Accounting Services You Need As A Cannabis Business Owner

Are you a cannabis business owner who still has a lot of questions, especially pertaining to finances and running your business? Don’t worry — you’re not alone. The cannabis industry is still budding, and you are, too. 

Whether you’re already in the game or just starting out, questions are normal and even expected with ongoing changes in the law and a widening societal acceptance of cannabis. 

I’m breaking down some of the most common questions I get as they relate to running your cannabusiness and understanding your financial needs so you can confidently position yourself for success in this thriving industry. 

What Services Does My Cannabis Business Need? 

It takes a village — or intentional partnership — to run any business. You’re reading this because you have questions on finances, but the reality is there are multiple professionals you need on your team. 

In particular, you’ll want to work with

  1. A cannabis consultant, so that you can fulfill all the license requirements and increase your chances of getting approved to sell cannabis (Read more here).
  2. An attorney, for assistance with compliance regulations and help in real estate, intellectual property, and trademark matters (Read more here). 
  3. A security company, so that you can protect your cash and inventory, which you will likely keep on site.
  4. A bookkeeper, accountant, and tax preparer, so that you can get insight into the most critical area of your business — the finances. Keep reading to learn more about this vital trio.

The Financial Professionals You Need to Support Your Business

Ideally, you’ll want your financial professionals to have a background in the cannabis industry. At a minimum, you’ll want them to have experience in similar verticals — so for example, if you have a grow operation, you’ll want them to understand the intricacies of working in agriculture.

When your business is picking up, an experienced accountant is the expert you need to help you understand new developments in your cash flow operations and your growing list of debtors.

You might also want to hire an accountant when you can no longer supervise your day-to-day financial team yourself and want to ensure your books remain current and accurate. Instead of your bookkeeping team preparing monthly or quarterly statements, your accountant may prepare monthly statements to help you make more up-to-date, informed decisions.

Your accountant can further help you organize your business structure, especially for 280E compliance and the current cannabis classification as a Schedule I substance under federal law.

Should you have two businesses so you can make tax deductions? Does your state tax cannabis sales? These are questions an accountant may be able to help you with, while a CPA or Tax Preparer will help you with more advanced tax advice for your cannabusiness.

Your accounting professional will provide ongoing services like:

  • Reconciliation to inventory and POS
  • Payroll
  • Budgeting
  • Forecasting
  • Payables management
  • Sales 
  • Coordination with your tax preparer to abide by state laws

Ultimately, you want someone who understands your needs and can offer guidance and support to help you know how you can maximize your profit and protect your bottom line.

What Does It Mean To Have Your Books Done? 

Having your books done doesn’t just mean reconciling every single transaction that occurs in your business — though that’s a crucial part of it to ensure you remain profitable.  

It also goes beyond simply comparing income and expenses. The services you need depend largely on the type of business you own and how you operate it. Do you need set up, systems, or POS implementation?

Some more services you might need include:

  1. Essential bookkeeping for establishing and maintaining compliant, clean books, plus providing monthly or quarterly financial statements and guidance on trends from month to month or quarter to quarter. 
  2. Controller or CFO services for in-depth guidance on improving your workflows, productivity, and profitability, plus oversight of your in-house finances and regular financial reviews. 
  3. Tax preparer services to ensure you’re getting maximum tax benefits.

Outsourced professional bookkeeping services will bring you confidence, ensure compliance, and significantly boost your growth potential.

What Can I Expect For An Accounting Line Item?

When it comes to understanding what you can expect to pay, most businesses find that their accounting line item is 1-2% of topline revenue. Ultimately, though, it depends on your services, levels, and add-ons. Specialist cannabis accountants help to protect your profits by ensuring compliance, conducting reconciliation, and helping you with forecasting. 

One of the biggest questions people ask me is, “What do your cannabis accounting services cost?”

It’s a good question, but the answer depends entirely on your business, its complexity, and your needs. Typically, costs might include setup if you’re just starting out or a file review and clean-up to understand where you are and bring you to compliance, which usually incurs one-time fees.

Then there are ongoing services, whether that’s bookkeeping or an outsourced controller or CFO.

So, What Services Do I Need?

Professional accounting services are an important investment in the health of your business. And the actual amount you’ll spend depends on the size of your company and the services you need. Here are some of the services you may want to consider:

  • IRS Section 280E Compliance management, which involves strategically and effectively managing risk and determining tax liabilities. 
  • Cloud-based bookkeeping and accounting services help keep your books clean so you can focus on raking in the real green.
  • Outsourced controller and CFO services take bookkeeping services to the next level. This tier of accounting services ensures you have the information you need to make sound financial decisions and ensure all of your hard work doesn’t go up in smoke. 

Then again, if you’re just getting started, you need someone to set up your books and systems. There are endless options out there, and the system that’s perfect for your business might not work for someone else’s company. You’ll need guidance from someone who understands your company and is positioned to help you figure out the right system and tech stack.

You see now that there’s a lot to consider when you’re looking at price. Bite the bullet and take advantage of the immense potential that you’ll get from investing in a professional accounting team.

I Have A Business Plan, But What Do I Do With It?

You started with an expert cannabis business plan, but now it’s time to evaluate your original plan and compare it with what really happened so that you can understand the differences and make adjustments moving forward. 

The challenge many new cannabis business owners face is that they create a business plan to achieve licensure but don’t know how to work the plan when it finally comes time to open their doors. If this sounds familiar, the big takeaway for you here is that your marketing, operational, and financial strategies need to translate into actionable tasks designated to a team to carry out.

Plus, you should be consistently measuring actual profits against those you forecasted in the plan. You need day-to-day accounting and reporting to evaluate and adjust the plan and or make a new plan moving forward.

Most bookkeepers deal in “after-the-fact”, meaning that they are always looking in the rearview mirror. While it is important to retain clean books and gain a solid understanding of how last month or last year went, it’s just as important to know what’s happening right now so you can make good decisions. 

It’s why we recommend systems that can give you up-to-date figures and accurately showcase your profitability levels. 

When you partner with a cannabis accounting specialist who understands the tech stack needed to grow your business, you get information on what happened last month and real-time data on what’s happening right now so that you can make the best financial decisions.

Why Do You Need All This Information On My Business?

The cannabis marketplace is growing at an astronomical rate and may feel highly competitive, so it’s often hard for new cannapreneurs to be 100% comfortable sharing their business plans. And I understand — your business is your baby, and you want to simultaneously protect it and let it thrive.

That’s exactly why you’re hiring someone like me to help you. So in order to be effective and give you the best advice, your accountant — whether that’s me or someone else — needs as complete a picture as possible.

What Taxes Do I Need To Be Aware Of? 

There are three major tax types you need to be aware of when selling cannabis. Although they vary drastically based on your state, they boil down to:

  • Sales taxes — the regular taxes levied on retail goods.
  • State taxes — an additional excise tax imposed on marijuana only that tends to run as high as 20-35%.
  • Recreational use taxes — some states also tax recreational use marijuana. And instead of being based on prices, these taxes are calculated based on THC content or weight.

A cannabis accounting professional can unravel the subject of taxation and ensure you’re in full compliance.

How Do I Determine My Target Market In Cannabis? 

There’s not a lot of data on the cannabis market — at least not yet. Don’t let that deter you. You’re part of something new and exciting, and directly communicating with existing and potential customers has tons of benefits. 

That’s right. 

You’ll need to throw on your resourcefulness hat to market your business well. Of course, it begins with finding your target market first.

Once you have a solid theory of what group might be interested in your product, start doing some interviews to determine where your services converge with these people’s needs.

Already in the game? Great! 

Ask your existing customers for feedback so you can better pinpoint your target market, align your strategy to alleviate pain points, and tap into their wants and needs.

Learn all about the community where your cannabis business is. Do you have competitors? Who are they targeting, and why? How big of a factor is pricing for your market? 

It pays sooner rather than later when you put in the effort and do proper marketing research. 

An Accountant Can Help You Identify A Profitable Market

An accounting professional who specializes in cannabis businesses can also help you identify a profitable target market.

They’ll also be able to tell you during which periods of the year you can expect to get the most income out of each relevant market segment. Remember, accountants, are the ones who will be compiling the very same numbers that experts will use in future reports on the cannabis industry. 

By hiring one, you get to bypass the wait for pivotal marketing data. 

Final Thoughts

There are two takeaways I’d like to leave with you:

The first is, compliance is key. Don’t be afraid to do an audit at any point in your cannabis journey to ensure you’re on the right track and keep yourself out of trouble. 

The second is that your financial partners are your secret ingredient to major gains. According to one estimate, US cannabis businesses could bring in a yearly profit of $130 billion by 2024, which means you have a lot of earning potential. 

It also means that there’ll be a lot of moving parts in the industry, and you’ll need people to facilitate all that movement. 

Let us help you grow confidently as a cannabis business owner. Book a free consultation with us to learn how you can show up in the cannabis market with timely systems and specialized accounting from professionals who can answer all of your burning questions!