What you need to know about Cannabis Accounting!
As a CEO of a cannabis company, there are many hats that you need to wear, but accounting should not be one of them! Why is it important that you find the right accountant for your company? You may think it is just so that you can get financial information, but that is not the only reason! Here are the top 5 reasons you should upgrade your accounting department.
You do need those financial documents
Have correct and updated financial documents will allow you to not only know where your business is right now, but you will be able to share this information with people that need it. Looking for investors? What about banking? Having financial documents that show you are on top of your business will help with this. Also, a strong finance department brings value to your company.
It's the Law!
Under IRS code 280E, you must be using accrual accounting (this is not cash accounting). Looking at your Cost of Goods Sold (COGS), this can only be deducted from your income for federal tax reporting, and there are parameters that must be meet to deduct.
IRS or State Audits
You should have a strong financial department in place so that when you are sent a notice for an IRS or State audit, you are prepared and ready. Having a strong finance department ensures that you have financial policies and practices in place that have checks and balances. This will make it easier for the audit, and get you through without a penalty. Getting information for the audit can either be easy (great finance department), or it can be difficult and time consuming (no policies or procedures in place).
Making Sound Decisions.
Strong financial reporting will give you as the CEO an inside look at your company. Many CEO's don't put a strong enough emphasis on financial reporting until it is needed. With financial reports, you will be able to make sound business decisions based on how the company is running now, and how you would like it to be in the future.
Exiting the business
As time goes on, you may want to plan for your exit and sale. When this happens, you will have to get your business valued, and many times audited. If you have a strong financial department, you will have the information needed in a clear, concise form that will increase the value of your business. With chaotic record keeping that is scattered all over, they could find inaccurate and troubling information that will decrease your business value.