Proven Unique Receipt Tracking Feature: Human-Verified Data Extraction

In the business world today, data is the real power. It is the solid foundation for nearly every decision-making within a business. To build a valuable database, a company needs to master the first step – data extraction.

Facebook, Amazon, Google, and Apple are all modern-day tech titans worth an estimated $4 trillion. But they weren’t always this size or this valuable. How did they grow to become so powerful? The answer is data.

Facebook has enough data on its average user to fill a 400,000-word document. Meanwhile, Google has more than seven times that amount or the equivalent of roughly three million-word paper per user. These giant tech companies can collect every data right down to what stickers we use in posts and messages.

In this article, we’ll define data extraction and its role in finance and management, as well as show you the simplest way to to extract data from one of your most frequently used documents – expense receipts.

What is data extraction? 

So what exactly does it mean to extract data? 

Data extraction is the process of getting data from a source for further data processing, storage, or analysis elsewhere. Data extraction is the first step in a data ingestion process named ETL, standing for Extract, Transform, and Load. The purpose of the ETL process is to move, transform and optimize data for analytics. 

Data is typically analyzed and then crawled through to get relevant information from the sources such as customer databases or documents. There are many reasons, uses, and examples of how the technology is used, including receipt scanning and data extraction, which we’ll get to later.

A great example of data extraction is scanning job application forms. Let’s say you’re a tech company looking to hire new software developers. But you require specific qualifications, skills, or even hobbies. It’s a high-paying job, so your company receives thousands of applicants.

Going through these job applications can be time-consuming to determine which candidate meets the necessary criteria and who doesn’t.

Data extraction comes in and helps us resolve the trouble of combing through a vast amount of forms. Data extraction technology goes through the applications, sees who matches the company’s specific needs, and discards the rest, saving valuable time, money and person-hours. 

Why do businesses need data extraction?

Data extraction is a vital process to automate data collection for analysis. The process provides necessary data from various sources like invoices, emails, or contracts. These data help automate processes and provide valuable insights and analytics for decision-making. 

Data extraction is also a fundamental part of many complex and technical procedures, such as improving legacy databases, consolidating resources following a merger or acquisition, or smoothening internal operations by combining data from different divisions and departments. 

Below, we’ve listed five significant benefits of data extraction for your business.

Improves accuracy & reduces human error

By automating data entry processes for repetitive tasks, data extraction tools can help improve the accuracy of your data inputs by reducing human errors. If your staff is entering large amounts of data day in and day out, the likelihood of errors and inaccuracies rises. These can include incomplete records, missing/incorrect information, and duplicates.

With an automated process for data extraction, you can remove these errors and get more accurate data overall which is great for your business as you can make better decisions based on actual data.

Increases employee productivity

Employee productivity is a crucial component of a successful business. Removing the need for manual data entry means your staff can spend more time on essential tasks that add more value to your business.

Your employees will have a more positive outlook because they are using their skill sets to complete more meaningful tasks instead of monotonous data entry. Allowing employees to have time and energy to be creative and innovative results in higher job satisfaction, increased productivity, and a better working environment.

Improves visibility

Using data extraction allows your team to get their hands on data faster. The simple process of extracting and storing data in a cloud or a database means it is more visible and accessible to anyone in your business that needs it. 

Saves you & your business time

Time is money, as they say. Wasted time can prove costly for businesses.According to a study, automating tasks could save up to 2 hours for employees and 3 hours for business leaders per day. Business owners should consider using tools that help improve processes and save time. When used correctly, data extraction tools can save your business time, giving staff time to concentrate on more critical tasks.

Helps reduce costs

By automating long and repetitive tasks where possible, businesses can save money in both the short and long term. In the day-to-day running of your businesses and as it grows, you don’t need to worry about scaling and investing in a large team to handle your data needs. In conclusion, regardless of your business type, extracting data is an essential tool in both financial and managerial aspects.

What is data extraction for receipts? 

As we all know, a receipt shows relevant details of a given financial transaction. Data extraction for receipts is an automated process of extracting and organizing critical data such as the date of purchase, quantity, and total payment from a receipt for further usage. Below is an example of extracting critical data from a receipt. 

Thanks to advanced modern technology, businesses have been experiencing an automating system of data extractions from receipts using AI. In particular, OCR (Optical Character Recognition) technology can read your receipts almost as perfectly as a human being by scanning data through handwritten or electronic receipts. Not only that, but it can also convert data into digital text so that we can store and analyze that information. 

If it may sound too good to be true, let’s look at this real-life experience of the data extraction process for receipts!

Image: Esther Schindler – Shoeboxed Review

The image above is a shared example from one customer using Shoeboxed software to extract data from her receipt. As you can see from Esther’s receipt, AI technology has scanned and automatically filled in a report with all of the essential information, including date, currency, total amount, tax, etc. Additionally, a digital version of the receipt is on the phone, laptop, or PC.

Why do businesses need to extract data from receipts?

In the past, most employees (especially accountants) had to manually read every single receipt to find the required information for expense reports or bookkeeping purposes. This procedure was not only time-consuming and tiring but was also the cause of many human errors which impacted the chain of work and productivity of the whole business. 

More and more businesses have eliminated that manual process to switch to automated receipt data extraction system because of its numerous advantages. Here are just a few benefits that data extraction from receipts brings: 

Effectively tracking expenses

Losing or forgetting about receipts is commonplace in business. Employees can now just take a photo of the receipt and have all data recorded immediately, with no worries of losing or forgetting the evidence of expense. Accordingly, it loosens the burden for the accounting department and helps accountants keep track of expenses more productively. 

Quick reimbursement 

A receipt is usually tagged along with an expense export. The purpose of the report is to list the items you’ve made a payment on behalf of the company and to request a reimbursement. Hence, a company could receive hundreds of expense reports every month. To avoid inconsistencies, receipt data must be processed properly. That’s why receipt data extraction software is essential for managing these receipts and quickening payments.

Reduction of accounting errors

Many organizations still rely on their accountant to manually input information held in papers in their systems. This leads to incomplete records, missing/incorrect information, and duplication. By automating the data extraction process, structured data gathered will include fewer mistakes, and business reports will be more accurate. 

Efficient supply chain  

A company cannot focus on improving the quality of its products or services unless it has proper supply chain planning. To ensure the supply chain runs smoothly, the flow of information relating to worker deployment, inventory, delivery, demand and supply analytics, and so on must be simplified. 

One way to do that is to digitize receipt data processing. Receipts and invoices include important supply chain information. Unnecessary delays can be eliminated by automating the extraction and intelligent processing of this data. All deliveries will then be on time, and overall efficiency will improve substantially.

By extracting data to keep track of your business’s receipts can help business owners understand and control the company’s cash flow and spending budget better. As great as it sounds, there’re still some issues relating to this approach because no-AI system is perfect (or maybe not yet!). 

Fortunately, we have a perfect solution for it – human-verified data extraction! 

Shoeboxed human-verified data extraction feature

AI tools tend to be highly accurate, but errors can occur. Many external factors can impact the performance of OCR technology, such as:

  • Poor handwritten text
  • Faded text
  • Small fonts
  • Noisy or blurred images
  • Camera motion and shake
  • Watermarking
  • Crumpled paper

If you have encountered one of those situations, don’t worry! Shoeboxed’s got it covered for you! 

Our team is well aware of all the troubles that customers might have during their experience using automated data extraction for receipts. That’s why we came up with this unique service to provide the best quality data for you: human-verified data extraction. Let’s simplify how Shoeboxed’s data extraction system works in the following four steps:

  1. A customer can send receipts to us physically through which we call Magic Envelope or upload them digitally.
  2. Our AI technology scans and collects data from your receipts.
  3. A team of data entry experts goes through each receipt to check, correct errors, and verify the accuracy of the extracted data.
  4. You then can find your neatly extracted data directly on your Shoeboxed account. 

Choosing our service ensures the best quality of your data extraction with the most accurate results. No more risk of missing information as your data extracted is corrected and verified by humans. The verification process is also super speedy when it can take only a few hours to 1-5 days, depending on your submission method and Shoeboxed subscription plans. 

Shoeboxed integrates with many popular accounting applications. It can also automatically import receipts from Gmail into your Shoeboxed account. Because of the excellent integration feature that Shoeboxed has to offer, you can say goodbye to manual entry, missing inbox receipts, and headaches! 

Go paperless!

How businesses control and manage receipts significantly impacts their performances. As important as it is, this process sometimes is not taken care of well enough due to its bulky nature.

Automation of data extraction is an innovative and beneficial choice for businesses. Shoeboxed ensures every single receipt goes through a systematic and thorough data extraction process. More importantly, the data is examined and verified by our data experts. 

We care about our customers and their business, even down to a single receipt!

Expense Report Everything to Know for Successful Business

In this article, we will go through some basic fundamentals of expense reporting. Once you fully understand the nature of an expense report, you’ll be sure to make the most of it and improve your business’s productivity and internal control.

Being in business is all about making a profit. But that profit isn’t only about your sales numbers. How to effectively control and minimize expenses is just as important as how to boost sales to achieve the ultimate goal: generate maximum profit. 

Caught between limited financial resources and the pressure to maintain competitive pricing, small businesses these days need to stay more proactive than ever to stay on top of their expenses. One of the most commonly used practices for managing costs among small enterprises is the expense report. 

What is an expense report for businesses?

An expense report is a document filled out by an employee or a partner so they can be reimbursed for professional expenses. They are also used to track company spending.

Expense reports are generally presented as forms, whether in a paper or a digital format. The report can be prepared using accounting software or using a template in Word, Excel, PDF, and so on. 

With the advent of new technologies, several solutions now exist to automate the expense management process. The purpose of these solutions is to free time up for everyone involved in the process, streamline expense reports management, and increase profit. 

What is an expense report used for?

Making reimbursements 

A small business sometimes has their employees pay for work-related expenses out of their own pockets then later, the business owner would make reimbursement for those expenses. This process is carried out by an expense report with 3 simple steps: 

  1. The employee fills in an expense report and lists all the business-related spending such as gas for vehicles, accommodation, or meals. Receipts should be attached to the document.  
  2. The employer checks the expense report for accuracy and validity. 
  3. The requested amount is paid back to the employee.

Sometimes, the process can be reversed in which the companies make advance payment for staff. The employee still needs to submit an expense report to detail expenditures. However, there won’t be any reimbursement. Instead, the employer will just deduct the expenses from the advances and have these transactions recorded in the bookkeeping system. 

Tracking expenses

An expense report is also a great tool to help small businesses keep track of their spending periodically (on a monthly, quarterly, or yearly basis). By reviewing expense reports, enterprises can examine their financial health, determine if they’re spending over or under budget, then analyze the causes and come up with immediate solutions to improve expense management. 

Shoeboxed expense report

Filing tax

Regardless of what type of business you run, filing a tax return is a real headache. From ancient times to the present, businesses have always learned ways to minimize their taxable amounts.

Many business expenses are deductible that can be subtracted from a company’s income before it is subject to taxation. Expense reports are the legal documents to prove just that. Creating an expense report allows you to monitor deductible costs that may not yet be shown on your company bank account, making it a lot easier to write such expenses off at tax time.

Auditing purposes 

Expense reports are valuable evidence for both internal and external audit activities. Unnecessary and fraudulent reimbursement claims are not, unfortunately, an uncommon theme in many workplaces. These reports can help with business audits by providing visibility into what funds are coming in and out of the business. By properly processing these expense reports, owners can examine the details and audit their current businesses’ financial and managerial health. 

As we’ve just mentioned above as well, expense reports are vital for deducting tax. They can be requested for submission as supplemental documents, in addition to reporting total applicable costs on tax forms when submitting taxes with the revenue service at any time. 

What does an expense report look like?

Small businesses usually create expense reports using templates in Word, Excel, PDF, etc, or have them automatically prepared by accounting software. No matter how an expense report is made, it typically should contain these elements: 

  • Employee’s information: name, department, position, their manager, or details of who submits the expense
  • Date: when expenditure was incurred (a receipt showing the same date should be attached)
  • Vendor: where a product or service was purchased
  • Description: the nature of the expense such as taxi fee, meal, or hotel
  • Account: where the expense should be charged to 
  • Amount: the total sum of the expense (this amount should also be on the provided receipt) 
  • Subtotal: the amount for each type of expense listed 
  • Subtraction: adjustments when there are any prior advances paid to the employee
  • The grand total: the final amount of reimbursement requested
  • Note: an extra explanation for any unidentified or unclear type of expenses. 

Sometimes, an expense report may also include a brief summary of the company’s policy regarding which kind of expense is not reimbursable. It’s a good way to remind employees before they submit their expenses, saving time for employers and also raising awareness of spending policies within the enterprise. 

An expense report may look different among small companies, depending on its nature of business as well as each company’s own preference. However, it should always tell you how much the expense is and what it was used for. 

Business expense categories 

One of the most important functions of using expense reports is to help small businesses collect data and categorize business expenses, many of which can be written off in a company’s taxes. Some of the most common expense categories include utilities, travel, office supplies, and rental expenses, but there are many more that small businesses, freelancers, and sole proprietors should pay attention to. 

According to the IRS, as long as an expense is “ordinary and necessary” to running a business in your industry, it’s deductible. That’s why we suggest you should follow the categories listed in the Schedule C form  from the IRS for your expense report if you run a sole proprietorship. Developing categories that match your business and a tax return file can make the tax filing process easier, smoother, save you time, and make sure you get all the deductions that you can.  

We’ve listed below the most common 10 business tax expenses that you can deduct with brief explanations of what’s covered, what’s allowed, and what’s not.

Advertising

You can fully deduct expenses related to promoting your business, including digital and print advertising, social media advertising, website design & maintenance, and the cost of printing business cards.

Business insurance and professional service

You can deduct the cost of your business insurance on your tax return such as business liability or workers compensation. Fees paid to an attorney, designer, architect, or other professionals directly related to operating your business are also tax-deductible.

Office supplies

You can write off office supplies including stationery, office cleaning service, drinks & snacks in the break room, and work-related software. Shipping and postage charges may also be deducted. Bear in mind that you may only deduct the expenditure of materials used in the current year.

Home office expenses

Small business owners who work from home cannot miss this information! Generally, you’d need a space that is regularly and exclusively used for businesses to be qualified for deduction. You can deduct $5 for every square foot of your home office which meets all the requirements, up to a maximum of 300 square feet.

Travel expenses

The first and foremost condition to write off travel expenses is that the travel is qualified as a business trip. Here are 3 rules to help you know whether your trip is qualified or not:

  • The trip must be primarily business-related.
  • The trip must take you away from your tax home, i.e. outside the city or area where your company is located.
  • As well as being away from your tax home, it must be substantially longer than a normal day’s work and it must require you to sleep or rest on the route.

Business interest

A business interest expense is the cost of interest on business loans required to keep operations running. Your deduction is generally limited to 30% of adjusted taxable income while it was up to 50% in 2020 due to Coronavirus. However, this limitation is not applied to small businesses (with average annual gross receipts of $25 million or less over a trailing three-year period), farms, or real estate investment enterprises.

Cell phone and internet bills 

You can deduct your entire bill if you have a dedicated business cell phone or Internet connection. It’ll be a little bit more complicated if you mix business with personal usage. In this case, you will need to calculate and deduct only the percentage used for work. 

Wages and benefits

If you run a small business and hire people, you may deduct their wages, benefits, and vacation expenses. However, don’t include your own wages because they’re not allowed to be deducted by the IRS. 

Donations 

Tax-deductible donations must meet certain criteria such as the organizations you give charity to have to be qualified. Examples of qualified institutions include religious organizations, nonprofit educational agencies, museums, local volunteer groups, etc. There will be different guidelines depending on the nature of your donations such as cash, food, clothing, etc.

Depreciation

When you deduct depreciation, you’re usually writing off the cost of a tangible asset like a vehicle or machinery over the useful lifetime of that item, rather than deducting it all in one go for a single tax year. It’s best to deduct depreciation for costly long-term business investments, so you’re reimbursed for the expense over the entire lifetime of use of the item. 

Medical expenses

You can claim insurance premiums and you’re self-employed and pay for your own health insurance, you can deduct your health and dental care insurance premiums. You can also claim medical care expenses, including doctor’s fees, prescription drugs, and home care.

By designing your expense report template based on Schedule C, you’ll find it much quicker and easier when inserting data into tax forms.

So get organized and save time and money!

What is a monthly expense report? 

A monthly expense report details company outlays paid over the course of a given month. These reports are not typically used for employee reimbursement, but rather to track company or department spending, allocate expenses to specific projects or clients and compare expenses to revenue to determine a company’s overall profitability. These reports are typically organized by category, or payee, and can be tremendously helpful for companies to coordinate planning, budgeting, and resourcing requirements. In times of financial difficulty, a monthly expense report can be used to check how costs can be cut or eliminated to improve profit. 

What is considered an expense? 

Not all costs are expenses. An expense is the cost of operations that a business incurs to generate revenue. It can be salary compensations for employees, train tickets fee, or rental for the office. The summary of all expenses is shown on Income Statements (Profit or Loss Statement) as deductions from the total revenue.

While businesses can write off many kinds of expenses, they are not allowed to claim their personal, non-business expenses as business deductions. They also cannot claim bribes, lobbying costs, penalties, fines, and contributions made to political parties or candidates. 

There’s also a common mistake among businesses when they write off “capital expenditure” as an expense. Capital expenditure (CapEx) is used to acquire, upgrade, and maintain tangible assets such as property, buildings, or equipment. Businesses must capitalize those expenses or write them off slowly over time as depreciation. For example, if you acquire a new oven for your bakery business, the oven should be capitalized and recorded as your asset, instead of a business expense. Identifying the nature of an expense will help you do your taxes properly and precisely. 

Essentially, companies should have strict rules regarding what can be considered a business expense. Employees should be informed thoroughly as well before submitting expense reports for reimbursement. 

Conclusion 

Expense reporting and analysis is an indispensable element of an effective cost management process. However, many small businesses struggle with keeping track of documents and receipts manually which ends up being time-consuming and unproductive.

Clear away that pile of documents and go paperless with Shoeboxed!

Shoeboxed creates clear and comprehensive expense reports that include images of your receipts. In just a few clicks, you can export, share or print the information you need for easy tax preparation or reimbursement.

Bookkeeping For Cannabis Industry Must-knows 4 Proven Best Practices

The US Cannabis Industry

Due to its illegal status at the federal level and as the business is growing fast with a variety of emerging sub-industries, Cannabis companies are facing ever more complex issues that are unique to the industry and require their operators to be extra careful when it comes to keeping their books accurate and organized. Hence, bookkeeping for Cannabis industry best practices is proven to be necessary for businesses in the field.

Let’s go through everything must-knows and best practices about bookkeeping for Cannabis industry in this article!

Banking

Not many federal-regulated financial institutions welcome those who run their business in cannabis as it is still classified as an illegal drug in many states, thus making its risky and problematic reputation. Apparently, the lack of banking options from the beginning subjects cannabis businesses to multiple issues, including internal and external theft, misallocation of funds, payroll, and insurance paid in cash.

It is not totally hopeless to find a bank that can work with your cannabis business though if you are willing to go through complicated application procedures in which regular financial statements must be handed in for reviews. The banks often do this quarterly, but monthly financial records should be ready at any time for submission since it is likely that they will be investigated to support what is reported. The banks will also pay attention to fluctuations in your report, and you don’t want your account to be shut down because you can’t account for such inconsistencies!

Cash flow control

Needless to say, it is challenging to manage cash-only businesses, and those trading in cannabis are no exception. Without a proper tracking system in place, tracking cash transactions by transaction can become a mess. In this case of cannabis – a federally controlled substance, every piece of inventory matters, so any suspected activity may cost the companies their precious licenses or even lead to criminal charges against concerned individuals.

Anti-money laundering

To prevent money laundering, marijuana companies must meet strict requirements regarding accounting and keeping records of every activity and transaction during the course of business, “from seed to sales”, and from suppliers, distributors, retailers to customers. Moreover, for any transaction or a series of transactions that total $10,000 or more in cash, cannabis businesses have to prepare Form 8300 for tax purposes, the filing of which can be confusing with errors resulting in serious fines and audits. 

Taxes

According to Internal Revenue Code Section 280E, “No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by federal law or the law of any state in which such trade or business is conducted.” In compliance with this, cannabis-related businesses follow strict limitations when reporting taxable income, with the cost of goods sold being the only deductible expense. Accounting processes, as a result, must implement complete record-keeping to ensure a compliant inventory environment.

Seed-to-sale tracking

 Cannabis business and accountants working in the industry do not often talk about seed-to-sale tracking with much enthusiasm. Every state has its own seed-to-sale system to monitor the production and distribution of Cannabis plants, causing a great deal of confusion for growers, distributors, and other stakeholders involved who need to adhere to changing rules of each local government. 

Specifically, depending on its preference, each state may require a different software system to trace and monitor the plants and finished products from inventory to the point of sale. The three popular seed-to-sale software, Biotrack, MJ Freeway, and METRC, however, tend to have unreliable reporting and it is also difficult to integrate them with existing accounting systems.

Bookkeeping for Cannabis Industry

Bookkeeping is fundamental to accounting, and with all the federal and state regulations that make accounting for cannabis extremely complex, anyone who deals with keeping the books must do it right. 

In particular, bookkeepers should know the ins and outs of Section 280E in the tax code because of its major implications on the business’s actual income and profit. Unlike those working for most small-to-medium-sized businesses, accountants and bookkeepers in Cannabis companies must get used to concepts such as cost accounting, accrual accounting, generally accepted accounting principles (GAAP), and absorption accounting. 

Since many of these principles are not required for everyday small business accounting, a generalist accountant may not be familiar with them. Finding a person with the necessary skill set to keep good records for your cannabis business, therefore, is important in several ways.

Getting ready

Whether outsourcing professional bookkeeping services or hiring an internal bookkeeper, cannabis businesses benefit greatly from having their books handled by people who have experience in the industry. It will be too late to get your accounting system set up and begin organizing your expenses months after the business starts operations. Money is spent on a daily basis, and without proper tracking of day-to-day expenditure and transactions, catch-ups of bookkeeping will turn into a nightmare with a higher tendency of errors. Even for pre-revenue companies, having a comprehensive bookkeeping system in place is essential at the beginning of their journey, when they need to know how much is spent on what before making the first profits.

Raising money

The key to keep a cash-intensive business like Cannabis companies up and running is said to lie in fundraising. Not to mention the difficulty of finding investors who understand the possible pitfalls of the industry, there are a host of components that accountants and bookkeepers can’t overlook if they would like to attract investors to their business. However, it all comes down to the basics such as providing organized books and accurate financial reports that show effective internal controls and accounting policies. There is no one who wants to entrust their money in incompetent hands, and for marijuana businesses that wish to access capital, it is expected that they can express their efficiency in financial management through good bookkeeping practices.

Taxes and deductibles

As mentioned above, under the regulation of IRC 280E, Cannabis companies cannot take deductions from business expenses such as rent, vehicle, and marketing like other companies because their business is related to a controlled substance. Despite this tax limitation, professional accountants can help to legally reduce taxable income by allocating costs to inventory and the cost of goods sold, which is mandated by IRC 471.  

Besides the reputable IRC 280E, there are other tax requirements that accurate bookkeeping can help cannabis businesses fulfill, thus maintaining their license while staying out of trouble with the IRS.

GST/HST and Provincial Sales Tax

Once a proper accounting system is set up with organized bookkeeping practices guaranteed, Cannabis companies can be at ease that they are paying the correct amount of sales tax they are supposed to. What’s more, based on the tax collected it will be easier for them to plan ahead, using the expected tax refunds for business operations. 

Excise duties

Exercise duties, applied at the time the cannabis product is delivered to a buyer, are compulsory for any cannabis licensee. Duties of each transaction must be kept track of, and the higher duty payable must also be reported. Those who own a business in the industry had better have a good grasp of what rules and regulations that the excise duty framework entails to know how to calculate duties or have a reliable accounting team to do this meticulous task for them. Plus, they should do it from early on too before all the transaction receipts pile up or go missing!

Bookkeeping for cannabis industry best practices

Knowing the rules

Whether it is for medical use or adult purchases, businesses associated with marijuana are restricted by countless written and unwritten rules, the sheer number of which may shun anyone wishing to be engaged in this space. Those who overcome the hurdles to take on the role of bookkeepers in Cannabis companies must be well aware that there is no room for ignorance here. Before things can be done “by the book”, first and foremost, bookkeepers must find out what “book” to read. Both federal and state laws have their own specifications regarding cannabis businesses, and it goes without saying that bookkeepers need to know them like the back of their hands to stay compliant. Legality, undoubtedly, is a top concern when it comes to the future growth of the cannabis industry.      

Going digital

As the foundation of good accounting and financial management, bookkeeping is all about being organized. You may have heard about digitized receipt services such as Shoeboxed that help to keep your documents safe, both online and offline, but there are more advantages of applying technology in bookkeeping than you would imagine. 

With brilliant features including verified data that is audit-ready and easily located, customized expense reports, and integrations with a variety of accounting systems, Shoeboxed offers an actionable data tool. Just like any other business, accurate records and transparent accounting procedures are what a cannabis business needs to track its finance and enhance its credibility with the bank and other financial institutions, as well as potential investors.

Shoeboxed provides digital secured quick bookkeeping solution for businesses

Software workarounds

A cannabis company is a complicated entity that involves several sub-industries (farming, chemical manufacturing, food production, and retail), and each requires all kinds of reporting pursuant to the many legislations at the state and federal levels. Another big headache for cannabis bookkeepers and accountants is the buggy seed-to-sale software requested by local regulations. Unfortunately, software that are specifically designed to assist this complicated process are still lacking and don’t work well with widely used accounting systems. 

While looking for more plausible solutions, specialists in the field suggest we make use of current software, combining their functions to serve our needs. For accounting, Quickbooks and Xero are popular choices although some attempts must be called for to create charts of accounts for each business stage. The good old Excel is also a basic tool for cost accounting, reconciliations, consolidations, and so on. If one realizes its versatility and puts decent effort into utilizing its functions, preparing monthly reports or creating accounting templates can become much easier. Finally, the unsolved issues of seed-to-sale software must be acknowledged so that predicted errors can be avoided. Making do with what we have seems to be the right strategy, at least for now.

Checks and balances

Problems with bookkeeping in cannabis businesses are mostly due to the huge amount of cash being collected, which may lead to undesirable consequences ranging from careless mistakes to fraud. There are so many things that can go wrong and result in inaccuracies found in the books when a lot of business activities occur every day. Many of them, however, can be prevented by implementing checks and balances consistently during operations. 

For example, cash counts on a daily and weekly basis can help to identify discrepancies between actual cash on hand and the records in the books. Likewise, sale receipts must be kept carefully and compared to the receipts listed regularly. It is also a good idea to have two people do the cash collection and reconciliation separately to lower the chance of a financial thief. In this way, professional bookkeepers and accountants make a perfect couple who compliments a reliable internal control system.

We have yet to know when the federal legalization of cannabis is coming and how it will change the bookkeeping practices in Cannabis companies. Whatever may happen, there is truth in keeping accurate and organized books for business smooth operations. 

What do you think about the future of the cannabis industry from now on? Do you have more tips on good bookkeeping for cannabis industry to add?

Don’t hesitate to share with us your opinions in the comment section below!