Reporting periods in accounting can be distinctly complicated and are typically left to accountants to handle. For example, Balance Sheets are a snapshot at a point in time, usually the end of a month, quarter, or year while an Income Statement is the reporting over some time, such as the “month of” or “last year.” Straight forward conceptually, but it can be quite tricky and different depending on each industry’s standards.
Using real estate development as an example, say you are a developer building a house. When you sign the contract to build a $1m house, you could say you just made $1m in revenue, or you could say you haven’t earned anything until you deliver the keys to the home you built. While the accounting standard is that you record revenue based on the build’s progress, there is an added layer of complexity when reporting revenue for income taxes. Income taxes tend to be assessed based on when you receive payment for a job. The variations between the business’s recorded net income and the income reported on their tax return create what accountants call “M-Adjustments” or, more commonly, book-to-tax differences.
Complexities like these are why there are accountants and how people can get in trouble when they operate outside the codified rules.
When asking your Operators to report their monthly sales, creating established parameters will often assist in collecting accurate information. For example, if you are looking at a specific cannabis product, can that product be packaged through the track-and-trace system in multiple ways (think about an edible: is it one gummy bear or one package of gummy bears)? If it is a weight-based product (such as flower or concentrates), are you using a standard unit-of-measurement? If it is a quantity-based product (such as pre-rolls or edibles), does the quantity make sense, or should it be converted to another unit-of-measure? Are you basing sales on when the transaction occurred in the track-and-trace system or when the Operator received payment? There are many flexible areas in reporting that can cause discrepancies in overall expected gross sales.
“How much did I sell last month?” may sound like such an innocuous question, and it can be, as long as you define the parameters on what you are expecting.
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