Is Your Chart of Accounts Scalable?

A chart of accounts (COA) is a foundational element of your cannabis business's financial management. It organizes financial data, ensures accuracy, supports reporting and analysis, and helps you comply with regulatory requirements. A well-designed COA is essential for informed decision-making and effective financial management in your business.

You may not consider the idea of scalability when establishing a chart of accounts. But what happens when you purchase a new building and need to start allocating costs to this location? What about when you take on a loan, and the lender requires reporting on only one of several revenue streams? Sometimes these questions will cause a cannabis business’s accounting department to spend hours manually breaking out costs via spreadsheets when a proper chart of accounts could have prevented the unnecessary time and effort.

Here are a few tips to help your chart of accounts become as scalable as possible:

1. Consider the bigger picture. Where will your company be in 10-15 years? What “categories” of revenue will you have?

2. Evaluate reporting requirements at the most stringent level. You can always roll up, but it’s much harder to break out revenue/expenses into smaller categories from a Profit & Loss statement once the data has been produced.

3. Take advantage of modern software/tools. Most modern accounting software has additional categorization tools beyond the general ledger accounts, which can help further define data and produce customized reports. Locations and Classes in QuickBooks Online is just one example.

While it is possible to expand and adjust your COA along the way, being intentional about developing a robust set of accounts from the very beginning is the best way to ensure that your accounting system can support your cannabis business’s evolution into the future.