One of the biggest challenges for cannabis operators is tracking the true Cost of Goods Sold (COGS). A comprehensive understanding of COGS is essential for making informed business decisions, optimizing accounting processes, and complying with tax regulations. Despite the hours spent on compiling COGS, many operators find their data inaccurate and outdated due to fragmentation. Enter Flourish’s COGS Software - a game-changing solution that simplifies tracking and provides trustworthy data for cannabis businesses.
What is Cannabis Cost Accounting or COGS in the Cannabis Industry?
At its core, the Cost of Goods Sold (COGS) for cannabis refers to the expenses incurred to create your end product. This calculation encompasses costs such as raw materials, labor, some overhead, and amortization. It's important to note that COGS doesn't factor in costs tied to marketing, sales, or distribution.
The assessment of Cannabis COGS can be carried out over various time frames — be it monthly, quarterly, or yearly. While the choice of frequency rests with the business owner, a monthly evaluation is often advised for a clearer financial snapshot. Inaccurate and outdated COGS can have far-reaching consequences on a cannabis business. These issues stem from data being scattered across different systems, making it difficult to consolidate and analyze. This fragmentation leads to several challenges:
- Accounting Complications: Inaccurate COGS complicates financial reporting, making it difficult to assess the true profitability and financial health of a business.
- Poor Business Decisions: Without reliable COGS data, operators struggle to make informed decisions on pricing, production scaling, and resource allocation.
- Tax Compliance Issues: Accurate COGS is essential for tax reporting, and discrepancies can result in penalties or audits from regulatory authorities.
Flourish Software's comprehensive cost-tracking feature revolutionizes the way cannabis operators manage their COGS. By integrating all costs, including cannabis, non-cannabis, and non-inventory items such as labor, electricity, and service charges, into a single system, Flourish provides accurate and up-to-date COGS data. This unified approach ensures trustable information, enabling operators to make strategic decisions, streamline accounting processes, and maintain tax compliance. If you are interested in learning more about how cannabis businesses can save money on their taxes, check out this in-depth guide.
Flourish COGS Software takes it a step further by offering both standard and variable costing and pricing options. This flexibility allows operators to evaluate profitability and identify variances between standard and actual profits. By understanding these discrepancies, businesses can pinpoint areas for improvement, optimize operations, and ultimately boost their bottom line.
What are the Biggest Issues with COGS in the Cannabis Industry?
The biggest issue with tracking and maintaining COGS is the amount of work it takes to enter costing data on top of all compliance, sales, and inventory information. Flourish Software's comprehensive integration with METRC, sales platforms, and accounting platforms solves this challenge by eliminating double data entry. As your team members perform their tasks within Flourish, such as receiving METRC transfers, finalizing production runs, adjusting inventory, and allocating packages, the costs carry over automatically. This synchronization not only saves valuable time but also ensures accuracy and consistency across all departments.
Accurate tracking is the key to unlocking the success of cannabis operators, and Flourish Software's comprehensive cost-tracking feature provides the solution. With Flourish, operators can access reliable data, make informed decisions, streamline accounting, and ensure tax compliance. Don't let inaccurate COGS hold your business back - explore the benefits of Flourish Software today and unlock your cannabis operation's full potential.
Interested in learning more about how Flourish can help your business succeed? Get a free software demo and start Flourishing today!