As the cannabis industry continues its meteoric rise following a record-setting 2020, more companies outside the sector are staking their claims. While there are definitely still opportunities for cannabis startups, many dispensaries, cultivators, and processors are subsidiaries of larger parent companies that operate across multiple industries.
This presents a unique set of challenges for parent companies, who federal laws require to specifically distinguish between cannabis and non-cannabis business entities and what makes global consolidation so difficult.
Sage Intacct’s cloud accounting software provides the capabilities for parent companies offering multi-entity, multi-location, and even multi-currency management features to simplify business operations. With an industry-tested cannabis ERP accounting solution like Intacct, cannabis parent companies easily manage finances between multiple entities more efficiently. And by consolidating accounting tasks while increasing accuracy, cannabis finance departments can close the books sooner.
Here, we look at some of the key features that Sage Intacct’s accounting software offers, and how it helps parent companies integrate disparate financials.
The most immediate benefits of Sage Intacct’s ERP software comes from the consolidation of disparate entities into one manageable system. Instead of separate business systems for each legal entity, Sage Intacct provides one software solution that centralizes controls, allowing for increased management functionality and efficiency.
Utilizing unified logins, users only need to log in to the system once to access any entity within. To ensure security, user profiles can be configured to restrict user access to only the specific entities and transactions related to their job. The homogeneity of these entities into one comprehensive ERP solution facilitates inter-entity transactions by centralizing payables, automatically creating clear and accurate audit trails between entities, and providing advanced customization for entity-specific tasks.
Inputting data into the system only needs to happen once, and with advanced configuration applications, the data will automatically travel between the entities that need it. Sage Intacct’s ERP accounting software provides granular visibility into all consolidation aspects with journaled consolidation reporting. Eliminations can be automated at the point of consolidation, and post-consolidation adjustments can be made quickly.
An unlimited hierarchical structure can be implemented, allowing for complex ownership consolidations and even partial ownership structures. This kind of consolidation provides enhanced reporting accuracy, allowing stakeholders to easily gauge the status of entities, their performance, and their impact on the company overall. Most of these consolidations can be automated, eliminating the need for error-prone manual entries from individual entities.
Company analytics become much more effective, and cannabis business entities can be wholly incorporated into the overall analytic picture. Sage Intacct’s accounting software also provides enhanced user functionality, allowing multi-dimensional tagging for individual lines of business that can offer an in-depth look at individual entities.
By consolidating entities into one ERP platform solution, Sage provides real-time insight into multi-entity operations. Advanced automation and AI assistance update information system-wide, providing users with company-wide real-time reporting.
By generating these financial and operational reports, companies can get insight into company-wide performance by customer, vendor, project, and more. Company-wide credit exposure reporting provides global visibility into specific vendors and customers, running central AP/AR aging reports across the complete company structure. This enhanced global visibility allows companies to make strategic decisions quickly, promoting the integration of disparate business entities and the overall growth of their parent companies.
Maintaining regulatory compliance for cannabis entities should always be a top priority for multi-entity managers, as parent companies will certainly be held responsible for violations – and the IRS track record for winning litigation against companies with compliance issues has so far been impeccable.
For parent companies with cannabis entities, federal law requires that specific operations be completely separated operationally from non-cannabis entities. Federal tax code IRC 280E prohibits tax deductions or credits for entities that ‘traffic’ controlled substances, so making clear delineations between entities is absolutely critical.
IRC 471 also presents challenges for multi-entity accounting, including cannabis businesses, requiring comprehensive inventory reporting and cost valuations each year that must be separated from non-cannabis inventory reporting. Compliance with these tax codes requires meticulous record-keeping, with cannabis businesses in particular required to track all cannabis products from seed-to-sale.
Failure to comply with these regulations can result in serious financial consequences for a company and culminate in severe criminal penalties.
Moving forward, multi-entity cannabis business management starts with the cannabis ERP solution that meets the needs of every location all the time. Sage Intacct’s cloud-based accounting software has the flexibility and homogeneity that parent companies need to be successful, integrated, and compliant multi-entity operators.