The Chart of Accounts Sets the Outcome
Every important cannabis accounting decision gets made at setup, not at year-end. Each cost account needs a designation as inventoriable or non-inventoriable, production costs need segmentation by function, and activity needs to be trackable by license, by location, and by business line for an operator running multiple sites across the state.
A chart of accounts borrowed from a generic retail template cannot produce a defensible 280E computation. Rebuilding it after the fiscal year has closed is exactly the kind of after-the-fact reconstruction an IRS examiner is trained to distrust.
Inventory Sits at the Center of Everything
In most industries, inventory is one line among many. In cannabis, it simultaneously drives the federal tax computation, the RLD compliance posture, and the balance sheet.
That means running perpetual inventory reconciled against BioTrack, applying a consistent costing method period over period, rotating cycle counts continuously, and documenting a valuation policy that gets reviewed on a fixed schedule rather than improvised each quarter.
- Perpetual inventory reconciled to BioTrack monthly, without exception
- A written valuation method applied consistently across periods
- Rolling cycle counts supplemented by full physical counts at period end
- Shrink and waste quantified by cause rather than absorbed silently into COGS
Running a Real Monthly Close
A cannabis-grade close checklist includes bank and vault cash reconciliation, revenue tie-out to point-of-sale or wholesale invoices, an inventory rollforward, accrual and prepaid entries, payroll reconciled to filed returns, intercompany elimination across affiliated entities, and a documented variance review.
Set a fixed close calendar and hold to it. Books closed six weeks late describe history nobody can act on; books closed on the fifth business day are a management tool.
Internal Controls for a Cash-Heavy Industry
Segregation of duties, dual-signature cash counts, tiered approval thresholds, restricted system access, and written inventory-handling procedures accomplish two things simultaneously: they reduce loss, and they demonstrate — to a lender, an examiner, or a regulator — that reported revenue is complete.
That second purpose gets underrated until an examination opens with an indirect-method reconstruction of income, at which point strong controls become the difference between a routine exchange and a protracted dispute.
Building Reports People Actually Use
Maintain formal statements for lenders, regulators and outside stakeholders, and a short internal metric set for day-to-day decisions: gross margin by category, unit cost by product line, inventory turns, labor as a share of gross profit, and cash conversion timing.
A report nobody reads is a cost center. A report that changes a purchasing or staffing decision is the entire point of building the function in the first place.
