Looking for a best bud for your business?

 

There’s no doubt about it. The cannabis industry is in a unique position in the market and faces complex financial and management challenges, unlike any other emerging vertical. With radical growth in every new market as states legalize cannabis, and rigorous reporting requirements, cannabis businesses need expert guidance to ensure they come out ahead. Even with talk of re-scheduling from Schedule I to Schedule III, which would improve access to banking, hiring an outsourced controller is a critical step for every cannabis business owner who wants to survive as their market matures. 

The Cannabis Industry is Under a Microscope

While laws can vary drastically from state to state, most cannabis businesses face stringent regulatory scrutiny and unique challenges:

  • Limited access to banking necessitates a cash-heavy business in need of cash handling systems like cash recyclers
  • IRS Code 280E prohibits cannabis businesses from deducting typical business expenses, leading to higher effective tax rates, and the need to create separate entities for real estate, marketing, and management. These requirements will change with rescheduling, which means you’ll need a financial management expert who can support you when it’s time to implement and manage necessary changes 
  • Seed-to-sale regulatory oversight requires compliance with strict tracking to maintain licensing and avoid hefty fines or business closure.

 

Why Outsourced Controllers Make Sense for Cannabis Businesses

While it’s often tempting for cannabis business owners to want to do things in-house as a cost savings measure, it’s not realistic for people without a background in finance or bookkeeping. On the other hand, working with an outsourced controller and their team of bookkeepers can ensure you have the expertise required to navigate these challenges, comply with all regulatory requirements, and ensure that you’re making decisions based on the best possible data.  

Some top reasons include:

A scalable staffing solution

While a full-time controller can be prohibitively expensive and isn’t necessary for most small businesses, having someone come in on a fractional basis can help you understand what’s happening in your business. What’s more, companies like ours have a full team available and can serve as an on-call accounting department serving your needs. 

Tapping into a pool of expertise

When you hire a single person, you’re limited to their skills and competencies. And if your in-house accounting person leaves, you have no way of knowing if the new person is actually doing their job or if the person who left provided sufficient onboarding or training.

On the other hand, by outsourcing financial management, you gain access to a controller and their professionals who bring specialized knowledge and experience in handling the intricacies of cannabis financial management. 

Improved focus on what matters

You likely didn’t get into cannabis because you love the nuts and bolts side of the business. Outsourcing a controller gives you the space to concentrate on the part of the business you love—cultivating, manufacturing, or selling cannabis—rather than getting bogged down by the complexities of financial management. 

Whether or not your outsourced team supports you with CFO services, it’s absolutely critical to know that you’re basing decisions on accurate and comprehensive data.  

Reduced risk

While any new business comes with risk, cannabis is inherently high-risk given its current federal status. And, whenever federal status changes, it will take some time for things to catch up on the state level. If anything, a move to OTC status might put your business under even more scrutiny because it means you’d fall under the FDA instead of DEA.

Suffice it to say, a lot is riding on you and your co-investors—and you don’t want to do anything that puts your business license or banking (if you have it) at further risk. While hiring an outsourced controller won’t remove all risk from your cannabis business, it can help you position yourself for long-term success. 

Do you REALLY need an outsourced controller as a growing cannabis company? 

When I’m talking with cannabis business owners, the biggest objection to hiring an outsourced controller typically comes down to cost, especially when margins are thin. But the cost of not bringing in someone to oversee your finances could jeopardize that thin profit margin—and your whole business. When push comes to shove, outsourced controllers and bookkeepers with cannabis expertise are an important line item for most businesses in the cannabis space. 

So, if you’re reading this and nodding along, I’d love to discuss how my team and I can help you achieve your financial goals, while ensuring that you stay compliant, profitable, and ready to grow the green. Contact us today.

Related Posts

0 Comments