When you hear about cannabis tracking software, it’s typically referring to tracking the cannabis plant from seed-to-sale. While monitoring the plant is one of the most critical steps in operations, compliance, and measuring costs and profit, many businesses are skipping out on solutions to track work associated with the plant across their employees. After all…
People are at the heart of any well-run business.
Yet the data associated with people can be used to track time spent on production in every phase from seed-to-sale. And even beyond, to concepts like recognizing deductible Cost of Goods Sold (COGS) for filing 280E and increasing tax deductions and a cannabis company’s bottom line.
If you want the best returns possible, that means finding smart seed-to-sale software and solutions to getting the most from the cannabis workforce you employ. One of the best ways to help run your business more efficiently is through the use of cannabis tracking software and cost centers.
What is a Cannabis Cost Center?
Cost centers are generally understood as individual departments, functions, jobs, or tasks that cost money to operate and only indirectly contribute to the cannabis company’s profit. For example, if you operate a vertically integrated cannabis company, positions or tasks like your bud trimmers, packagers, and truck drivers would be considered cost centers.
With the right kind of cannabis tracking software for employees, you can leverage your payroll, human resources, and time and attendance tracking to segment cost centers in your supply chain. But why does that matter?
Cost Centers in Cannabis Tracking Software
By treating these cost centers as separate units in your accounting, you can measure the costs associated with specific actions within your supply chain. Without making such a distinction, it will be infinitely more challenging to figure out specific costs across your seed-to-sale process.
In order to find out how much it costs to employ your bud trimmers manually, you’ll have to sort through personnel files, payroll records, and crunch the numbers yourself. It is possible, separating your costs centers is far more efficient with cannabis tracking software. By separating your cost centers into COGS buckets, you will be better equipped to allocate precious resources to where they are needed most… Especially when employees cross over between departments, jobs, or tasks.
Let’s say you’re planning a new cannabis product launch. Based on your experience, you expect to see a 10% increase in sales. If you already know how much it costs to get that product from seed-to-sale, you can easily calculate the expenses associated with that additional output at each stage within the process and compare it to the profits you expect to see from the product launch.
Using Cost Centers and COGS to Maximize 280E Deductions
As a cannabis business owner, you already know how difficult it can be paying taxes. Aside from the financial burden of being taxed at a higher rate than most businesses, there is also the fact that cannabis businesses can’t take as many deductions as a regular business because of section 280E of the U.S. Tax Code.
Under 280E, any business that consists of “trafficking in controlled substances” prohibited by federal law cannot take tax credits or deductions. However, there is an exception to 280E, which allows you to deduct the cost of goods sold – a list of 280E deductions can be found here.
For cannabis businesses, this means you can deduct labor costs directly related to cannabis cultivation and extraction. For example, cleaning, trimming, curing, and packaging are all tasks that can be applied as deductions. By segmenting your cost centers, not only are you able to more efficiently distribute resources, but you can also get an accurate measure of your tax-deductible labor costs. With time and attendance software, you can figure out your employee’s output and how much it costs. So not only do you know how efficient your employees are, but you also know how much you will be able to deduct in taxes.
The Cannabis Tracking and 280E Deduction Solution from Seed-to-Sale
Wurk offers a suite of cannabis tracking software services that can help optimize your workflows and maximize your 280E deductions. The time and attendance solution, specifically, allows you to:
- Track time and labor data
- Generate data for payroll processing
- Export 280E reports
- Analyze costing trends
- Manage paid time off and calculate accruals
When evaluating your next cannabis tracking software, go beyond tracking just the plant, and incorporate employee time tracking and management. With the help of a great cannabis tracking software, you can keep track of all your deductions with pinpoint precision, which can increase margins and help your business thrive in an increasingly competitive marketplace.
Guest Author: Marketing All Day
Who is Marketing All Day?
"We’re a group of people passionate about advancing the HCM market and helping GREAT payroll and HR companies grow throughout the industry by leveraging our team's 10+ years of HCM industry experience."
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