5 Accounting Issues Legal Cannabis Businesses Face
How the Right Cannabis Accountant Can Help Grow your Business
Having an Accountant with experience in cannabis accounting can help you grow your business and avoid major roadblocks. More cannabis businesses are cropping up as more states move towards legalizing medical and recreational cannabis use and commerce. While cannabis dispensaries and grow operations face many of the same issues that any new business must contend with, they also have a unique set of challenges.
- Getting a Bank Account
One of the most fundamental problems facing cannabis businesses is getting a bank account. Because cannabis is still a controlled substance on the federal level, many banks are leery of taking on cannabis clients. Even though the federal government has issued guidelines to banks about legal state cannabis businesses, most major banking institutions are not willing to take the risk of having cannabis businesses as account holders and clients.
An Accountant can help you find the banking services you need, at the lowest possible cost.
- Using GAAP to Keep You Out of Trouble
Generally accepted accounting principles (GAAP) is a set of standards that govern how businesses are expected to keep their books and account for things like depreciation. GAAP is important to the success of any business. But, it is critical to the survival of a cannabis business. Cannabis businesses operate under a microscope.
A variety of federal agencies are actively monitoring cannabis businesses and examining their business practices. Two of the most dangerous agencies for cannabis businesses are the SEC and the IRS. Both of these agencies have the ability to not only fine businesses, but they can also refer criminal charges.
Using GAAP in your cannabis business will help you avoid dire consequences when these agencies decide to examine your books.
- Avoiding Tax Traps
Taxes are always complicated for businesses. But, the IRS has made things especially difficult for cannabis businesses by severely limiting what expenses are tax deductible. An Accountant with experience in the cannabis industry can help you with tax planning and tax compliance.
Nobody wants to pay more in taxes than they have to, but not cannabis business wants to attract the attention of the IRS either.
- Surviving an Audit
Cannabis businesses face a much higher chance of being audited than other businesses. Audits are always rough, but when the agency auditing you feels that your entire industry is illegitimate, audits can be especially painful.
An Accountant can help make sure that you are fully complying with the document requests from the audit and can push back on the unreasonable claims made by the auditor. Having an Accountant on your team while facing an audit may be the only way to survive the ordeal.
- Understanding the Numbers
Most people don’t start daring businesses like dispensaries and grow operations because they wanted a way to use their passion for math. But, the numbers are important for the future of your business. You may not need to know the exact cash flow, profit, and loss numbers for each day, but you do need someone who is closely watching your numbers.
An Accountant is trained to calculate and interpret the key financial indicators for your business. If you want to last in the competitive cannabis industry, you need an Accountant to help you understand your financial strengths and weaknesses. You also need their strategic guidance to make the best tax and investment decisions for the future of your business.