3 Tips for Optimizing Payroll in Your Cannabis Company

Cannabis companies face a myriad of challenges, with payroll processing taking one of the top spots. The various banking and tax hurdles the industry faces can also cause unique payroll problems which often require creative solutions. 

If you run a marijuana dispensary, payroll and taxes are likely to cause you frequent headaches. Luckily, there are ways to optimize your payroll processing and ensure compliance with relevant regulations. In this article, we will discuss the best payroll practices for your cannabis-related business. Read on. 

What are payroll best practices?

As of May 2021, 48 of 50 U.S. states allow for some form of medical cannabis, while 15 states allow recreational use, although many others are expected to follow suit. Although the cannabis industry is one of the fastest growing, the regulatory uncertainty involved has a direct impact on the availability of necessary financial services for businesses. Because of this, traditional payroll processing doesn’t fit a growing cannabis-related business. 

To overcome these hurdles, cannabis business owners have to employ creative banking and payroll solutions. To get the same level of financial services as other businesses, you’ll have to pay more attention to the following: 

• Ensuring compliance with FinCen and AML/BSA regulations
• Diligent documentation of employee training records and SOPs 
• Thorough background checks on key employees and interested parties 
• Obtaining relevant proofs of business insurance 
• Ownership structure and organizational documents 

How can I improve my payroll process?

If you are looking for more concrete ways of improving your payroll, here are the 4 most important areas to pay attention to: 

1. Develop a foolproof tracking system 

Since the cannabis industry employs several compensation models, tracking can be particularly difficult. With non-exempt (hourly), exempt (salaried employees), and those paid by specific outputs (e.g. bud trimmers), most traditional tracking software won’t be able to accommodate such a pay model. 

To remedy this, some businesses choose to track manually, but that creates additional recordkeeping challenges. Luckily, you can skip this hassle by choosing to use flexible and versatile time and attendance programs that allow you to track your employees specific to their pay model. Many companies offer time-tracking software specifically designed for the cannabis-industry that seamlessly integrates with your payroll processing system. 

2. Choose a marijuana-friendly payroll provider 

Choosing a payroll provider that services the cannabis industry is essential for ensuring compliance. Make sure that the company is willing to work with marijuana businesses in the long-term and look for a new provider if they say “no”. Don’t be discouraged if you run into a couple of bad apples. You’ll find the right payroll service provider for you soon enough. 

3. Know your COGS (IRS Code 280e) 

The section 280e of the Internal Revenue code states that state-compliant marijuana businesses are not allowed to deduct business expenses except for those for the cost of goods sold, i.e. COGS. This is a saving grace for cannabis processors and growers, since even inventorial labor costs, including those for trimming, curing, and packaging, are considered COGS. For tax purposes, therefore, it is essential that you assign specific roles and titles for your employees and track their work time and date closely. 

Upgrade your marijuana dispensary with an integrated system for HR, payroll, and taxes

The many payroll challenges the cannabis industry faces push business owners toward modern integrated HR systems, and for good reason. Choosing a payroll provider that offers cannabis-specific HR payroll software that will save you from elaborate workarounds. At Green Leaf Business Solutions, we offer a state-of-the-art payroll suite designed to provide you with transparent and detailed solutions to your HR and payroll struggles. Our innovative payroll suite includes everything from employee self-service and a mobile-friendly platform to integrated timekeeping. Contact us now to reap the benefits of cannabis payroll processing.