Start With the Chart of Accounts
Cannabis accounting is decided at setup. Each cost account must be designated inventoriable or non-inventoriable, production costs must be segmented by function, and activity must be trackable by license, location and business line.
A generic small-business chart of accounts cannot produce a 280E computation, and reconstructing one after year end is exactly the work an examiner will scrutinize.
Inventory Is the Center of Gravity
In most industries inventory is one account among many. In cannabis it drives the tax computation, the compliance position and the balance sheet simultaneously.
That means perpetual inventory tied to track-and-trace, unit costs applied consistently, cycle counts on a rotating schedule, and a documented valuation method reviewed each period.
- Perpetual inventory reconciled to track-and-trace monthly
- Documented valuation method applied consistently period to period
- Cycle counts continuously, full physical counts at period end
- Shrink and waste quantified and categorized rather than absorbed
The Monthly Close
A cannabis close checklist includes bank and vault cash reconciliation, revenue tie-out to POS or invoices, inventory rollforward, accruals and prepaids, payroll reconciliation to filed returns, intercompany elimination, and variance review.
Close on a fixed calendar. Books closed weeks late are historical documents; books closed promptly are management tools.
Controls in a Cash-Intensive Business
Segregation of duties, dual-control cash counts, approval thresholds, restricted system access and documented inventory procedures serve two purposes: preventing loss and demonstrating that reported income is complete.
The second purpose is easy to underrate until an examination begins with an indirect method income reconstruction.
Reporting That Gets Used
Produce statements for the outside world and a short metric set for the inside. Gross margin by category, cost per unit produced, inventory turns, labor as a percentage of gross profit and cash conversion cover most operating decisions in this industry.
Reporting that nobody reads is overhead. Reporting that changes a decision is the point of the function.
