When most people hear the word “audit,” their pulse starts to race and their chest gets tight. An audit can be a very stressful event. Not all audits, however, are days of financial reckoning for you and your company. Certain kinds of audits can actually be the best thing for the health of your organization.
While audits commonly refer to the Internal Revenue Service and taxes, the IRS isn’t the only one who conducts them. Consulting and compliance companies will often conduct complete audits of a business to verify that their procedures are sound, to confirm the financials in a report, and to verify that the business is following all rules and regulations.
Below we examine several types of audits and how they can help your cannabis company or financial institution.
When it comes to the nascent legal cannabis industry, rules and regulations continually change and also often differ by state and locality. In most states, any business dealing with cannabis face strict requirements. A full compliance audit can help companies identify any potential problem areas where rules are gray or changing. It can also confirm that the company is meeting all current requirements.
Compliance audits serve a necessary function for cannabis businesses due to the high cost of regulatory mistakes. If you’re licensed in a legal cannabis state, failure to comply with all requirements can cost you $50,000-100,000 for each instance. A lax stance on compliance laws can even cost you your license to operate if you’re a “plant-touching” business.
A compliance auditor carefully combes through your practices and helps to ensure your peace of mind. A thorough audit can catch any processes that may be problematic and prepare you for future inspections. They sweat the details so that you don’t have to.
Dealing with the responsibility of employing people to work for you is a challenge for every business. In the legal cannabis industry, the challenge is complicated by the fact that many employees need their own special licenses. It’s important to know that the people you hire are right for the job and meet all requirements for employment.
A human resources audit can help streamline your HR processes from reference and background checks to finding areas to improve your employee relationships. An audit can also identify problem areas in your procedures. Identifying these areas is key to making sure your business runs at peak efficiency.
The cannabis industry suffers a higher turnover rate than most. An HR audit can help reduce that rate and stabilize your staff.
Mergers & Acquisitions
Mergers and acquisitions play a large role in the legal cannabis industry. Whether a multi-state cannabis operator looking to expand or a small business considering selling, companies need to know all of the factors in play. Due diligence is the key term when it comes to mergers and acquisitions and it needs to be thorough.
Before you sign any agreements, you need to determine your own strengths and weaknesses as well as your potential partners’. A complete and thorough audit of the business you’re in talks with is crucial to making the best deal. A mergers and acquisitions audit will identify all of the financial and operational considerations so that you can proceed with confidence.
RADD CANN serves buyers and sellers by providing in-depth, strategic consulting with an eye toward securing the best agreement informed by all of the facts.
Lastly, most businesses these days rely heavily on third-party vendors for supplies and services. Finding the right vendors for your business can be a painstaking process with the company’s profit or loss on the line. A vendor management audit helps businesses by reviewing all agreements to make sure a company’s footing. It also looks for any areas of improvement.
It’s never easy to balance the need for cheap vendors with the need for reliability and quality. If you’ve never had a professional with a complete understanding of the state and local industry providers, you may be losing money with every transaction. A qualified consultant can review all vendor agreements to ensure terms are met and no better options are available.
RADD CANN is an auditing and consulting firm serving cannabis operators, financial institutions and municipalities. Contact them today for a free consultation.