Get Informed on State, Local, and Federal Taxes
If you're managing cash on your own, stay up to date on the state, local, and federal taxation. But if you're working with a CPA, make sure they're experienced in handling cash for cannabis businesses. Your CPA should be able to teach you about the percentages and calculations you'll need to set aside cash to pay your taxes.
Your CPA will explain whether your taxes are based on gross receipts, the base that your tax rate is calculated on, and other information about your taxes. This information will vary depending on what you do, so speaking with an expert about your situation can shed some light on it.
For example, dispensaries should have some sort of target revenue monthly, quarterly, and annually. This allows you to calculate what you expect your tax bill to be for each period. With this insight, you'll have a good idea of what you should set aside to cover your taxes.
Set an SOP for Cash Reconciliation
Once each day ends, reconcile your cash on hand using your POS system. This is how you'll ensure there hasn't been a theft or diversion.
Your team should have a standard operating procedure for handling cash. Here's what your procedure should cover:
Set Aside Cash for Regulating Agencies
Compliance is essential in the cannabis sector, and your business must remain compliant with regulations set by the state, local, and federal agencies. Cash should be put aside for taxes, but also for license renewal fees and potential penalties you might incur.
Handling your cash flow involves putting cash aside to manage every aspect of your business. This should also include an emergency fund that's capable of covering your company's operating expenses for at least 60 days. Emergency funds can be a serious blessing in instances when you find yourself dealing with an unexpected expense like a high tax bill or something else.
Use Banking Services for Cannabis
Sometimes, it's challenging to get a business account for a cannabis endeavor. However, it's not impossible. If you have a business bank account, make your cash deposits at least two or three times weekly.
If you can, deposit cash into separate accounts to hold your tax money. But if you can't separate your cash, make sure you have at least 115% of what you estimate your tax bill will be in your account.
Incorporating a Drop Safe
While a drop safe isn't always a priority, it's one of the most effective ways to keep your cash safe and ensure you're allotting money towards everything you need to handle. A drop safe physically separates the cash you have into categories. For instance, you can have a drop safe for taxes, another for operating expenses, one for payroll, etc.
You should only grant access to your drop safes if it's essential. The fewer people with access, the better. The only people who should have access are the owner, their lawyer, and perhaps a designated cash handler. Recording each drop in a cash log is also recommended because this will help with reconciling your dispensary's cash at the end of each month.
For Digital Payments, Separate Your Income from Taxes Automatically
Some merchant processors will let you automatically set aside income money from tax money. For example, if you've recorded $1,000 through your POS, you can set the system to deposit part of that money into separate accounts automatically. You can set it to send 10% into your sales tax account, 20% into an account designated for state and federal taxes, 10% into a city tax account, and everything else into your main account.
Incorporate Counterfeit Cash Detection Procedures
Your employees likely haven't been properly trained to spot fake bills. But that won't stop the government from taxing you based on fake cash your employees have accepted.
With this in mind, avoid paying taxes on fake cash by incorporating counterfeit cash detection procedures. You also have the option to use a device that checks for authenticity.
Hold People Accountable for Their Tills
Cannabis cash handling demands accountability. Someone, whether it's your general manager or shift manager, should be responsible for counting the cash at the state and end of each workday.
The cashier or budtender responsible for the till should watch as the GM or SM counts the money. They should then sign off on the count in or out. Once this is completed, whoever is in charge should reconcile the cash with the day's sales. This should all be done in a recorded room that offers clear views from all angles.
Need help determining the best course of action for cash management at your dispensary? Contact us today to learn more about how we can help.
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