Due to ongoing legal, banking and regulatory hurdles, plant-touching cannabis businesses must transact the vast majority of their business in cold, hard cash. With the sheer volume of cash that flows through these companies, a cash-only approach can be fraught with potential business challenges — security not least among them.
Because of such challenges, cannabis companies must take a diligent and proactive approach to cash management. Below, we break down four tips cannabis companies can use to ensure effective cash management.
Document every cash transaction
There’s a record retention principle among accountants: If it’s not documented, it didn’t happen. Upholding this principle with cash can prove difficult since there’s no natural paper trail with cash. For example, if you pay a vendor in cash, but keep no record of it, there’s no way to prove the transaction occurred if that vendor comes back demanding payment later. This also applies for customer payments and bank deposits.
This is why you must create your own paper trail when you transact anything in cash. From vendor payments to bank deposits, be sure to document everything. This will ensure your records are accurate and up to date. And while it may be tedious: Don’t push it off. You may think you’ll remember all the transaction details, but you won’t. Weeks or months will pass, and you will be left annoyed, frustrated and without a proper accounting of your business operations.
Create internal processes
While there are several technology solutions for cashflow management and cash maintenance, none work very effectively for cannabis businesses. That means companies must develop their own unique processes and systems for how best to manage the stacks of cash they deal with on a regular basis.
Creating such processes is not an intuitive part of traditional business management since most other industries don’t transact heavily in cash. Other businesses have the luxury of banking, after all. This is why it’s important to recruit someone — like the accounting professionals at Rebel Rock — with a background in creating these types of controls.
Daily cash counts
Another important part of cannabis businesses’ cash management is daily cash counts. At the end of the day, the amount of cash in the register should match up with the amount in the safe, reflecting a balanced picture of that day’s sales and transactions. Be sure to do this every day. Not doing so leaves room for potential theft and/or error.
Don’t cut corners
In cannabis, cashflow is the lifeblood of your business. While it may be frustrating to implement proper cash management processes, they are imperative to staying in business. If you try to cut corners or save money with cash management, you open up your business to a number of potential problems.
Cash controls are of vital importance for cannabis businesses to operate with success. But since each company has their own unique needs, not all controls may be a good fit. The accounting professionals at Rebel Rock can help you establish the most efficient cash management methods and ensure all employees are properly trained. Let us help you take control of your cashflow, get your records in order and position your company for sustainable growth.