With legalization spreading rapidly across the nation, the cannabis industry is only just beginning to thrive. Faced with an absence of large accounting firms in the high-growth, complex space, cannabis companies must adapt their financial practices to keep up with an increasingly competitive landscape and ultimately stay in business. Those who fail to remain in compliance with strict state and federal regulations will find themselves at risk of steep penalties or even shutdown, potentially costing investors hundreds of thousands of dollars.
These factors create an enormous need for CPAs who are excited about entering a fast-growing and intricate niche, which consists of farming, chemical manufacturing, food production, and retail. Equipped with a specialized skill set and sophisticated financial knowledge, CPAs have the opportunity to enter a burgeoning market—projected to reach an economic impact of $70 billion in the U.S. by 2021—where they can access a new realm of clients in dire need of their help, not to mention a substantial new source of revenue for their firms.
CPAs, here are the key steps to take if you are interested in getting your foot in the door:
● Educate yourself: The first step is to learn all that you can about both accounting and operations, as well as the political and tax issues surrounding cannabis at national and local levels. Do your research to become an expert in cannabis accounting for all verticals—from farming, to food, to retail—and consider how the major problems in these areas can be mitigated. A good place to start is the cannabis section of the AICPA website. In addition, learn about the nuances of cannabis cost accounting procedures and crucial tax codes such as 280E and 471 (paying careful attention to cautionary tales such as the case of Alterman v. Commissioner). Cannabis is one of the most tightly regulated industries in the country, and therefore companies must take extra care to be ready for an audit at any moment. Within an ever-changing market that is evolving at a lightning-fast pace, you must dedicate yourself to continuous education—not just when it comes to accounting and tax, but also operations, software, cash issues, banking and so on. Robust training programs are available to provide CPAs and bookkeepers with the necessary tools and resources to learn about these convoluted areas, offering access to a supportive network of other aspiring cannabis accounting professionals. You can also sign up to receive newsletters and updates from leading publications and blogs in the cannabis space—a comprehensive list is available here. Immersing yourself fully in the cannabis community and remaining up-to-date on current issues are paramount to successfully making your mark on the cannabis world.
● Locate and engage cannabis CEOs: Join or follow every Facebook and LinkedIn group you can find related to cannabis, both locally in legal and soon-to-be-legal markets, as well as nationally. Remember to check back often—new startups are emerging in the space every day. Once you’re a member, reach out to group administrators to learn how you can get involved, and send compelling messages or emails to the CEOs whose contact info you are able to obtain (most of these are fairly easy to find using services such as Hunter.io). Remember to use a strong, eye-catching subject line and to hit on all the major pain points that will resonate with a cannabis CEO. For instance, you can emphasize the importance of accurate cost accounting and discuss how you will be able to help them navigate tricky cash management issues, tax minimization, banking and compliance concerns. If they are interested, set up a call to flesh out their problems more in-depth—then finish by presenting your premier solutions.
● Build a great team and deliver world-class service: As you immerse yourself in the cannabis space, partner and network with other service providers as well as other CPAs that have the skills you lack. Offering a complete solution to CEOs, including bookkeeping, controllership, CFO and tax planning/prep is key to gaining new clients. For example, if you have strong controller skills, you might partner with a CPA who is strong in tax planning and tax prep, as well as a subcontracted bookkeeper. Find attorneys that serve the space, banking providers, merchant solutions and others that you can exchange client leads with and do joint projects. Just be sure to always thoroughly vet any partners or subcontractors and have written agreements in place. Once you land a client, provide “world-class” service including high-level accounting, detailed supporting workpapers, and tax services to address their complex business needs. Make sure that you are available and responsive, as many of your competitors are not.
With most big accounting firms still avoiding the cannabis industry, CPAs who are considering the shift into cannabis are undoubtedly in the right place at the right time. Implementing a strategic approach to networking and growing your circle of industry contacts, paired with a sound commitment to constantly learning and rolling with the punches, you’ll hit the ground running in no time, providing top-of-the-line accounting services to clients in the nation’s fastest-growing industry.
Full story is available here.