The importance of maintaining transparency and diligent accounting services cannot be overstated. The federal government's current stance on the cannabis trade could change for the worse at any time and subject retailers, dispensaries and cultivators to civil penalties and criminal prosecution, not to mention the inevitable time consuming audits. Therefore, regardless of whether retailers, dispensaries and cultivators gain access to the federal reserve system, the necessity of compiling AND MAINTAINING truthful and accurate accounting records in accordance with Cole Memorandum due diligence standards is highly desirable and strongly recommended in order to reduce or avoid entirely the adverse effects of federal regulatory action.
CMS uses rugged, robust hardware to provide the level of protection and security of on-site cash storage suitable to the needs of the business. These "Modified Cash Recycling Machines" are custom state of the art cash accepting and dispensing machines with bill storage capacity to meet the needs of the varying volume of revenue streams. CMS machines have level 1 or 2 security features available. Clients can integrate their existing point of sale equipment with the CMS machine. This avoids the frequent and costly transfer of cash from the business and the expense of off-site storage.
What is CMS?
CMS is a complete financial management service designed for legal cannabis cultivators, dispensaries and retailers. It facilitates efficient collection of revenue, calculation of excise, employment and income taxes, payment of employees, vendors and trade creditors, distributions to owners, full and complete due diligence and transparency through accounting best practices, thereby reducing loss of funds and regulatory intervention risks.
CMS offers a true "closed-loop" network system. Proprietary software ties individual cash recycling machines together in a private, intra-state network setting without the need to connect to any bank-owned or operated network. It's not a"cloud" or internet based network, thereby greatly reducing security risks.
THE INDUSTRY CHALLENGE
The CMS system provides real time monitoring of inventory, receipts and disbursements as a stand alone business management solution. It can calculate tax payments and dispense employees' pay. Employees will not have to touch incoming revenue at at all. Once the network attracts sufficient users, businesses can exchange "credits" and "debits" electronically via the CMS network, with periodic physical reconciliation to square accounts.
The CMS system relieves employees and management of the tedious burden of counting, sorting and storing cash, while providing full chain of custody documentation. This reduces to a minimum the risk of revenue diversion and loss. CMS machines restrict access to the onboard safes to only authorized employees under controlled conditions. Every CMS machine is equipped with the latest security features to deter theft.
What will CMS achieve?
Through the use of advanced cash handling technology, proprietary controls, accounting software and hardware, working together, will provide an efficient method of transferring funds to trade creditors, pay employees and remit taxes with a lower risk of loss to theft. CMS will also provide revenue and payroll services, tax preparation, payment and compliance services, and accounting services to aid businesses in compliance with standards contained in the Cole Memorandum. This will allow owners of cannabis businesses to focus on the business with CMS providing the information for regulatory compliance issues, all while reducing cash handling costs.
Why won't banks do business?
Legalization of cannabis for either or both medical and recreation use has been a difficult and lengthy process. Success at the state level solved only half the problem, leaving the real benefits of legalization--legitimizing the revenue of the trade--totally neglected. From a financial perspective, federal banking regulations discriminate against legal cannabis businesses. The current legal climate prevents legal cannabis businesses from conducting credit and debit card transactions, making them have to deal only in cash.
Right or wrong, the Justice and Treasury Departments have real power to prosecute owners of cultivators, dispensaries and retailers, and financial institutions that do business with them, unless Congress changes the classification of cannabis under the Controlled Substances Act. How likely is that? Who knows. Until then, access to commercial banking services will continue to be very problematic, mostly unavailable, and thereby causes the industry a huge headache.
However, the items of concern listed in both the Cole Memorandum and the FinCEN Guidelines provide good advice to cannabis business owners on best accounting practices in order to reduce the likelihood of federal hassles. Transparency extends to both revenue and expenditure aspects. Therefore, funds management and accounting services are essential in order to achieve the recommended level of transparency for taxation and Cole Memorandum compliance.
Why does the Cannabis Industry need CMS?
The problem is that cash is hard to move around and the risks involved in dealing only in cash was what originally gave rise to the electronic payment system built and maintained by the federally regulated banking industry.
The fear and headache about cash is that it's difficult to handle and move efficiently because of the risks of loss, its weight and bulk. Banks established the electronic payment system to reduce their costs and risks involved in handling cash and coins in bulk by making the convenience of electronic money movement systems available to more and more people. Unfortunately, due to discriminatory federal laws, cannabis businesses still face the old, old problem: how to handle, store and move cash around efficiently while reducing the risks inherent in handling it.
CMS arrived at the conclusion that in order to handle and move cash efficiently, cannabis businesses require a private, proprietary network of hardware and software components that reduce the costs and risks associated with current cash handling practices. When fully developed and deployed, this network would significantly ease the cash handling burden while providing increased security and dependable accounting. This will reduce risks associated with handling cash, make using the revenues more portable and efficient, and provide better safeguards against losses.