Don’t let these accounting errors cost you your license. — Ready to save millions? Schedule a free consultation today!

As cannabis accountants, we’ve seen it all; from dispensaries losing six figures to bad bookkeeping, to cultivators facing audits because their COGS allocations weren’t airtight.

This industry is tough enough without getting tripped up by challenges that are 100% avoidable.. if you know what to look for. So, whether you’re running a grow, manufacturing edibles, or managing a multi-location dispensary, here are the 7 biggest cannabis accounting challenges we see far too often (and how to avoid them).

1. Treating Cannabis Like Any Other Business

Biggest Challenge: Using a general accountant or software not built for cannabis.

Cannabis accounting is not standard accounting. Between IRS 280E, state-by-state compliance rules, and unique cash management needs, this industry requires a whole different playbook.

Avoid it by: Working with a cannabis-specific accountant (like Mindtrix) who knows the rules, the loopholes, and the risks — inside and out.

2. Poor Cost of Goods Sold (COGS) Allocation

Biggest Challenge: Not accurately tracking and allocating COGS, or worse, lumping in non-deductible expenses.

Under 280E, COGS is your only legal deduction, which means it needs to be done perfectly. If you’re not separating costs tied directly to inventory, you’re either overpaying taxes or putting your business at risk during an audit.

Avoid it by: Setting up a cannabis-specific chart of accounts and reviewing COGS allocations monthly.

3. Not Separating Cannabis and Non-Cannabis Activities

Biggest Challenge: Running multiple lines of business under one entity without clear separation of activities.

If you operate both cannabis-touching and ancillary services (think: consulting, apparel, wellness), combining them in the same legal entity could blow up your tax strategy.

Avoid it by: Structuring your business properly from the start and keeping your books cleanly separated.

4. No Internal Controls or SOPs

Biggest Challenge: Lack of documented financial processes, especially for cash handling.

With the banking challenges in this industry, cash is still king. Without internal controls, you’re leaving the door wide open for theft, fraud, and compliance violations.

Avoid it by: Implementing standard operating procedures (SOPs) for cash, inventory, and financial reporting, and enforcing them.

5. Falling Behind on Monthly Bookkeeping

Biggest Challenge: Playing catch-up during tax season.

If you wait until year-end to get your books in order, you’re already too late. Disorganized books mean missed deductions, inaccurate tax filings, and a giant headache if regulators come knocking.

Avoid it by: Reconciling your books monthly and reviewing financials with your accountant regularly.

6. Ignoring State-Specific Compliance

Biggest Challenge: Assuming your state’s tax rules are the same as federal, or not keeping up with updates.

Each state has its own rules on sales tax, excise tax, METRC reporting, and more. Failing to comply can trigger audits, license suspensions, or massive fines.

Avoid it by: Working with professionals who monitor both federal and state cannabis regulations.

7. Waiting Until You’re in Trouble to Ask for Help

Biggest Challenge: Calling a cannabis accountant only when the IRS or regulators are already on your doorstep.

Prevention is 10x cheaper than damage control. Don’t wait until an audit, cash flow crisis, or tax bill hits to clean up your books.

Avoid it by: Investing in expert help now, not after a costly mistake.

Final Thoughts: Don’t Let These Challenges Derail Your Business

Save millions, stay complaint and protect your license. Strong internal controls safeguard your cash flow and build trust with regulators.

At Mindtrix Accounting, we help cannabis operators navigate the unique financial and regulatory landscape with confidence.

Let’s make your accounting as strategic as the rest of your operation together. Schedule a free consultation today!