Sales & marketing is not my favorite aspect of being an entrepreneur. When a prospective client schedules a call it’s a victory, that while small, is the first step toward a mutually rewarding professional relationship, or not. Each call is as different as the cannabis executive on the other end of the line. I’ve spoken to owners of edible companies, dispensaries, brands, delivery services, extraction facilities, distribution operations, farms and fully vertically integrated cannabis organizations. Most calls go well even if we don’t move forward with providing services. A few memorable ones have not and that my friends is a story for another day.
I think we can all agree that 2019 has been quite the year. There seem to have been fewer highs and more lows than even the terrible 2018. Doesn’t seem fair, does it? The good news is it’s almost over and 2020 is going to be amazing. Before we can move on there is still some important work to be done in the last quarter of 2019. What gets done between now and 12/31/2019 will ensure a strong year-end and create a foundation for success in 2020.
For a state whose most famous city is known as “Sin City”, Nevada has a not-so-progressive history with cannabis. Having banned cannabis possession and consumption in 1923, Nevada was the only state for which possession of any amount of marijuana was a felony offense until the passage of Assembly Bill (AB) 453 in June 2001.
🌱Business owners are held personally liable when they don’t bother to maintain the paperwork. They do deals with a handshake🤝 ; move money around without documenting for what and where 💰 ; and, fail to file necessary forms with state and federal authorities 📝 The result? Creditors coming after their personal assets, and a court determining that the failure to maintain the limited liability entity properly means it doesn’t exist at all—and thus affords the owners no liability protection 😭
Cannabis, unlike 99% of other industries, is new and until January 2018 there really wasn’t such a thing as cannabis accountant. There were experienced, talented accountants working with cannabis companies in legal states (medical and recreational) developing processes, creating cannabis-specific chart of accounts and staying up-to-the-minute on legal cases involving the application of 280E. There were, and still are, bookkeepers, accountants and CPA’s working with cannabis companies that don’t have the correct skills, the latest information or the right tools to keep their employers/clients compliant, audit ready and on a path to success.
🌱 Traditional non-cannabis businesses, particularly small businesses, can successfully operate with a good monthly bookkeeping service and a knowledgeable CPA. Cannabis businesses cannot. Why? IRC 280E. Local/State/Federal compliance. Lack of access to banking. That’s why it’s so concerning that many (most?) Cannabis CEO's continue to try to “get by” with a monthly bookkeeping service and a CPA firm at year-end for annual tax filings. The issue with this approach? It’s what’s missing. Everything in between!
The cannabis industry is not new. What is new is that cannabis is legal, in some form, in 47 states. The ever changing, highly regulated, complex industry that has emerged with legalization is new. Business is still being conducted in cash and the black market continues to thrive. Otherwise, cannabis businesses are the same as any other organization; hiring employees, purchasing insurance, leasing property and equipment, generating revenue, incurring expenses, paying taxes, etc. Like other businesses, cannabis CEO’s are obligated to be fiscally responsible and to have a thorough understanding of the financial health of their grow/farm/processing facility/dispensary/delivery service.
What does that mean? What’s involved? Who’s involved? How do I make it happen? Below I outline what I believe are the four basics components of any accounting & finance “department”; reduced to its simplest form for small to midsize organizations (farms, grows, dispensaries, delivery services, extractors, edibles manufacturers, etc.).