By Harry Shurek
Dealing with finances is not exactly one of the most fun aspects of running a business. Even so, detailed financials are vital to your success. Just like any other business in the US, your cannabis or hemp business needs to have accurate, up-to-date financial information. Here’s how it can benefit you.
Make the Loan Process Easier
If you want to apply for a business loan, you need to have your financial information in order. While requirements vary by lender, the information you will need to submit likely includes:
Your current financials
Bank statements from the past four months
Your business and personal tax returns from the past two years
The info you provide allows lenders to assess your risk and determine if you are eligible for funding. Having your financials in order speeds the loan application process and increases your chances of approval.
Satisfy Potential Investors
To secure funding from prospective investors, you need to demonstrate to them that you are profitable. One of the best ways to do that is with accurate, up-to-date financial information. By keeping up with your numbers, you can build trust and demonstrate that you are worth the investors’ time and money.
Take Advantage of Current Tax Year Write-Offs
Because cannabis is still illegal under federal law, tax time can be a bit tricky for those in the cannabis industry.Under Section 280E of the US tax code, any business that is involved with the “trafficking” of Schedule I or II controlled substances is ineligible for tax deductions. Section 471(c), however, enables you to classify many of your expenditures as the cost of goods sold (COGS), which are deductible. You can only take advantage of those deductions, however, if your books are up to date.
Another issue faced by cannabis and hemp businesses is that they are more likely to face scrutiny by the IRS. As a result, they’re more likely to be audited. One of the best ways to minimize your tax burden and reduce the pain of dealing with an audit is to have current financials.
Get the Jump on Opportunities
When your numbers are up-to-date, you’ll have a much better understanding of your overall financial situation. Armed with the knowledge of exactly how your company is doing, you can make better decisions and take advantage of new business opportunities when they arise.
Without this essential information, you would have to take the time to crunch numbers before finding out whether a particular opportunity is viable for you. That time could mean the difference between making a profit and missing
Why You Need an Accountant
Along with the above benefits, keeping current with your financials is required by law. If you’re behind (or don’t keep track of your financial information at all), you’re likely to be in non-compliance with local, state, and federal regulations.
With everything that you have to do, keeping your financial information up-to-date can be tough. Rather than resting extra responsibilities on your own shoulders, you should work with an accountant that is well-versed in the cannabis and hemp industries.
My Cannabis Accountant offers comprehensive accounting and tax services to cannabis businesses operating legally in the US. We can help you keep track of your finances, stay current with tax changes, and minimize your tax burden.
Up-to-date financials are vital to the success of your hemp or cannabis business. For more information about how we can help you stay on top of things, contact My Cannabis Accountant today.
Important Upcoming Tax Deadlines
July 15, 2020 – C-Corporation and Trust Tax Return and Extension Filing Deadline
July 15, 2020 – Individual Tax Return and Extension Filing Deadline
July 15, 2020 – Non-Profit Tax Filing Deadline