a cash-only business. This means many companies are forced to operate without essential banking services, like checking accounts and credit lines.
Most of the time, when someone first starts a cannabis company, banking and the financial aspect of the operation are the first considerations. But without accessible banking services, the available options are limited.
Cannabis business operators need an alternative solution that provides the same features and benefits as a bank account. However, they need these financial services without the hassle or risk involved in dealing with traditional financial institutions.
Because marijuana remains illegal under federal law, banks have little motivation to offer financial services to cannabis businesses. In fact, there’s some risk involved for federally monitored lenders.
Without access to traditional banking solutions, your business may be forced into the shadows with cash-only transactions or face legal consequences for operating outside the law. This also means you have no way of tracking their profits and losses accurately.
And then there are the significant security risks to consider. Storing large amounts of cash at cannabis facilities is an incredible risk, but without another available option, it can become a reality for many of these business operators.
A Cannabis Merchant Account offers all the features and benefits you’d expect from a regular bank account, including online banking capabilities, credit card processing support, direct deposit options, and more. These accounts can help you track your business’ sales effectively while keeping your money safe from theft or robbery. However, you’ll need to ensure that your business is compliant with all rules and regulations.
Cannabis businesses need help staying compliant while also achieving growth goals and managing their finances effectively. A professional accountant who understands this growing industry’s unique needs can help you manage your money—and keep you out of trouble in the process! Want to grow while avoiding compliance-related risks and potentially costly infractions? Consider bringing in a professional accountant.
Problem #2: Expired or Irrelevant Licenses
It’s tough to be a cannabis business owner. You have so many things to worry about, from finding the right location, getting your license, keeping it up-to-date, managing employees, paying taxes on time, etc. Moreover, many cannabis business operators make a critical compliance error by failing to maintain the proper licenses.
As we mentioned previously, businesses must keep all required documents on hand at all times so that they’re ready when regulators come knocking with questions about your operation’s status. That way, you’ll never need to worry about whether you’ve maintained the proper licenses throughout your business period.
Simply put, you need a good accountant on hand to guide you away from these issues.
Your first step should be hiring an experienced cannabis CPA who knows how to handle risk in this industry. This way, they will make sure that you get all the licenses you need and pay them on time. They will also help with payroll taxes, income tax returns, etc.
With the way the world is going, some cannabis CPAs are willing to work remotely, without visiting your facility every day. This saves both their time and yours!
Problem #3: Failing to Report Inventory
Some states make it incredibly easy to track your inventory by using RFID tags attached to each product. If you fail to tag your plants or products correctly, you risk getting slapped with fines and penalties from the state for a compliance infraction. This can be costly for any small business owner who relies on income from sales to pay employees and other expenses associated with running a successful operation.
To solve this issue, you’ll need to implement an inventory system that will facilitate submitting compliance reports regularly.
Having a system in place makes this more accessible because it keeps track of what has been sold over time and how much product remains at all times. It makes reporting easier without sacrificing accuracy or missing deadlines set forth by regulatory agencies.
Some regulatory agencies involved in overseeing cannabis operations include state governments or even federal entities like the Food and Drug Administration (FDA). So, when it comes to cannabis accounting, it’s best to stay up to date on all regulations and demands.