Why if starting a cannabis business, you should learn some accounting first
Accounting is an asset to the cannabis industry. The cannabis industry has boomed since the legalization of cannabis in Canada as well as many US states.
Many businesses have been established on large-scale providing cannabis jobs for many persons. Some of these businesses include marijuana dispensaries, companies, and grow operations. There are many challenges cannabis businesses face, such as getting a bank account. This is because cannabis is controlled federally. Many banks are reluctant to do business with cannabis clients. However, there is a list of guidelines issued by the federal government to the banks regarding legal cannabis businesses.
An accountant can be very useful in providing you with banking services. Starting a cannabis business can be very rewarding, but there are also problems that you may face. It is recommended that you learn some accounting skills. Knowing accounting can be an asset to you and your business. It is important to know Generally Accepted Accounting Principles (GAAP). This is a set of standards that guides how account books are kept.
Some federal agencies may oversee and monitor cannabis businesses to see if their practices are business-like. The SEC and IRS are two agencies that cannabis businesses must be aware of. Both SEC and IRScan charge the business a fine. Also, they can cause the business to be criminally charged. When you use Generally Accepted Accounting Principles, (GAAP), you will have little or no problem if these agencies ever inspect your accounting books.
Additionally, a cannabis entrepreneur should learn to account. This knowledge of accounting can help your cannabis business to avoid tax issues that may arise. You should know which taxes to pay first as well as which taxes apply to your business. It will be harmful to your business if the payment of taxes is neglected.
Furthermore, knowledge of accounting can also equip you with the skillset to survive audits. An audit is an official inspection of an organization’s financial documents. Cannabis businesses will usually be targeted for auditing than other businesses. This is so because cannabis was once illegal in many States. As a result, there is much effort exerted to regulate the operations of the cannabis business. Accounting is necessary to a business whether you hire an accountant, or you are an accountant yourself. It is paramount that you comply with the federal agencies request to see your financial documents. This will provide them with evidence as to whether you are carrying out legitimate business practices.
Considerably, a cannabis business such as a marijuana dispensary must be understood based on its cash flow and profit/loss. Understanding numbers is crucial to the proper functioning of the business. A marijuana dispensary usually faces problems with managing their cash. Cannabis is still illegal on the federal level. Therefore, many banks will not give their assistance to cannabis businesses. As a result, many dispensaries collect only cash from customers. Overtime, we may see some improvement in the ‘cash only' system.
Prospective cannabis business owners can learn to account before starting his business so that he can be able to know if an employee is embezzling money from his business. The business owner will also be able to ascertain whether the business is profitable or not. Accounting skills can also allow you to make better investment choices.