The cannabis industry is rapidly evolving, and with that comes a variety of new tax laws and regulations that need to be accounted for. Financial health and stability are the core of any business, especially one that remains as fluid as the cannabis industry. Here we’ve identified four key areas in which to focus your resources to ensure the financial future of your cannabis business.
Keep Detailed Records
Every transaction made from the inception of your business should be tracked to ensure you have an accurate measure of all expenses and revenues. In any business, it is important to have detailed records. Due to conflicting laws and regulations at both the state and federal level, this is even more vital in the cannabis industry. Quarterly reviews of your finances should be performed. Ideally, you’ll want to have a dedicated accountant to keep track of and to develop your financial statements. “A complete set of financial statements is made up of five components: an Income Statement, a Statement of Changes in Equity, a Balance Sheet, a Statement of Cash Flows, and Notes to Financial Statements.” Each of these items has a particular function that will help you to understand the actual financial state of your business and identify areas of opportunity.
Stay Abreast of Tax Laws and Regulations
As the cannabis industry grows and becomes legal in more areas, tax laws will continue to evolve. Perhaps more than any other industry, being compliant with tax laws and state regulations can determine the fate of your business. Performing your own due diligence, as well as regularly consulting with an expert, can help to ensure your compliance. In an industry that remains largely controversial, a legal mishap can spell disaster for your organization. Investing in the financial side of your business is essential, especially in the early years of this burgeoning industry. “Getting everything right is crucial in developing positive relationships with government regulators, vendors, end consumers, and ultimately protecting the bottom line.”
Maximize your Inventory
In most cases, inventory is the most significant expense for cannabis-centric businesses. Keeping accurate track of your inventory and avoiding a surplus is essential when your primary product has a limited shelf life. Software that tracks your inventory has a myriad of benefits. It can help reduce waste, identify your top products, and even uncover potential theft. “Seed-to-sale tracking and inventory management directly impacts a cannabis business’ profitability and compliance with tax regulations. Therefore, it’s critical that a cannabis business master inventory tracking to be successful.” There should also be a plan in place when a surplus does occur. Cannabis is a very versatile product, and there is a myriad of ways you can extend its shelf life to help minimize loss.
Incorporate Financial Technology
Employing a robust financial platform is one of the best ways to track all of your financial transactions accurately. Having this information all in one place will help you to stay within the confines of state and federal regulations and make it much easier for your business to scale. With the right software, you can quickly determine areas of opportunity, which will help you to make more sound financial decisions for the future. When selecting your financial software, it is best to look for a company and platform that specializes in the cannabis industry, as there are several nuances unique to this industry.