This will be a three-part blog, intended to help you manage your business in the absence of a bank account.  Here’s what you know (or need to know):

The IRS is targeting the marijuana industry, auditing these businesses as much as eight times as often as other businesses.

The IRS is a stickler for documentation.  They want support for every transaction you report on your tax return.

In most instances, the IRS looks to the company bank account to see transactions going in and out.

You don’t have a bank account.

This is the situation for most all cannabis businesses.  They know the IRS will be looking for documentation but they don’t have a bank account so the IRS can’t look at the bank statements to see business transactions.  So what do you do?  The answer is you take extra steps to assure that all of your transactions are documented, even when they occur in cash.

Let’s start with cash receipts.  If you are a dispensary, this is relatively easy, because you have a point of sale system that will tell you how much cash you should have at the end of each day.  Many of the POS systems will also track the amount of cash in each till and how much should be in the cash safe (assuming proper setup).  Dispensaries should run their end of day reports, which will indicate how much excess cash should be in each till.  You should leave a standard starting balance in each till ($200 for example) and count the cash over that amount.  The total of your count should match the total cash sales on the end of day report.  Assuming that reconciles, within the software you can indicate that you are moving the cash counted from the till that matches the report, into the cash safe.  If it doesn’t reconcile, you need to do further research to determine why the cash doesn’t matchup.

For the rest of you, my suggestion is that you create a form that includes the following information (I’ve created this form for you to download below):

  1. Your company name, address, basic contact information
  2. The date of receipt
  3. The customer’s name, address, contact information
  4. Who you are dealing with (your contact person with the customer)
  5. Description of the product sold, (i.e. 454.5 grams Blue Dream, 10 2-pack peanut butter cups)
  6. Sales price of each item
  7. Total amount paid
  8. How it was paid (cash, check, money order)

customer invoice form

Store these completed forms in a file (call it “to be entered”) for entry into your books by your accountant.  Keep the forms in the “to be entered” file until you have reconciled your cash (see Part III) Once you have reconciled your cash and entered these transactions into your books, file the form into a separate file by customer.  The file can be paper or electronic, whatever your preference, as long as you can access it when needed.  Part II of this blog will discuss cash disbursements or rather, cash paid out.  Part III will wrap it up, discussing how to audit and reconcile the cash in your safe.  Riveting stuff right?