How Ready Is Your Financial Back Office?

When MariMed, an MSO spanning the Eastern United States, reported its 2024 results, annual revenue had reached approximately $158 million, with wholesale sales growing almost 29%. Alongside that expansion, the company made an adjustment to the way it valued its inventory. Its annual report disclosed a $3.7 million inventory revaluation expense after the company revised its standard cost assumptions to better reflect actual production and purchasing trends. The adjustment contributed to the increase in its cost of revenue.

Reviewing those assumptions is part of maintaining financial information as a business changes. MariMed’s disclosure illustrates how much can sit behind a reported balance: understanding the figure requires knowing how it was calculated and whether that calculation still reflects the operation.

That is a useful starting point for assessing a financial back office. An operator needs to know how much review stands between the information currently in its systems and the numbers management can confidently use. When that work begins only after a lender requests statements or an owner considers a major purchase, an ordinary financial question can require substantial preparation.

In this article, we propose a practical review guide that starts with cleaning up unresolved records, then establishes how to keep them current and reliable. From there, operators can assess whether the information supports day-to-day decisions and how much additional work it would take to respond to a lender or prepare for year-end planning.

Getting the Information Clean

Begin with a significant balance whose accounting treatment still depends on unresolved information. Ask the team what is needed to complete the review and involve the person familiar with the underlying operation.

Consider a cultivator completing an expansion in stages. One growing room is already operating while work continues elsewhere in the facility. The project accounts may capture every invoice correctly, yet accounting still needs to establish which assets are ready for use and which costs belong to unfinished work.

Curaleaf’s 2024 annual report explains that construction in progress includes projects not yet completed or otherwise ready for use. Once an asset is completed and placed in service, its cost is transferred to the appropriate asset category and depreciation begins, spreading that cost over its useful life. For an operator completing a facility in stages, waiting until the entire expansion is finished could leave assets already in use classified as unfinished construction and delay theT depreciation that should be recorded.

Have operations and accounting review when each part became ready for its intended use, then update the asset records and depreciation schedules accordingly. The project’s payment history alone will not establish those dates.

Review the project schedule with operations and accounting, using evidence of when individual assets became ready for their intended use. Have accounting determine the appropriate classification and depreciation treatment, and retain the supporting explanation. The invoices establish what was purchased; completing the review requires understanding what has happened to those assets.

Use that approach to define the scope of cleanup elsewhere. Prioritize unresolved amounts that could materially change the company’s financial position or an upcoming decision. For matters that remain open, identify who will obtain the missing evidence and when accounting will revisit the treatment. Management should leave the review knowing which balances are settled and which may still change.

Keeping It Current

Once the backlog has been addressed, examine how significant operating changes will reach accounting during the next close. In the cultivation example, responsibility for communicating when an asset becomes ready for use should be agreed before the next phase of construction is completed.

The close also needs to capture information that develops throughout the month. A manufacturer may have current sales and payroll records while its production cost calculations still rely on provisional assumptions. If final batch yields and cost allocations arrive after management has reviewed margins, the report used in that meeting may subsequently change.

Ask which estimates remain in the reporting package when it reaches leadership, and examine how much they have changed after recent closes. Repeated substantial revisions can help identify where the schedule or review process needs attention.

Operations and accounting can then agree on when production information will be available and how provisional amounts will be handled. Estimates may be necessary, but management should understand their significance, and accounting should compare them with the eventual results.

Set the close schedule around when management needs to review performance, allowing time for those checks. Good financial operating habits include regular reviews and responsibility for follow-through. At this level, progress means producing timely reports whose significant estimates are understood and consistently reviewed.

Making It Reliable

Reliability requires testing whether the evidence still supports the reported amount, even when transactions have been processed correctly and the systems reconcile.

Inventory can reconcile across systems while its recorded value still needs review. In Trulieve’s 2024 annual report, the auditors described testing the company’s estimates for excess and slow-moving inventory against evidence that included current selling prices and costs. This matters because inventory may cost more to produce than the business can eventually recover from selling it.

Consider an aging batch of flower that remains recorded at its production cost, although recent sales of comparable batches have required substantial discounts. The quantities may be correct in every system, but the accounting team still needs to assess whether the recorded value is supportable. Compare the batch’s carrying cost with its expected selling price, after allowing for any remaining costs of completing and selling it. Use evidence from products of comparable age and quality sold through the intended channel; the price achieved for fresh premium flower may offer little guidance. If the expected recovery falls below the carrying cost, have accounting determine the necessary write-down and document the basis for it. An ERP can provide the transaction history, while the valuation requires an informed assessment of what the remaining stock can realistically earn.

Make sure the comparison reflects the product’s actual commercial circumstances. A recent sale of fresh premium flower may provide limited support for the expected selling price of an older batch destined for another channel. The person responsible for selling the stock should help establish whether the assumptions used in the valuation remain achievable.

Following a production change, operations and accounting should also examine whether the cost assigned to the product remains supportable. Record the basis for any revision so future comparisons can distinguish a change in operating performance from a change in measurement. An ERP provides the transaction history; the review establishes what that history supports.

Making It Useful

Put the reviewed information against a decision management expects to make soon. A manufacturer considering a larger wholesale contract, for example, needs to understand how fulfilling that order will affect both profitability and cash.

The product may show an attractive historical margin, but the new contract could require smaller packages or additional production shifts. Use the existing cost records to establish a starting point, then have operations identify what would change for this order. Keep those assumptions visible in the analysis so management can evaluate the offer and later compare the outcome with its expectations.

The same analysis should reflect when the customer is likely to pay. Contractual terms provide a starting point, but a customer’s actual payment history may support a different collection date. BDC’s guidance on financial indicators recommends checking whether collection expectations reflect the circumstances of outstanding accounts.

Map the order’s expenditure against that expected collection and examine the effect of a delay. A profitable contract may require more working capital than the company can comfortably commit under the proposed terms. With that information, management can assess whether a deposit or staged deliveries would make the order workable.

As Verdant explored in The Moment Tax Stops Being Enough, operating decisions place demands on reporting that extend beyond completing the books. If this assessment is needed regularly, establish a repeatable analysis using maintained accounting data, with explicit assumptions for each new commitment.

Being Ready for the Request

Test readiness with a request the business reasonably expects to receive. For financing, ask the prospective lender about its requirements early and begin preparing the supporting analysis.

Where a lender evaluates earnings using EBITDA or an adjusted measure, establish the definition it intends to use. The number in management’s reporting package may include adjustments that the lender evaluates differently. Prepare a reconciliation from the financial statements and retain support for each proposed adjustment.

An operator might exclude a substantial facility-opening expense from its internal assessment of ongoing performance. Before presenting that adjustment, establish what the expense covered and whether similar spending has occurred repeatedly as the business expands. The lender can then evaluate the treatment using a documented explanation, and management can see how a different treatment would affect the financing assessment.

Use the preparation process to identify anything that still requires investigation. Management should know which figures are provisional and how an unresolved issue might affect the decision. Being ready includes being able to explain those limits clearly.

The same exercise can support year-end planning. Ask the tax team what it needs before the planning meeting, then work backward to establish when the relevant accounting must be complete. October leaves room to resolve questions while there is still time to consider their implications.

Where are you at with your financial back office?

Contact Verdant to help answer that question, assess the quality of your financial information, and establish the ongoing accounting support needed to keep it ready for the decisions ahead.