Audits in the Cannabis Industry
Canna-businesses experience regular audits with substantial adverse outcomes of a bad audit. There are various substantiation tools you can use to support your business in an audit, most being required by the state (on a state-by-state basis). Audits are more likely to occur for canna-businesses, so it is essential to have records/receipts, keep up-to-date state and federal codes, stay on top of deadlines, properly deduct business expenses, and use appropriate verification tools.
Preparing for an Audit
- Receipts. Knowing what counts as a receipt is a small, essential aspect of your records. To qualify as a receipt for a transaction, you need (1) the amount, (2) the date, (3) the place, and (4) the nature of the expense. Receipts can be paper or digital as long as they are still legible.
- Cash. Protecting your business in an audit comes down to the everyday business interactions and your policies. Your internal cash handling procedures and records should be well-documented.
- Form 8300. In addition to cash records discussed briefly above, a specific form needs to be completed when cash transactions meet or exceed $10,000 to keep your business in compliance. Form 8300 should be satisfied every time you go over this limit.
- Documenting your 280E compliance. 280E compliance is essential; however, it means nothing if it is not adequately documented. To know more about compliance with these federal regulations, check out our entire dedicated page on 280E compliance.
The Full Cycle CFO Difference
Why Choose Our Team For Your Cannabusiness?
Audits can be as small as an accuracy claim, so every number in your books should be appropriately recorded and substantiated. In this industry, correctly classifying our deductions can significantly benefit your company when faced with an audit.
Be prepared to handle an audit when it inevitably occurs. We will help you when that unavoidable audit arrives.