Report: Federal Regulations Pose Threat To $30 Billion Cannabis Industry
New Frontier Data, the global authority in data, analytics, and business intelligence on the cannabis industry, in partnership with CohnReznick, a leading advisory, assurance, and tax firm, releases U.S Cannabis Accounting & Financial Management: 2019-2020 Best Practices. This report addresses the key themes cannabis business decision-makers must consider as they plan, grow, and compete in this opportunity-rich but high-risk environment.
“In such a fast-evolving sector, it is imperative that investors and operators in the industry – and those seeking to enter it – understand the complexities of running a legally compliant cannabis business,” said New Frontier Data Founder & CEO Giadha Aguirre de Carcer. “Amidst increasing competition and M&A activity, well-run businesses with optimized financial management and well-managed accounts will have significant advantages over less-efficiently run competitors.”
Key financial issues that operators must understand to effectively and competitively operate in the industry include:
- All plant-touching businesses are denied certain deductions under tax code Section 280E.
- Lowering operational costs will be a source of competitive advantage.
- Operating a cash-based cannabis business creates additional complexity and security risks.
- As company valuations rise, thorough due diligence is now more important.
- Businesses should prepare emergency response protocols to minimize disruptions.
- Cannabis real estate is growing in popularity, but it is not without risks.
- Technology plays a continually greater role in operationalizing, diversifying, and regulating the industry.
- In a global cannabis industry, businesses looking to expand internationally should begin planning early for the best-suited business structures (and accounting practices) to so do.
“This report identifies how to navigate some of the industry’s critical accounting issues that our team has seen firsthand from clients and tracking federal regulations’ impact on the industry,” said Michael Harlow, CPA, partner, CohnReznick. “We hope this report is an opportunity for cannabis businesses and other stakeholders to manage risk and lower their tax exposure.”
“U.S. Cannabis Accounting & Financial Management: 2019-2020 Best Practices” is available for download on New Frontier Data’s online cannabis business intelligence platform, Equio.
To accompany the report, New Frontier Data and CohnReznik will host a free webinar on March 25, 2020, Navigating Capital Restraints and Global Crises in the Cannabis Industry. Speakers John Kagia, chief knowledge officer for New Frontier Data, and Michael Harlow, CPA, partner at CohnReznick, will discuss the most important trends currently shaping financial management in the cannabis industry.
This discussion will continue at the upcoming Global Cannabis Town Hall: New Economic Realities on April 2, 2020.