Top 6 Skills & Qualities to Look for When Hiring a Cannabis Accountant
When your numbers are right, your conversations are different.
Many cannabis owners try to muddle through their own accounting or employ a family member to manage the books. While handling your own accounting may pass muster in some industries, cannabis accounting is a complex beast that fluxes depending on current state and federal tax regulations.
You need an accountant specifically trained in the industry to prevent you from owing thousands of dollars in tax penalties due to miscalculated inventory or improper entity structures.
The problem is not all cannabis accountants are created equal. Many accountants flocking to the cannabis market are not qualified to keep you compliant. They also do not understand the banking and inventory requirements for cannabis.
To make it easier to locate, vet, and hire an accountant for your company, I’ve created this six-question guide to serve as a simple checklist. Keep it handy to find the best professional service providers in the industry.
1. Is the accountant aware of your state’s unique cannabis compliance requirements?
Due to the federally illegal status of cannabis, every state has its own set of rules and regulations for the market. The accountant you hire must understand your state’s unique compliance requirements to keep you in business and out of hot water with the tax authorities.
To help you stay compliant, the accountant must know how to maintain a certificate of good standing with the state, the department of revenue, and the unemployment department – all may be necessary for you to renew your license depending on your state requirements.
Remaining compliant with these departments also involves proper budgeting and remitting business registration fees.
Additionally, a cannabis accountant should understand which forms need to be completed. Furthermore, they should know how to fill out and file the forms and send payments.
Note: Some states only allow in-person or check payments because no electronic remittance options are available. Accountants need to know these details to properly serve cannabis clients.
2. Do they understand state-mandated seed-to-sale software?
State-mandated seed-to-sale software is the source of truth for cannabis regulators. If your inventory values and sales numbers do not align with what’s in the system, you can face crippling penalties or lose your hard-earned license.
A cannabis accountant worth their title will understand this and have procedures to protect your business. However, make sure you ask a potential accountant about their experience with seed-to-sale. Cannabis licenses are required to access seed-to-sale systems, so many inexperienced accountants have never touched the software.
Ensure the accountant you hire has been trained on your state’s seed-to-sale software by asking about their training in various programs and understanding of necessary system workarounds.
3. Do they have a good system for cash controls and SOPs?
If you find that you are running your multi-million-dollar business using “the envelope system” and are relying on your budtender to cash out the drawer every night correctly, you need tighter cash controls.
Most cannabis companies are not banked or have limited banking access. Even when banked, credit card transactions are illegal, so they still deal with a ton of cash. And all that cash laying in bags in armored trucks, waiting to be transported to vendors or tax authorities, opens up a wide range of problems, ranging from theft to fraud to managing vendor accounts.
A trained cannabis accountant will understand how to implement tight cash controls, such as cash logs, cash count procedures, and check-in balances, to keep cash from walking out the door. The accountant you hire should set this up with your company, monitor performance, and provide training to store operators to ensure they closely follow the process..
4. Does your accountant understand cannabis inventory, and do they have inventory controls and SOPs?
Inventory problems in cannabis arise when inventory counts don’t match the seed-to-sale tracking system data or aren’t performed correctly. These inaccuracies, such as mistakenly coding grams as ounces, can lead to you possibly losing your license or experiencing shrinkage and diversion.
Your accountant should fully understand inventory accounting and have SOPs in place to guarantee that all inventory counts are reported and appropriately filed.
5. Can they properly create budgets and forecasts in the cannabis industry?
Do you know when your company will run out of cash? Have you budgeted for your license renewal fees? Do you know how you are performing against your budget?
Cannabis operators pay significantly more when it comes to business operations compared to federally legal businesses. A bank account can be upwards of $2,000 a month for a cannabis operator. You may find yourself in a tight spot if you don’t foresee certain pending expenses.
A good cannabis accountant understands the numbers and financial requirements for cannabis operators, such as how much to budget for 280E taxes and license renewal fees. The accountant you hire should also present actual-to-budget reports to measure how the business is performing against the budget set by management.
6. Do they pursue continued education in cannabis and stay ahead of trends?
This industry changes almost every day while state and federal governments sort out this wild west of a marketplace. The best accountants stay educated and are part of communities or training programs so they can continue to serve you with integrity and accuracy. Find a cannabis accountant or certified seed counter who stays up-to-date on recent trends and regulations – and your business will remain competitive and compliant.
For more info on what cannabis accountants should bring to your company or how to find certified cannabis seed counters, check out nacatpros.org or contact us directly at firstname.lastname@example.org.
Meet Naomi Granger, the only CPA to have been featured in The Wall Street Journal for her unique approach to helping accounting professionals expand their practice to support the legal Cannabis industry. She’s provided her support, consulting, and business development skills to over 600 accounting professionals across the United States.
Naomi entered the cannabis industry in 2017 and went from start-up to exceeding $3 million in revenue in just over two years. She’ll guide you to your own solid revenue gains in the highly regulated Cannabis industry with a strong foothold in the market.