Ep. 72: From Seed to Sale: The Ins and Outs of Categorizing Inventory for Cannabis Companies

Do you know how much it costs to produce and sell a pound of pot, from the moment a seed is planted to when the delivery truck ships it to its final destination? If you don’t know this answer, you may not understand inventory cost accounting.

Cost accounting is essential when serving Cannabis clients because it’s required to help companies stay compliant with IRC 471. If you don’t know how to allocate inventory costs to Cost of Goods Sold (which is the ONLY way Cannabis companies can claim deductions), you could be shorting your client’s cash flow or setting them for crippling penalties from the IRS.

In this podcast episode, Andrew Hunzicker, CPA explains how to categorize inventory for Cannabis companies to help you better understand the nuances of this complex process.

Topics discussed include:

Inventory categorization terminology: the basics begin with understanding basic categories under which to record inventory, including Work in Progress (WIP), Raw Materials (RM), and Finished Goods (FG) (and we'll provide examples of each to give you some context)

Different grow stages and inventory counts for each vertical: from manufacturing to retailers, we’ll cover a range of inventory counts found in each stage (helping form a foundation for inventory accounting that you can quickly build into a more robust service offering)

How to reconcile inventory with POS for retailers: if you work for retailers, reconciling each inventory count with your POS system is essential for correctly tracking every item (we’ll discuss the high-level categories you’ll need to cover and the overview of this process)

Establishing a Bill of Materials (BOM): the BOM is essential for manufacturing as you’ll need to track and count each “ingredient” that goes into a product (we’ll quickly demonstrate this document and discuss the components required to properly do inventory accounting for each product)

For more information about DOPE CFO visit DOPECFO.com or download your FREE "Accountants Guide to Managing Your Client's Cannabis Accounting Needs" at bit.ly/2GUnpPr

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