Guide
Cannabis Financial Reporting: A Practical Guide
What belongs in the monthly package, who reads it, and what they check first.
Reporting exists to answer questions. The problem with most cannabis financial packages is that they answer questions nobody asked while omitting the ones a lender or buyer will ask immediately.
This guide describes the package we deliver and why each component is there.
The statements
Balance sheet, income statement and cash flow statement, prepared consistently and comparably. For multi-entity groups, both consolidated and entity-level views, with intercompany eliminated.
Consistency matters more than sophistication. A simple package produced the same way every month is more useful than an elaborate one that changes.
The operating layer
Statements describe the past. The operating layer explains it and points forward.
- Budget to actual with written commentary on material variances
- Gross margin by category, channel and location
- Cost per unit trend for producers
- Inventory turns and days on hand
- Labor efficiency and headcount
- Thirteen-week cash forecast update
What diligence tests
Buyers and lenders look at the same handful of things: revenue recognition consistency, inventory valuation support, related-party transactions, quality of the close and the reliability of prior forecasts.
A business whose forecasts have historically been accurate receives a materially better reception than one with a clean balance sheet and no forecasting track record.
GAAP versus tax basis
Many Minnesota operators keep tax-basis books, which is fine until an institutional counterparty enters the picture. Converting under transaction pressure is costly and undermines confidence.
Where an exit or outside capital is plausible, track the differences as they arise rather than reconstructing them later.
Frequently asked questions
How detailed should the monthly package be?
Detailed enough to answer the questions its readers ask, and no longer. A focused ten-page package is read; a fifty-page package is not.
Who should receive the reporting?
Ownership, any lender with a reporting covenant, and outside investors on the agreed cadence. Distribution should be defined rather than ad hoc.
When do we need audited statements?
When a lender, investor or transaction requires them. Audits are expensive and should follow a genuine requirement, not anticipation of one.
Upgrade the monthly package
Send your current statements and we will identify what a lender or buyer would ask for.