The future in accounting for cannabis is looking good. However, at this point, the space isn’t completely clear. There are still many uncertainties plaguing cannabis companies, particularly in the accounting department, although this will soon change thanks to the work we’re doing at Northstar.
We’re pioneers in cannabis accounting, molding the future in accounting for cannabis with our fractional CFO model. Our clients can scale up or down as needed, giving them the freedom they need to ensure their operation runs smoothly during the busiest and leanest times of the year.
Looking for cannabis CPA services to scale your operation? Contact us now to speak with one of our experts about how we’ll grow your business.
Accounting for Cannabis in the Future
Accounting for cannabis in the future will likely be easier to find. While many CPA firms aren’t willing to work with the cannabis space, the subject matter will no longer be as taboo as the industry gains a firmer footing.
We’ve already seen some massive changes in the cannabis space that make it more appealing for accountants to jump into. But be wary of accountants and CPAs who lack experience working with cannabis businesses as errors can be costly.
Here are the reasons we believe accounting for cannabis in the future will be more widespread:
Cannabis Sales Rising
Cannabis use is on the rise, and with more people staying indoors because of the COVID-15 pandemic, we expect to see this trend continue.
Retail marijuana sales experienced significant increases in 2020 compared to 2019, and it’s projected that these sales will hit $37 billion by 2024. The U.S. even deemed cannabis an “essential” business during the pandemic, showcasing just how powerful the presence of this industry is becoming.
As more states and even countries legalize and decriminalize cannabis, it opens the doors for accountants to work with cannabis businesses in an advisory role.
Cannabis is no longer as taboo as it was in the past. Now that this industry has become more wide-spread accepted, we’ll continue to see more success in the space. With this profitability comes a need for cannabis CPAs.
Businesses Need Knowledgable Cannabis CPAs
Cannabis is one of the most complex industries in the U.S. The finances are connected to challenging requirements that go beyond what’s expected of non-cannabis businesses.
Tax laws like the IRS Tax IRC 280E make this industry difficult to work with for some. Accounting professionals must specialize in this field in order to maintain compliance with 280E while simultaneously maximizing the operation’s cost of goods sold (and tax deductions).
Appropriately accounting for cannabis businesses means organizing structures properly. This involves managing an additional layer of complexity that isn’t found in other industries. With this in mind, an experienced cannabis CPA firm brings knowledge that guides these operations.
Many Banks Refuse to Work With Cannabis
Since many banks are hesitating to work with cannabis operations, it’s a serious challenge to get the banking services other businesses can obtain. However, we expect cannabis to become legal at the federal level eventually, and when this happens, these operations will no longer need to keep significant amounts of cash on hand.
Until the future in accounting for cannabis comes to fruition, cannabis business owners need assistance with cash tracking. These operations are more prone to safety, theft, and fraud risks. But when we put proper cash management procedures and internal controls in place, we mitigate these risks.
Our services don’t stop at cash management and maintaining accurate records. We help cannabis businesses find compatible banks and obtain banking services, which helps these operations bypass one of the most common limitations experienced by those working in the cannabis space.
Cannabusinesses are Profitable
Looking at the cannabis sector as a whole, it’s becoming increasingly apparent just how profitable this industry can be. The American Cannabis Company claims that over 25 percent of dispensaries are generating more than $1 million in annual revenues. Another 15 percent report annual revenues that range from $500,000 to $1 million.
Cannabis is profitable, and since these operations’ revenues are on the rise, it only makes sense that this profitable niche sees a future in accounting for cannabis. More cannabis CPAs will be needed in the future. But they’re also needed now as the industry grows.
As cannabis sales continue to rise, the growth potential for cannabis CPA firms serving this industry is impressive. But this may tempt unqualified accountants to hop into the space.
Choosing financial professionals in the cannabis space can be tricky. Learn how to choose a qualified cannabis CFO.
Less Risk Involved Once Federal Legalization Passes
Once the federal government legalizes cannabis, the risks that are associated with accounting for the cannabis industry will dissipate. This means more accountants will want to become part of the space. But it also will cause the demand for these services to rise and those who are experienced in handling complicated financial issues within the industry will continue working with cannabusiness operators.
Equally important to keep in mind is that the future in accounting for cannabis may not be as challenging. But some things, like keeping accurate records and practicing good risk management, will still remain essential.
Fields of Interest for the Future in Accounting for Cannabis
The future in accounting for cannabis will continue to involve certain fields of interest. Some spaces will continue expanding at a more rapid rate, demanding more accountants to keep up with this swell in demand.
With the cannabis industry growing significantly over the next few years, accountants will see a lucrative future in accounting for cannabis. But it’s not limited to just financial professionals, who are required to have specific qualifications before they can practice their craft.
Here are a few niche services we believe will maintain and expand market hold for the future in accounting for cannabis:
The CBD space continues to grow, and CBD companies are profiting from this boom. But if they continue to try keeping their sales in cash form, it could lead to a host of problems for these businesses.
We want to bolster a future in accounting for cannabis, which is why we help these companies find banking relationships that will benefit both the stakeholders and the company without compromising customer security.
We’re also cannabis CPAs who are familiar with CBD products and the unique challenges that come with a newly legal marketplace.
As the demand for CBD products continues to rise, there will be more accountants who are eager to handle this space’s financial affairs. We want to take part in guiding these businesses as we’re molding the future in accounting for cannabis.
Reporting & Bookkeeping for Dispensaries
Dispensaries need reporting and bookkeeping services right now. But the future in accounting for cannabis will increase the demand for these financial services.
Accountants will need to be adept in working with financial institutions that no longer see cannabis businesses as a risk. This requires accountants who are up to date on current federal and state laws, effective tax planning strategies and the most recent banking practices.
We want to contribute to this future in accounting for cannabis by serving medical and recreational dispensary owners. Our reporting and bookkeeping for dispensaries help these operations maintain compliance while bypassing costly infractions and taking advantage of all potential write-offs.
Dispensary Chart of Accounts Organization
Dispensary chart of accounts organization will become increasingly important as more of these operations open. The way we generate this reporting helps these businesses grow, which is essential, especially when considering the current competitive nature of this space.
The competition is only going to increase, making this even more vital. This is why we believe that dispensary chart of accounts organization will play a significant role in the future in accounting for cannabis.
Cannabis dispensary operators already have a lot to track. Between remaining compliant with regulations, tracking KPIs, and remaining alert for security breaches, these operations are complex.
Proper dispensary chart of accounts organization offers the financial structuring these operations need. With a strong foundation for managing and tracking accounts, our dispensary operator clients find checking data and maintaining compliance easier, and will continue to do so in the future.
Other 420 Accounting Services
Other 420 accounting services we expect to see demand grow for include:
Cannabis Tax Planning
As the federal government contemplates how to tax this booming industry, as CPAs, we must remain diligent and keep our clients updated on how these changes may affect them.
Cannabis & Hemp Business Accounting
Cannabis and hemp business accounting is the bread and butter of accounting for cannabis. Generally speaking, this involves assisting growers and dispensaries with their financial reports. This is an area that will continue to see significant growth as more states legalize the use of cannabis and hemp for medical and/or recreational purposes.
Cannabis Controllership & CFO Services
As the cannabis space grows, we see the need for cannabis controllership and CFO services expand, too. This involves budgeting, cash-flow management, IRS tax code compliance, and monthly financial reporting.
Our clients receive the planning and data analyses they need to scale their operations. In turn, these services directly contribute to the cannabis sector’s expansion, which is why we expect to see a growing need for cannabis controllership and CFO services.
Closing on Future in Accounting for Cannabis
We’re looking forward to this future in accounting for cannabis as we continue working with our clients as cannabis CPAs. Our mission is to help our clients succeed, which contributes to the success of the cannabis industry as a whole.
With all that this industry offers, we’re sure to see a bright future for cannabis accounting as well.
At Northstar, we help dispensaries and other marijuana businesses with their financial reporting requirements and more. Our cannabis CPAs are ready to provide guidance based on the current state and federal laws regarding medical and recreational marijuana.
Contact us now to speak with one of our experts about how we’ll scale your business with financial services. We’re ready to help you expand your share of this budding space!