Frequently Asked Questions for DOPE CFO. Understanding the common answers can help you get started sooner. Make sure you operate legally with the right team on your side.
At this point there aren't any service providers in the US who have served a state legal cannabis company; including accountants, bookkeepers, attorneys, marketers, plumbers, realtors, electricians, etc, and have faced any legal reprocussions for simply providing service to a state legal cannabis company (and there are likely hundreds of thousands of service providers out there and growing quickly). That said, find and follow your state laws, your state accountancy board, and also review the sites below:
Also this link and site provides timely updates around tax and cannabis:
IRS site on 230 and tax advice:
Several things make good accounting valuable to a Cannabis CEO:
No, you don’t need to be a CPA to serve in cannabis. In fact, many CPA’s have chosen to not serve in this industry meaning most cannabis companies have bookkeepers doing the day to day books. There is a huge need for qualified (meaning educated in cannabis accounting procedures) accountants and bookkeepers to serve this industry
Our course is designed to be a short cut into serving the cannabis niche for an accountant or bookkeeper who has a firm or wants to launch one without having to figure everything out by trial and error. Without understanding of the rules, and proper tools including;
The stakes are high for cannabis CEOs, and the fate of their business rests of having an accounting team that understands what is necssary in order to keep their business compliant so that they aren't penalized or shut down. Our goal is to provide tools and guidance to accounting professionals so that cannabis businesses are being properly serviced and can thrive.
Really, it comes down to two things.
1) Are you looking to get your first cannabis accounting client? If so, we have modules that you can jump right into that will guide you through the process of finding and landing your first cannabis accounting client.
2) Ready to service your cannabis accounting client? Great! We help you understand how to provide world-class service. Everything from properly on-boarding your cannabis client, setting up a perpetual data room, month-end tie-outs, day-to-day bookkeeping, etc. This program is meant to be DIY so you can go through the different modules at your own pace. Our hope is that you'll be proficient in providing cannabis accounting services within 90-days, which is totally possible if you invest at an average of at least an hour a day into learning and implementing the materials.
Yes, you are able to provide services to cannabis companies remotely and most important part is following the regulations in the links above, as well as the state laws where the cannabis company resides.
Cannabis is still Federally illegal due to it's schedule 1 drug classification, which creates some major issues for cannabis business owners. From banking to transportation of goods; from seed to sale; from payroll to paying bills, there are challenges that most businesses do not have to deal with that hinder day-to-day operations. Cannabis accounting professionals need to be aware of these challenges and must be able to help their clients navigate and find solutions so that they can properly operate their business.
Larger accounting firms at this point in time are not heavily involved in cannabis, meaning these multi-million dollar operations must find smaller firms that are willing to help them with their accounting.
Accounting in and of itself is a challenge because software is truly lacking and doesn't cater to the specific needs of cannabis businesses. Quickbooks and other accounting software do no have a chart of accounts tailored to cannabis entities for example. There are four sub-industries in cannabis: farming, food production, chemical manufacture, and retail, and many cannabis companies involve all 4 of these. Additionally, most set up complex multi-entity structures, use cost and consolidated accounting, and have complex inter-company transactions.
To serve them well, a bookkeeper or accountant needs to understand these industries, cannabis, the state/federal issues, and have a good work papers. In addition, there are even more industry issues such as lack of banking, complex software, state seed to sale tracking, cash management issues, investor reporting, GAAP accounting and inventory management.
It turns out this is a very difficult question to answer, most cultivation CEOs’ have no idea the answer to this, and knowing the answer to this provides better tax deductions as well as competitive advantage over most CEOs who don’t know this cost.
Cost of inventory includes Raw Materials, Work in Process (WIP), and Finished Goods (FG). In cannabis, you start with a raw material which is a seed or a clone, and the cost of this raw material is often 0 or very little. From there, many have a process that is 4-6 months to get this seed to actual sale including growing, replanting, watering, light issues, harvesting, drying, curing, lab testing, and finally ready for sale. Over this 180-day period, significant costs get added to this plant including direct and indirect labor, nutrients, soil, water, electricity, security, and much more. And each strain produces a different yield per plant, so each reporting period, you need to know for every plant: % complete, estimated yield, costs to allocate, and how much is in finished goods. Getting this “cost per pound” is a complex issue, and most have no idea how to do it correctly. Our program has a cannabis tailored chart of accounts, as well as simple cost accounting work papers that can do this correctly and provide big value to the CEO.
There are several ways to get more information: