With an influx of new businesses in the cannabis space, it is easy to get caught up in the opportunity that this burgeoning market brings. As marijuana makes it’s transition from a street drug to a medicinal substance used in various treatments, to a state-legal - yet Federally classified Schedule I drug, some investors and CEOs are making the crucial mistake of not treating their investments as businesses.
Here are some common missteps that canna-business startups can avoid, and protect their investments.
Under most States cannabis licensing requirements, thorough financial accounting and record keeping is part of State Law. A number of states have very high penalties for not keeping accurate books and financials. Under IRS codes sections 280E and 471, accrual accounting (as opposed to cash accounting) is required to maximize allowable allocations of certain costs into Cost of Goods Sold (“COGS”) and Inventory. See more information on 280e here: http://thecannabisindustry.org/federal-policy/
Below is an example of state accounting requirements (Oregon guidelines):
845-025-1200Financial and Business RecordsIn addition to any other recordkeeping requirements in these rules, a marijuana licensee must have and maintain records that clearly reflect all financial transactions and the financial condition of the business. The following records must be kept and maintained for a three-year period and must be made...
In a recent article by DOPE CFO's Andrew Hunzicker, he shares five secrets to launching a cannabis accounting firm.
"To succeed in an accounting business in the booming cannabis niche, firms must be able to deliver real value to clients."
Andrew Hunzicker has created a course to teach other CPAs, accountants and bookkeepers what they need to know to break into the cannabis industry.