State regulators cannot issue marijuana licenses fast enough, so many individuals and companies are scratching to get one.
When so many of these hopeful applicants or successful license holders are researching how to open a dispensary or start a grow, who is asking how to getting their finances in order?
Here is your extensive checklist that will help you establish a strong foundation for a financially healthy cannabis business.
The Financial Foundations
- Set up bank accounts
- If no bank accounts, consider
- prepaid cards
- cannabis friendly financial institutions
- local/state-chartered banks or credit union (more focused on state regulations which would include cannabis)
- If no bank accounts, consider
- Financial Modeling & Relationships
- Projected Financial Statements
- Capital sourcing
- Investors
- Banking relationships
- Maintain lending documents/notes payable, amortization schedules, promissory notes etc.
- This is not only for state and federal compliance, but also lender/banking compliance
Internal Controls & Compliance (Audit Proofing)
- Legal documents review
- Articles, bylaws, minutes, consents, stock plans, etc.
- Know what seed to sale system your state requires
- Illinois requires BioTrackTHC
- Many other require Metrc
- HR set up, employee manual, employee applications
- Set up stock option plan/ tracking spreadsheet
- Accounting entries, fair value issues
- 1099 set up for contractors,
- W9s
- Create Summary of Accounting Policies and Procedures by cycle and accounts, including internal controls
- Security and processes around cash are critical
- Determine procedures for state and federal reporting and compliance
- Processes to ensure compliance with state licensing requirements
Operations
- Determine what POS or operation software is needed
- Guardian, MJ Freeway, MMJMenue, BioTrackTHC
- Determine key applications you will need to run operations
- Cloud solutions with good file structures such as Dropbox, Microsoft ShareFile, Google Drive
- Imperative for smooth and successful audits that are inevitable
- Cloud solutions with good file structures such as Dropbox, Microsoft ShareFile, Google Drive
- Inventory & POS system and management process
- Set up revenue cycle processes
- Will you need a third-party merchant to accept card payments?
- Stripe, merchant banking, PayPal, other solutions
- Will you need a third-party merchant to accept card payments?
- Set up accounting software
- Proper accounting is a must to remain compliant to state and federal laws
- Set up chart of accounts and opening entries within the accounting software for proper accounting
- Determine monthly report package (including KPI, dashboard, cash forecast etc.)
- Understand what financial numbers are the most important to your company and will help it grow successfully and then focus on those numbers
- Weekly or monthly cash flow forecasts will help alert you to potential future cash losses
- Set general ledger monthly process and workpapers (asset and liab reconciliations, agings, tie outs)
- Processes should be in place to review and reconcile accounting records to catch errors
- Determine outsource providers
- Tax returns, payroll, audit if needed, legal, HR
Bonus Items
- Monitor recurring items
- Review of accounting staff or bookkeeper work
- GAAP entries/accruals/ revenue recognition
- Monthly reviews and reports
- Consolidations and eliminating entries if more than one entity
- Budget and Cash forecast
- Tax filings/ 280 E deductions
- Permits/licenses (state and city)
- Insurance renewals and audits
- Board meetings and minutes
- End of year work (tax returns, 1099s, reporting etc.)
- Documents on cloud (bank reconciliations, statements, visa statements, stripe, payroll reports)
- Insurance: workers comp, business, D&O, health, etc.
- Inventory cycle counts
- Project work: due diligence, acquisitions, exit support