If you are like most small cannabis businesses, you might be starting to think about your business year end and taxes … or you might be wondering where to sell this year’s product. Either way, you still need to produce financial records for the year. Don’t panic, here at Making Waves Management Services we pride ourselves on making it easy to follow processes and procedures that put financial recordkeeping on autopilot. One way we do that is with checklists. (Check out the link at the end of the article to download our printable version of the year-end checklist that we will be walking you through in this article.)
Step 1: Where will financial information be stored? We go over this step right away with our clients. Many free Excel templates can be downloaded and used or you can sign up for Quickbooks Online or Quickbooks Self-Employed, Freshbooks, or our personal favorite, Xero. Because this is a year-end checklist, I will assume that you have already picked something out and have been using it fairly regularly throughout the year.
Step 2: Make sure that all sales and invoices have been entered in the program.Those businesses with no bank account can record all of this info in a cash account. Sales that have not been paid for will need to be entered in a separate account called Accounts Receivable.
Step 3: Enter all expenses. This can get tricky. You might have to dig around your car and your garage looking for old receipts. If you spend too much time trying to locate and tame the pile of receipts this year, consider an app such as Receipt Bank or Expensify to help avoid this problem next year. Record how money was spent. Categories may be kept broad, but separate and record receipts for items related to the plant or that are used to help it grow for example: facilities, soil, seeds, utilities, payroll and water. These are considered direct costs and can be deducted.
Step 4: Look through personal credit card and bank statements for any expenses that are business-related and record them the same way as you did for those in step 3.
Step 5: Make a list of all fixed assets that were purchased this year, with the date and the amount. These are the big-ticket items that are over $5000. Keep all of the receipts for these together, too.
Step 6: If you have inventory, take a physical inventory count.
Step 7: Gather all loan paperwork for outstanding business loans.
Then you are done! Well, not really. Then you need to create financial statements to see how your business performed. The last step is to take all organized paperwork to a CPA or accountant who can help you navigate the tax implications of running a cannabis business.
This article was written by Co-Founder Sara Walker of Making Waves Management Services and OfficeBox. To learn more about how to handle the paperwork crunch, download the free printable PDF at https://mailchi.mp/67563188d326/officebox or check out our website makingwavesmanagement.com.