Updated: Jul 21
Cost Accounting is the tracking, categorizing and recording of all the costs, both direct and indirect, incurred in producing a product or service. Cost Accounting in the Cannabis Industry is essential and must be done correctly in order to maximize the benefits of 471 and legally lowering their federal tax bill, while at the same time, keeping you off the audit radar of the IRS.
Additionally, business owners, managers and key decision makers must be able to rely on the information the accounting system provides to not only run the day to day, but also to plan future operations and strategically grow.
Lastly, Cost Accounting is required for GAAP compliant books which will prove extremely useful if (and when) the company comes under audit, prepares for a merger or exit and to complyCost Accounting in Cannabis, CBD and Hemp businesses.. with the due diligence and associated financial benchmark requirements of lenders and investors.
In most businesses that operate in the Cannabis space, proper Cost Accounting is not happening.....and the IRS knows it. Books that are poorly maintained and show an overall lack of compliance will sink many businesses and have already done so as seen in court case after court case. What's worse is that it usually comes to light years after the problem began. This translates into an accumulation of accounting problems that need to be corrected.
In conclusion, the moral of the story is that the sooner a business in the Cannabis space adopts a proper accounting flow, the better it is for the overall success and longevity of your business.
If you need assistance in any aspect of your accounting, set up a call, we'd be happy to assist.