Navigating the financial aspects of running a business can be overwhelming, particularly when it comes to operating a dispensary.
Key aspects of dispensary accounting include tracking expenses, inventory management, preparing financial statements, monitoring cash flow, and staying compliant with tax regulations, such as the 280e tax code.
By implementing effective accounting practices, you can gain insights into your dispensary’s financial health, improve cash flow, increase profit margins, and avoid tax penalties.
Tax codes and compliance requirements vary by state, so it’s essential to stay informed. Since handling accounting can be time-consuming, consider working with a cannabis accountant to manage your financial priorities efficiently and accurately.
Today, we will provide you with expert guidance on how to further incorporate accounting in your dispensary business.
How To Manage Accounting For Dispensaries?
When you’re building and maintaining business operations, there’s alot to focus on, but the one element you need to focus on is accounting.
It’s responsible for keeping your business afloat and ensures you stay in operation by calculating important financial aspects of the business.
Here are some ways you can start doing accounting:
- Tax preparation: You need to make sure you’re prepared for taxes by identifying the amount of taxes you may owe, paying your taxes on time, following the 280e tax compliance process, and recording all cash transactions. By mastering the tracking of these financial aspects and keeping your taxes up to date annually, you can effectively prevent accounting problems.
- Prepare financial statements: Every dispensary must prepare its financial statements by analyzing expenses, revenue, debt, and profitability. This means recording invoices, receipts, cost of goods sold, inventory, sales, and other financial components.
- Maintain cash flow management: It’s best to maintain cash flow management to know what’s coming in and what’s going out, financially. The better you understand and keep cash flow positive, the better your business can operate.
- Tracking and Recording: Tracking and recording everything is essential to business success. You need to track expenses and all financial transactions to ensure you are keeping track of everything.
- Tax Compliance & Regulations: This is important for all cannabis businesses since there are alot of tax compliance elements and regulations. When you know how to navigate this area, you won’t have to worry about getting audited. Tax compliance involves staying ahead of the 280e tax code and reporting all cash transactions.
These accounting elements can keep your dispensary in operation for many years to come. They are a few things you can utilize in your business, but there’s more you need to know about in accounting.
It’s why talking with an accountant is essential to ensure you’re not making pivotal mistakes or leaving anything out accidentally.
What Are The Benefits Of Doing Accounting For Dispensaries?
There are several benefits of doing accounting for dispensaries to know about. The benefits include the following:
- Know Your Dispensary Financial Health: When you know the health of your finances, you can scale the growth of your business better.
- Improve Your Cash Flow Management: Understanding and optimizing cash flow management can improve the process by keeping more money in than out.
- Increase Your Profit Margins: Another benefit is you can increase profit margins since you have a clearer picture of your revenue, sales, and transactions.
- Ability to Forecast and Prepare for Future Finances: When you conduct accounting, you are likely to understand all your finances which can prepare you to handle or predict future expenses and transactions.
- Saving money in business: You can save money in your business by knowing how much you owe to taxes, how much revenue you’re earning every year, and what expenses you can spend money on. The better picture you have of your accounting in business, the more you can optimize areas of financial growth in your business.
- Avoiding tax penalties: By knowing the tax compliances and yearly tax protocols, you can avoid tax penalties. You don’t want to accidentally get a penalty for a financial element you didn’t take into consideration.
These are the benefits you can expect in utilizing accounting for dispensaries and can save you from a financial headache in the future.
How Much Is The Dispensary Tax Rate?
The dispensary tax rate varies from state to state since they all have different regulations on them.
Dispensaries pay various tax rates that include the following:
- Excise tax
- State tax
- Cultivation tax
- And potentially more
These tax rates are different depending on where you’re operating your dispensary and can be alot or little.
Knowing the amount for each tax rate can give you insight into how to do your business accounting.
How Does 280e Affect Accounting For Dispensaries?
The 280e tax code influence accounting for dispensaries by minimizing what they can’t deduct from their business that normal non-cannabis businesses can deduct.
The tax code gives dispensaries more taxable income since they can’t deduct certain business expenses that include the following:
- Advertising
- Traveling
- Wages
- Salaries
- Rent
- Utilities
- Insurance
- License fees
- Contract labor
- Equipment
- Storage equipment
There may be other expenses dispensaries can’t deduct that are not listed above that may require expert hands on guidance to navigate you specific situation effectively.
When considering your taxes, it’s best to get prepared by planning around the 280e tax code and how it impacts your dispensary.
What’s Deducted Under 280e Tax?
Dispensaries can deduct the cost of goods sold (COGS) that’s essentially the cost of their inventory and anything concerning inventory.
COGS that can be deducted include:
- Electric bills for inventory storage and inventory shipping costs
- Transportation
- The invoice price of cannabis
- Testing
It’s essential to deduct these expenses since they are only a few of what dispensaries can deduct under COGS.
Does Excise Tax Influence Dispensaries?
Yes, excise tax influences dispensaries from around the U.S. and other businesses in the industry.
Excise taxes are the sale increase of cannabis products to consumers to cover taxes and leave a small cut to dispensaries’ products being sold. Due to the tax increase, there are enough costs in products to cover the tax imposed on dispensaries and cannabis businesses. They receive a small profitability portion of the cost of their products being sold.
The excise tax rate depends on the cannabis product weight and quantity of states imposing the tax rate. The tax rate can go as low as 6 percent and as high as 37 percent.
As a dispensary owner, you may need to monitor the inventory to ensure you’re not paying too much in taxes. This means weighing and calculating the number of cannabis products being sold within your business.
Final Thoughts on Accounting for Dispensaries
There’s a lot to focus on when you’re doing accounting for your dispensary and it can prove time-consuming.
To reduce your time working in the business, you should consider hiring a cannabis accountant to conduct all your dispensary accounting requirements. You can save time and money by working with a professional to handle your financial priorities.
It’s not easy doing accounting by yourself and it can seem like another full-time job you don’t need.
You can work with our cannabis accounting professionals to conduct all your cannabis accounting needs today.
