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Cannabis

In many states, the legalization of the marijuana business is still only a couple of years old. Some cannabis accounting services are still trying to find their footing and figure out the best practices for their clients. GJR Consulting is ready to hit the ground running for your company. We already have experience in the cannabis space and the codes that govern how these businesses operate. We can tell you what to avoid and what will serve you well in the future.    

3 ‘Tricks’ to Avoid in Cannabis Accounting

Being a relatively new industry is not slowing the growth of cannabis companies across the U.S. Inexperience in this thriving market has led many organizations to try to find shortcuts or ‘tricks’ around the tax codes and accounting regulations of selling cannabis. Here are three accounting practices to avoid in your cannabis business. 

  1. Trusting the CEO to handle everything.
    The cannabis industry is one of the most strictly regulated in the country. You must comply with local and federal regulations just to keep the doors open. Your tax planning and accounting services should not be left to just anyone with some bookkeeping experience. Without a professional, experienced partner in your corner, your business could be hit with significant fines or just be shut down altogether.

  2. Trying to shortcut the IRC 280E and IRC 471 Codes.  
    Section 280E of the IRS code prevents any business or trade from making tax deductions or receiving tax credits if any part of their business sells controlled substances. Cannabis is still considered a Schedule 1 substance and falls under this federal law.

    Unlike with other industries, this means you can’t claim typical business deductions such as the costs of administration, marketing, or rent. The one thing you are allowed to deduct is the “cost of goods sold” or (COGS). These rules have led many businesses to wildly over-inflate their COGS. They try to move costs around in complicated ways that can backfire. If done incorrectly, this can end up costing much more than if you had not tried to shortcut the system.    
  3. Not investing in the latest financial tools and processes.

    The strict regulations of the cannabis field require software solutions tailored to their standards. GJR Consulting has the cannabis accounting software to perform all the tasks you need. We even offer training for your staff to keep your books more accurately. Trying to save money by not investing in cannabis software like this ends up costing your business more in the long run. 

Cannabis Accounting Services From an Experienced Firm

GJR Consulting is the accounting firm your cannabis business needs. One of our specialties is navigating the intricacies of Section 280E and other regulations like it. We offer a broad range of financial consulting solutions and business tax services. We believe in collaborating with our clients. You can take advantage of our comprehensive services or just come to us for targeted assistance with things like payroll or tax preparation. 

To learn more about the things to avoid in the cannabis industry or the ways we can help your business, contact GJR Consulting today.

person doing accounting

Cannabis growers and sellers face a unique challenge in the business world. They all work in a heavily regulated industry, and they all need dependable accounting services. Whether you just opened a dispensary or own a long-running cannabis company, nothing will kill your business like issues with cash flow and not handling your taxes correctly. You need an accounting firm that understands the regulations of your industry and the details of business tax services. 

Cannabis Accounting Services Are Still a Growing Specialty

With every month that passes, the legal cannabis industry is growing larger. Legalization is spreading throughout California and across the country at a rate that demands attention—and with legalization comes regulation. A single cannabis business might have to comply with regulations for everything from farming and chemical manufacturing to food production and retail sales. A wide swath of laws govern all these activities, and as a business owner, you’re probably not going to have expertise in all of them. 

At GJR Consulting, we see the cannabis space as an opportunity to flex our skills and increase our capabilities. We can help you with tax preparation for all the new laws that are setting the standards of your market. We offer cash flow management to assist your business in planning ahead for when and where your cash needs will occur. The consulting experts at GJR even offer to train your people on bookkeeping services like QuickBooks. We are here to aid your growing business and help you lay the groundwork for a successful future.   

Accounting Issues for Cannabis Could Cost More Than Just Time

Cannabis small business workers might know which strand or edible to recommend for their customers, but few of them are experts in preventing long-term financial problems. Bookkeeping and creating accurate financial statements are a totally different skill set that takes familiarity with the federal level of legal marijuana regulation and knowledge of accounting tax planning. Businesses can make many common mistakes when they don’t have the help of professional accountants or bookkeepers. 

  • Confusing Cash Flow for Profits: It’s easy to understand how those outside the accounting world might confuse terms like cash flow and profits. Cash flow is the movement of your money in and out of the business from the beginning to the end of the month. Profits are the result of your revenue minus the expenses for a given period. Mixing up these two numbers can cause you to spend more money than you have and overextend your business.
      
  • Recording Transactions in the Wrong Period: Professional bookkeepers, like the team at GJR Consulting, can do what is called ‘closing the books.’ Every month, we’ll figure out your different accounts, prepare financial records, and perform other tasks to close out your books for that month.

    Without these practices, it is a common mistake to put new transactions in a previous period. This mistake will result in total balance adjustments that won’t match your bank reports or financial records. To further complicate things, it will impact your tax records and could cause some harsh penalties from the IRS down the line.  

Cannabis Businesses Are Already Dealing With Heavy Regulation     

Accounting services for cannabis share many of the same challenges as other regulated industries, but on an even larger scale. The cannabis market is already filled with enough sources of stress, and poorly executed accounting can impact an entire staff. Cannabis companies often employ a large number of people, and all of those people need to get paid accurately. You can delve deeper than just our advisory services and have us fully manage your payroll services. Your payroll figures can be made available online for you to access quickly and securely.  

GJR Consulting also offers strategic planning for the future of your organization. We can help you create a long-term business plan for the growth of your business. We go in-depth with predictive evaluations of profits and roadblocks. We research market factors and financial planning. The more time you spend on the foundation of your business, the easier it is to grow. Do yourself and your business a favor: Take advantage of the accounting services at GJR Consulting.    

To learn more about how GJR Consulting can help your regulated business, call us today.

The cannabis industry needs CPAs. Why? It’s a rapidly growing industry, with an economic impact that’s projected to react $70 billion by 2021. However, it’s also one of the most tightly regulated industries in the country, since cannabis is a Schedule I controlled substance, making it illegal under federal law, even though it has various levels of legality in over 30 states.

Cannabis companies need qualified, experienced CPAs to manage their taxes and accounting, as well as their business structuring and inventory management, in the face of strict federal and state regulations. Without professional accounting services, cannabis businesses have trouble staying afloat, since the IRS often targets their finances and bookkeeping to find ways to fine or penalize them, or even shut them down.

If using your accounting skills in the cannabis industry sounds like an exciting challenge to you, here’s what you should do to become a California cannabis CPA:

Educate Yourself

To work with cannabis clients, you need to teach yourself about the cannabis industry. Learn about Section 280E of the Internal Revenue Code, and how the IRS has been enforcing it recently. Make sure you understand Cost of Goods Sold (COGS), which can be used to help cannabis companies claim tax breaks. Find out about political and tax issues surrounding cannabis, including recent court cases. Learning as much as you can about the cannabis industry and effective accounting methods for it is the best way to make yourself a solid resource for any cannabis CEO.

Connect With Other CPAs

As a CPA, you know what your accounting strengths and weaknesses are. That’s why you should reach out to other CPAs as you work your way into cannabis accounting. Gathering partners and colleagues will help you offer well-rounded accounting services to cannabis companies. If tax planning and tax preparation are your strengths, you should partner with a CPA who has strong controller skills to balance things out. If you connect with enough of your fellow accountants, you can start your own cannabis accounting firm.

Reach Out to Cannabis CEOs

Whether you’re acting independently or as part of a cannabis CPA firm, you should begin joining Facebook and LinkedIn groups for cannabis startups. Once you’re a member, begin reaching out to cannabis CEOs with targeted messages and emails. Make sure your messages address pain points that would be important to a cannabis CEO, like tax planning, cash flow management, and compliance measures. State your qualifications and explain how your proposed solutions can help them navigate the complex space of cannabis accounting.

Find an Industry Niche

Carve out your own cannabis space with your accounting and industry knowledge. You could focus on accounting for medical dispensaries, or for retail storefronts, or you could focus on accounting for an entire supply chain. Whichever path you choose, stick to it and become as knowledgeable and experienced in that niche as you can. Finding a niche will allow you to develop expertise, which will help you serve your clients to the best of your ability.

California Cannabis CPAs You Can Count On

At GJR Consulting, we have placed ourselves on the cutting edge by offering cannabis accounting services. We push our work to a place where few accounting firms will go because we understand that cannabis is a legitimate industry, and the companies within it deserve access to top-quality accounting services. If you are interested in our cannabis accounting services, contact us today.

Accounting for cannabis is a complex task. On one hand, the cannabis industry is growing rapidly since 11 states have legalized cannabis completely, and 34 states have legalized medical marijuana. On the other hand, cannabis is still a Schedule I controlled substance, which means it is illegal under federal law. Since they are selling a controlled substance, cannabis companies have an extremely difficult time receiving tax breaks and getting banks to take their money.

Because of these restrictions, cannabis accounting must be accurate and tightly managed. If a cannabis company’s finances are not accurately managed, they can be penalized, fined, or even shut down, according to Dope CFO. Even in California, where cannabis is completely legal, cannabis companies must comply with Section 280E of the Internal Revenue Code, which prevents companies whose business “consists of trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act).” This is what prevents cannabis companies from receiving tax breaks, since the IRS sees them as drug traffickers rather than legitimate businesses. The IRS is currently enforcing Section 280E quite actively, which leads to the fines, penalties, and shutdowns mentioned above.

If you want to succeed in the cannabis industry, cannabis CPA services can help you structure your business so you can deliver your product from seed to sale while remaining within strict federal regulations. A California cannabis CPA service like GJR Consulting uses the following tools and strategies to help you do that.

 

Careful Tax Planning

When you work with cannabis accounting professionals, they will help you find and implement tax strategies that will comply with federal regulations while giving you room to access tax breaks where possible. For instance, they can help you implement Section 471 of the Internal Revenue Code, which governs taxes and accounting inventories. They can also help you with business structuring by handling the financial side of setting up cannabis and non-cannabis sides of your business or minimizing your tax liabilities with vertical integration. Working with a professional accounting firm to implement cannabis tax strategies will help your business secure a stable future.

Cannabis Accounting Software

While it’s not specialized exclusively for cannabis businesses, you can use QuickBooks to your advantage. Work with your cannabis CPA to draw up charts for the farm, chemical, and retail aspects of your business. This type of software solution will allow you to improve your inventory management.

Accounting Policies and Controls

Work with your CPA to create a summary of these policies and controls that clearly state how cash, insurance, inventory, and other financial aspects of your business will be handled. This will create trust between you and your CPA, and it will outline all parties’ responsibilities. This can help you down the road if the IRS scrutinizes your business or if you face a lawsuit from an investor.

Cannabis Compliance with GJR Consulting

As an entrepreneur in the cannabis industry, you will need high-quality accounting services to help your business grow, thrive, and survive under strict federal regulations and potential scrutiny. At GJR Consulting, we pride ourselves on staying on the cutting edge of the accounting landscape by working with cannabis clients. Not many accounting firms will reach out and help cannabis companies manage their finances during this period of great industry growth, but we are one of the few who will. If you are interested in our cannabis accounting services, contact us today.