Do you operate a cannabusiness but still have questions about how to manage your funds and run your company? You’re not the only one! You and the cannabis business are both still in their infancy – you can expect to have lots to learn.
With continual law changes and a growing acceptance of cannabis in society, questions are totally understandable (even anticipated) whether you’re an experienced business owner or not.
To help you properly position yourself for success in this booming sector, I’m delving into some of the most often-asked questions I get about managing your cannabusiness and your financial needs.
Which Services Do I Need for My Cannabusiness?
Any business needs several partnerships to manage it, and carefully nurtured partnerships. You’re reading this article because you have financial questions, but the truth is this: you really need a team of pros on your side, particularly:
- A cannabis expert: they can help you meet all the requirements for a license and improve your chances of being permitted to sell cannabis (Read more here).
- A lawyer: you’ll need one for guidance on compliance rules and aid with real estate, intellectual property, and trademark issues (Read more here).
- A security team: they’ll help safeguard your on-site merchandise and cash
- A bookkeeper, accountant, and tax preparer: to help you gain understanding of the most important aspect of your company: your finances. That’s what this entire article’s about, so stick with me.
To Grow Your Business, You Need This Lineup Of Financial Experts
The financial advisors you work with should ideally have experience in the cannabis sector. You’ll want them to at least have experience in related industries. For instance, you’ll want them to be familiar with the needs of an agriculture business if you run a grow operation.
As your business grows, a pro accountant is just what you need to understand your cash flow and your expenses.
When you become too busy to manage your daily financial team yourself and want to make sure your books are accurate and up to date, you may also choose to employ an accountant. To assist you in making more current, well-informed judgments, your accountant may generate monthly statements rather than the bookkeeping team’s quarterly or monthly reports.
Your accountant can also assist you in structuring your company, particularly for 280E compliance and the present federal classification of cannabis as a Schedule I substance.
To maximize your tax benefits, should you operate two businesses? Does your state levy sales taxes on marijuana? While a CPA or tax preparer will be able to provide you with more sophisticated tax guidance for your cannabusiness, an accountant may be able to assist you with the above questions.
Your accountant will continue to offer services like:
- Inventory and point of sale verification/reconciliation
- Accounts payable and payroll management
- Collaborating with your tax preparer to adhere to state regulations
In the end, you want someone who can relate to your needs and provide support and guidance to help you figure out how to make the most of your profits and safeguard your bottom line.
Bookkeeping Means More Than Just Reconciliation
Having your books in order doesn’t just mean reconciling each and every transaction that takes place in your company, however that is an essential component of it to guarantee your continued profitability.
It goes further than just comparing earnings and spending, though. The services you require are heavily influenced by the kind of business you own and how you run it. Do you need systems, POS installation, or setup?
Additional services that you could require include:
- Bookkeeping services to keep clean, compliant books, and produce monthly or quarterly financial statements and guidance on trends from one quarter to the next.
- Services from a controller or CFO to get in-depth advice on enhancing processes, efficiency, and profitability as well as management of your internal finances and periodic financial evaluations.
- Tax preparation services to make sure you’re receiving the most tax advantages.
Professional bookkeeping services that are outsourced will help you breathe easier, guarantee compliance, and greatly increase your potential for growth.
What Will Accounting Cost Me?
The majority of firms discover that their accounting costs 1-2% of their sales revenue. However, it ultimately depends on your add-ons, levels, and services. By guaranteeing compliance, completing reconciliation, and supporting you with forecasts, specialized cannabis accountants are a worthwhile investment to help to secure your revenues.
One of the most frequent questions I receive is, “How much are your cannabis accounting services?”
The real answer, though, is totally dependent on your company, its complexity, and your requirements. If you’re just starting out, expenditures can involve setup or a file review and clean-up to determine where you are and bring you into compliance, which often entails one-time payments.
Then there are the services you need on an ongoing basis, like an outside controller, CFO or bookkeeper.
What Services Are A Must-Have For My Business?
Accounting services are a significant investment in the success of your company. In the end, the precise amount you’ll pay for this investment is determined by the size of your business and the services you require. Some of the services to think about are listed below:
- Management of compliance in accordance with IRS Section 280E, which entails figuring out tax responsibilities and managing risk strategically and effectively.
- Accounting and bookkeeping services delivered via the cloud keep your books organized so you can concentrate on reaping the real rewards.
- The next level of bookkeeping provided by external controller and CFO services. By providing you with the data you need to make wise financial decisions, this level of accounting services makes sure that all of your hard work doesn’t go for nothing.
On the other hand, if you’re just starting off, you need help setting up your books and systems. There are several solutions available, and the ideal system for your organization might not be suitable for someone else’s. You’ll need assistance from someone who is knowledgeable about your business and in a position to advise you on the best system and tech stack.
You can see now that there are many factors to take into account while evaluating price. Take the plunge and capitalize on the enormous possibilities you’ll receive by hiring a seasoned accounting staff. (We’d love to help — contact us today to get started!)
What Should I Do With My Business Plan?
You started with a professional cannabis business plan, but now it’s time to assess it, compare it to what actually transpired, and understand what you need to change going forward.
When it comes time to open their doors, many new cannabusiness owners struggle because they construct a business plan to get licensed but don’t know how to implement it. The key lesson here for you (if you’re in this boat) is that your marketing, operational, and financial strategies must be broken down into doable tasks assigned for you and your team to do.
Additionally, you should regularly compare actual profits to those projected in your plan. To assess the plan, make any adjustments, and/or create a new plan for the future, you need day-to-day accounting and reporting.
The majority of bookkeepers work “after the fact,” which means they are constantly scanning the past. Yes, it’s critical to keep accurate records and have a thorough understanding of what happened last month and year, but it’s also crucial to be aware of the now so you can act wisely.
That’s exactly why we advise solutions that can provide you with up-to-date information and appropriately display your profitability.
You can get accurate, real-time information on what’s happened in the past, and what’s happening now so you can make the best financial decisions when you work with an accountant with cannabusiness experience who knows the tech stack needed to expand your business.
Why Do You Need So Much Intel On My Business?
Since the cannabis industry is expanding rapidly and sometimes feel fiercely competitive, it can be difficult for novice cannapreneurs to feel completely at ease discussing their business plan. And I get it! Your company is your baby, and you want to both protect it and watch it flourish.
That’s exactly why you’re hiring someone like me to help you. Whether it’s me or someone else, your accountant needs the most detailed picture possible to be productive and provide you with the greatest advice.
Taxes: What Do I Need To Know?
When selling cannabis, there are three main tax kinds to be mindful of. Although they differ greatly depending on your state, they basically come down to:
- Regular taxes imposed on retail goods (called sales taxes).
- State taxes – an excise tax (on top of regular taxes) that is only applied to marijuana and can range from 20 to 35%.
- Some states additionally tax marijuana used for recreational purposes (called recreational use taxes). Furthermore, these taxes are determined based on THC content or weight rather than the cost of goods.
A cannabis accounting expert can clarify the taxation topic and make sure you’re fully compliant.
How Do I Choose My Cannabis Business Target Market?
When it comes to the cannabis market, there isn’t a lot of information yet, but don’t be discouraged by that. You’re a part of something innovative and exciting, and there are many advantages to talking with your clients and potential buyers directly.
You read that right! To effectively market your company, you’ll need to think outside the box and begin with identifying your target market.
Start doing some interviews once you have an idea of the demographic that would be interested in your product to find out where your services and their wants align.
If you have customers already, talk to them so you can more precisely define your target market, match your approach to address pain points, and understand their wants and needs.
Get to know the neighborhood where your cannabusiness is located. Do other similar businesses already exist? Who are they aiming for – and why? What role does pricing play?
When you make the effort and conduct thorough market research, your business will pay off sooner rather than later!
Your Accountant Can Assist You In Finding A Lucrative Market
You can get help from an accountant who specializes in cannabusinesses in finding a potentially lucrative target audience.
Additionally, they will be able to forecast the times of the year you can anticipate earning the most money from each relevant market. Keep in mind that accountants will be gathering the exact same data that industry experts will use in upcoming reports on the cannabis sector.
You can avoid having to wait for crucial marketing data by hiring one..
I’ve given you a lot of food for thought, but I want to leave you with the following two takeaways:
- Compliance is critical. To make sure you’re on the correct path and keep yourself out of trouble, don’t be afraid to conduct an audit at any stage of your business journey.
- The key to making significant gains is your financial partners. You have a lot of earning potential – one estimate states that US cannabis enterprises might generate $130 billion in annual profits by 2024!
Additionally, it implies that the industry will have many moving pieces and that you will need staff to manage all of the movement.
We can help you grow the right way as a cannapreneur. To find out how to become a real up-and-comer in the cannabis industry with timely systems and specialized accounting from experts that can address all of your needs, schedule a free consultation with us today!