Welcome to the first of another month! It is time to do work-this is the best time to reconcile all of the previous month's book of business. In fact, we recommend it.
Redbud Advisors are cannabis tax experts and specialize in helping businesses within the cannabis industry not only survive but thrive. We have a passion for cannabis taxes and educating all business owners about best accounting practices. We work hard to save you time and money.
At the beginning of every month, all business owners—especially cannabis business owners—should get into the practice of reconciling last month's book of business. In this blog, you will find the information we ask our clients to provide by the 7th of every month to ensure nothing is unaccounted for and our clients are always audit-ready month-to-month.
In an industry tainted by the IRC 280E, riddled with IRS audits, and making headlines for billions in revenue it is safe to say cannabis isn’t getting a fair shake.
As a business owner, it's easy to let the small stuff slide. You're busy with other things—like figuring out how to beat the competition or make your product better. But as we've said before, it's important to keep your finances in order or better put, always be audit ready.
We are sure by now you already know this but we will say it again, this industry is particularly vulnerable to federal scrutiny and audits—whether they're from the IRS or the state. Keeping your business finances in order is the best defense against an IRS audit. Keeping your business finances in order is just good business practice in general.
In an industry tainted by the IRC 280E, riddled with IRS audits, and making headlines for billions in revenue it is safe to say cannabis isn’t getting a fair shake. In fact, it is probably annoying the amount of federal taxes you pay for a product that isn't federally legal. But in America, Uncle Sam always gets a piece of the pie.
To avoid the pitfalls of the IRS and giving all your hard-earned money to Uncle Sam, the Redbud Advisors team created an end-of-the-month checklist we send to all our clients. This puts the accountability not only in the hands of the accountant but the hands of the business owner as well. This helps to confirm nothing is missed.
This industry is particularly vulnerable to federal scrutiny and audits—whether they're from the IRS or the state.
We do typically curate this list based on the specific needs of our clients but this information is standard for most businesses. Depending on your vertical you may be required to provide additional end-of-month items. You will find the standard list Redbud Advisors uses to ensure nothing is unaccounted for and our clients are always audit-ready month-to-month below:
Bank Statements
Credit Card Statements
Invoices and Receipts
New Contracts or Leases
New Debt or Equity
All Checks Written
All Payroll Reports
All Sales Reports from POS
Monthly Inventory Counts
Cash Logs
New Employee/ Terminated Employee Information (if applicable)
Physical Count of Cash on the Last Day of the Month that Reconciles with the Cash Log
Are you exhausted just reading the list? It does seem like a lot to keep up with throughout the month or to throw together at the end of the month- but it is doable and necessary. It is an even easier process if you put daily and weekly systems in place. Tracking these items ensures your finances and taxes are in order and helps you make informed decisions in regard to your business.
Your accountant needs to have information for credits and debits for your business to do their job. Providing the listed information gives your accountant the ability to see all the income and expenditures for your business as a whole. Additionally giving your accountant the finer details like receipts, invoices, sales reports, and new contracts or leases ensures all your finances are being accounted for and categorized accurately.
In the cannabis industry, no one can afford to miss an opportunity to maximize the cost of goods sold or any other potential tax breaks. Providing all the information to your accountant month-over-month makes you a savvy business owner.
Conclusion
The bottom line as a business owner is to increase profits and decrease expenditures. By establishing a relationship with an accountant, hopefully, an accountant who specializes in your niche, you are taking the burden off of you to complete monthly, quarterly, and annual duties and putting it in the hands of a professional.
Reconciling your finances month-to-month will set your business up for success for quarterly and annual reconciliation. These practices will keep your cannabis business audit ready all year long. We cannot preach this enough, no one wants the IRS on their backs- especially a cannabis business.
Redbud Advisors are tax experts in the cannabis industry and we would love to help take your business to the next level with our proven methods- but most importantly we hope this blog has made the importance of having an end-of-the-month routine apparent.
Don’t hesitate to reach out to us for best cannabis tax practices, general questions, or a consultation.
