When you’re running a marijuana dispensary, there are so many things you have to think about. In addition to marketing, pricing and design, accounting is one of the main causes of a dispensary owner’s headaches.
Cannabis is still a young industry, no matter how meteoric its growth is. There are a lot of issues on the road to running a successful business.
In this rundown of common dispensary accounting problems, you can find valuable tips and solutions. Know about the problems before they come up and you will be able to mitigate them with ease.
A lack of knowledge about laws and regulations
You would be surprised to hear that a majority of dispensary accounting problems come from ignorance. Many dispensary owners enter the industry with insufficient knowledge about state regulations, taxes and the cannabis industry as a whole.
Read books, articles and find an advisor that will guide you through the entire process. Disregarding a law or a certain amount you have to pay in taxes can have devastating consequences for your dispensary.
It’s also wise to find a CPA that has experience in the cannabis business. They are notoriously hard to find because of two reasons. Firstly, cannabis is still a new frontier in the US and many accountants don’t have enough experience to mitigate or prevent any dispensary accounting problems.
The second reason is related to personal conviction. Some accountants are reluctant to work with dispensaries because cannabis is still a Schedule I drug on a federal level.
Most importantly, look for a CPA that knows the effects and properties of Internal Revenue Code Section 280E and what deductions are allowable for your dispensary.
Opening a bank account
Opening a business account for your dispensary is much harder than it sounds. Banks are technically registered federally and have the right to operate in any state. However, this coincides with the United States Controlled Substances Act which classified marijuana as illegal. Therefore, almost every bank is hesitant to grant a bank account to dispensaries. This will likely change when the ban on cannabis is finally lifted.
In some cases, a knowledgeable and experienced CPA can help you open a bank account through some loopholes in the law. This all depends on the state you’re in. If you do manage to get a bank account, you will have to go through living hell with all the documentation, verifications and other requests.
Moreover, if you can’t open a bank account, a good CPA will advise you on how to run your business on a cash-only basis. In recent years, there are also CPAs who know how to work with cryptocurrency. This approach requires significant knowledge.
Regulating your accounts
One of the most prominent dispensary accounting problems is keeping track of each and every account you have. Without a proper system of account organization, you will be more prone to accidental tax evasion and incomplete reports. Work with your CPA to create a system that you too can use and monitor, even without his or her help.
The best way to approach this dispensary accounting issue is to create an accounting chart. This form of organization allows you impeccable bookkeeping, as well as the opportunity to defend yourself against the IRS.
They are known to target dispensaries, so having an accounting chart will give them an overview of the legitimacy of your business.
Income tax audits
Perhaps the most annoying dispensary accounting obstacle are income tax audits. The IRS will flag any and all cannabis businesses because of the nature of their niche.
Due to the lack of legality of cannabis, there is increased suspicion that dispensaries are working illegitimately and acquiring funds from illegal means. To survive auditing flags, you need to be prepared for “impact” and work closely with your CPA.
A great CPA will advise you about potential incoming audits from one or more taxing authorities. It’s even better if they know tax attorney. Such a connection may help you retain your business and funds in the midst of an ongoing audit.
Remember, it’s essential that you prepare for the possibility of an audit. The more diligent you are, the lesser the consequences will be.
Understanding business software
Never hire a CPA who isn’t knowledgeable about modern technology and business solutions. You need to have a consistent advisor who will tell you whether you’re using a program wrong or if there are security issues.
The best option for dispensaries is the use of cloud accounting solutions. This gives you an extra layer of security, as well as insurance if something happens to your physical hard drives.
Talk to your CPA about creating a number of virtual backups. Update these backups on a weekly basis to ensure all your information will be safe. Discuss other modern business solutions, such as POS systems that will benefit your business. An experienced CPA will know all the pros and cons of a particular program. Listen to their advice.
Safety of assets
Remember, your dispensary always has a large quantity of federally illegal contraband on hand, as well as a large amount of cash if you’re without a bank account. This makes your business vulnerable to security breaches and burglaries.
The best way to combat this is to start with limiting employee access. People who work at the dispensary should only have access to what they need.
Ensure your entire object and install a video security system. Make sure that there is also an emergency button under the counter, in case an employee is faced with an armed robber. CPAs can also advise you on internal control practices and how to implement them.
Hire a personal consultant and a good CPA before you tackle any of these problems. Be prepared for scrutiny and regular audits from the authorities. Keep track of everything and constantly update your knowledge about local and federal laws and regulations. Even the biggest dispensary accounting problems can be solved with just enough preparation.