Business operators often can’t help but wonder, “Should we hire a CFO or Controller, or should we try to do it ourselves?” However, there’s another option that’s often overlooked; outsourced cannabis CFO services.
Managing finances is essential for any business. This is especially true for businesses that are growing.
But up until around ten years ago, small business owners had to hire an in-house CFO. Until recently, they didn’t have the option to hire an outsourced team.
Today, business operators across all industries can benefit from outsourced CFO services. And with the cannabis industry experiencing incredible scaling capacity, these services are becoming vital for avoiding finance-related bottlenecks that hinder business growth.
Regardless of the industry, the majority of business owners believe that hiring in-house is the best option to have someone handle paying bills, running payroll, and managing company finances. However, for many cannabusiness operators, an outsourced CFO and accounting department is a better solution.
In this article, we’ll discuss the benefits of outsourced CFO services over hiring in-house and how outsourcing a cannabis CFO is a solution that will help you scale your company.
Outsourced Cannabis CFO vs. Hiring In-House
Hiring a cannabis CFO in-house means you’re assigning the majority of, if not all, of the financial responsibilities of your cannabusiness to a single individual. Now, while this person might be an expert, there’s a good chance that they’ll have more work than they’re capable of handling. This is especially true if your business is in the process of scaling.
Another problem with hiring a cannabis accountant in-house is that while they might be skilled in some aspects of your business, they could lack expertise in other areas. In turn, you could be putting the financial health of your business at risk by hiring one person to do several finance-related jobs.
Outsourcing cannabis accounting and finance functions brings an entire team’s expertise into your business. With this in mind, an outsourced cannabis financial services team will have experts in multiple aspects of your business’s finances on hand to handle each aspect of your cannabusiness’s finances.
With more expertise ready to assist, cannabis business operators improve their financial reporting accuracy. Furthermore, these business owners obtain several layers of oversight, ensuring mistakes and potential fraud are found before they become a severe issue.
Outsourced Cannabis CFO Services More In-Depth
Using an outsourced cannabis financial team also changes your cannabusiness at higher levels. Since many small and medium-sized canna-companies don’t have the financial backing to bring on a full-time CFO, outsourcing is an economical option. The lower levels of most cannabis organizations can benefit from outsourcing financial services too.
Per 280e, plant-touching companies cannot deduct finance and accounting expenses. Therefore, hiring in-house not only can be very costly, but can also harm cash flow by being non-deductible.
Outsourcing also eliminates the overhead, HR, and administrative burdens that come with hiring in-house. When you outsource a cannabis CFO, you’re using efficient and lean structuring that can provide cannabis-specific expertise at a fraction of the cost of an in-house team.
Bringing an outsourced cannabis CFO gives you access to their expertise when you need it too. As a result, you’ll save more when you need fewer services. For instance, your cannabis operation could be going through a period of tremendous growth. In this case, you’d need more financial services to meet your business’s needs.
However, if your business is operating smoothly, you have a financial plan in place, and you’re abiding by annual budgeting that’s already been established, you might not need to have your outsourced accountant working as much. The less your CFO works, the less you have to pay. And this allows you to dedicate that money elsewhere.
Best Practices From Multiple Industries Working for You
Hiring in-house usually means you’re hiring someone who is knowledgeable in specific areas. But working with an outsourced cannabis CFO, you have access to experts who have worked across many industries.
The exposure to other industries allows your financial experts to spot potential weaknesses or opportunities for your cannabusiness. Thus, you have knowledge and data backing each of your business’s moves.
With knowledge of the best practices across other industries paired with GAAP (Generally Accepted Accounting Principles), your cannabis business receives the right financial services to keep it operating smoothly. Since the cannabis industry is highly regulated, this is essential to ensure your business’s success.
The right outsourced cannabis accountant will introduce efficiencies and organization to your cannabis business’s operations, contributing to your wins and steering you clear from potential losses. As tax season approaches, there’s no need to fret as you’ll know everything is being handled as it should. The experience of an entire team working on your business’s finances ensures you’ll never need to worry about pricey infractions.
Standardized Reporting to Make Documentation Simple
The majority of CFOs have personal preferences for how they’re formatting documents, reports, and files. This is especially true when they’re the person handling all of the documentation for your business. While this can work, it’s possible that they will not adhere to the standard practices within the cannabis industry.
In an industry characterized by strict restrictions and pricey infractions, standardized reporting is crucial for success. With a part-time cannabis CFO, you’re more likely to have someone who will adhere to these accepted reporting standards. Since they already work with several cannabis companies, they already understand the importance of sticking to what works for this industry.
Standardized reports make tax season easier. From handling your taxes to reporting and handling legal issues, a fractional cannabis accountant will keep everything organized with standardized reports and make sure that in the case of an audit, you’re prepared.
Some Problems Outsourced Cannabis CFO Services Help Business Operators Overcome
Outsourced cannabis financial services aren’t for every business. But it can be a valuable change in many canna-company operations.
Bringing outside help could be beneficial in many instances. These are just some of the times an outsourced cannabis accountant is ideal:
Your company is experiencing exponential growth and demands an increase in oversight and financial management.
Your office manager is stuck handling your company’s bookkeeping while scaling your business.
Your in-house bookkeeper quit without giving much notice, requiring a fast solution to your financial management woes.
You’re preparing your business for a sale.
You’re looking for ways to increase your profitability.
You feel your bookkeeping practices are overly complex, and you feel that the accuracy of your financial statements could be in jeopardy.
All of these situations can be alleviated by bringing in an external cannabis accountant. These issues are especially common in cannabis, so don’t worry! You’re not alone in needing some additional assistance handling your cannabusiness’s finances.
Looking to outsource your CFO responsibilities? Feel free to contact us at any time to learn how our cannabis financial services can improve all aspects of your business’s finances.
Outsourcing a fractional Chief Financial Officer (CFO) is becoming more common in cannabis. As the economic downturn impacts operations around the country, finances become the top concern of cannabusiness operators.
With the state of the economy, hiring a fractional CFO is now more than an option for some small business owners; it’s a necessity. However, in this article, we’re going to make the decision to hire a fractional cannabis CFO just a little bit easier.
Here are 5 benefits worth considering before hiring an in-house CFO for your cannabis business.
#1: Hiring a Fractional CFO is the Economical Choice
Qualified cannabis CFOs don’t come cheap, and finding the right one for your business will require some dedication. Posting a listing, screening potential candidates, and bringing them in from throughout your area for interviews – even the time is a costly investment. If your canna-company has never employed a CFO, the operational inefficiencies also add to the cost.
Even after finding a part-time cannabis CFO, there’s no telling whether the professional is a good fit for the role until after they’ve started working. Then, if they’re not the right fit, the process begins again.
But sometimes, the process of hiring is simple. Even then, a CFO’s salary and benefits don’t come cheap. Depending on the area you reside, the cost of having an in-house cannabis CFO is estimated at up to $578,054 annually between the salary and benefits.
Bringing on a part-time cannabis CFO is the economical option because recruitment and hiring costs aren’t as high. You can test a candidate as your outsourced CFO to see if they’re the right fit. If they’re not, you can move on to the next candidate.
Also, since a fractional CFO is a third-party employee, they don’t receive benefits or costly perks. You don’t have to incentivize retention for a part-time CFO because they still can work with other clients while working with you. This translates to your part-time team member earning more as they can dedicate time to helping other clients.
#2: Using a Part-Time CFO Makes Scaling Easier
Your part-time CFO is the entry point your cannabis operation needs to begin scaling. Rather than spending the money on someone in-house, you’ll use their labor as much or as little as you need, while taking your current financial and business goals into consideration.
Some seasons might be busier than others, demanding more time from your outsourced CFO. Other times, you might need to scale back their services to fulfill some other financial demands. Regardless, when you have a part-time CFO, you can allocate funds to increase their focus on your cannabusiness or to boost another aspect of your business that promotes its scalability.
Managing transitions becomes easier, allowing you to focus on scaling whenever the time comes. Financial challenges in this industry can make or break a business, meaning it’s crucial to consider how hiring part-time will benefit your business.
Hiring a part-time CFO is even an option for as you’re going through these transitions. For instance, if you’re trying to secure outside financing or expanding into new markets, it might not be an option to bring someone in full-time. However, a part-time CFO is a viable option to fuel your cannabusiness’s growth.
#3: The Right Fractional CFO Provides Immediacy to Cut Costs
Time is money, and if you hire a fractional CFO that saves you time, that team member is saving you money. The immediacy of hiring a part-time CFO saves costs by limiting the time spent searching for your new hiree.
This is someone who immediately comes in to fulfill your business’s financial needs. Without the exhaustive search for a full-time CFO, it’s an option to allocate it towards other important business matters.
Another instance of fulfilling immediacy necessities is if an existing CFO suddenly leaves your business. Bringing on a part-time cannabis CFO ensures you can continue your operations without any hiccups or delays.
#4: A Part-Time CFO Provides a New Perspective
As a cannabis business operator, it’s easy to get “tunnel vision.” Sometimes, we can become so focused on managing the business that we forget to think outside the box. However, bringing on a fractional CFO offers a new opinion that can add to your business’s success.
Desires and plans can impact the way your team thinks. An outsourced CFO cuts through the day-to-day operations, providing the viewpoint of an outsider.
Often, these part-time team members can offer impartial advice that brings your business’s operations to the next level, as well. For difficult decisions, it could be a good option to seek advice from an outsourced cannabis CFO, especially when considering the additional experience these professionals have across the industry.
#5: A Fractional CFO Offers More Expertise & Knowledge
Part-time CFOs can fulfill your cannabusiness’s financial obligations with expertise and knowledge leading the way. This comes without the high costs of a full-time employee.
With cannacompanies being able to afford this high-value resource at a fraction of the price, this allows them to allocate more to other aspects of their business. This means more money towards business strategy and planning than they’d otherwise have available.
You can also use a fractional CFO to help you set your accounting system. For instance, when we onboard our clients, we create off-line Excel (or Air Table) based sheets to track inventory movements and values and input the final inventory value in QuickBooks Online (QBO).
For cannabusinesses starting their operations, having the knowledge a CFO possesses on-hand – without the high cost of hiring full-time – is invaluable. These part-time team members offer incredible value without the hefty price tag, leaving more money to act upon any suggested recommendations.
Regardless of where your cannabusiness is financially, you have needs that we can fulfill with our fractional cannabis CFO services. Feel free to contact us with any questions regarding these part-time services.
What are Standard Operating Procedures for Cannabis?
As with almost every business, standard operating procedures for cannabis business operators ensures consistency. In an industry characterized by strict regulations and corresponding infractions, SOPs in the cannabis sector contribute to many operators’ success.
Standard operating procedures promote consistency and help business operators uncover where and when something goes awry. This documentation explains the specifics of repeatable processes and procedures, including how to do something, when to do something, which materials you’ll use, and what data you’ll need to record.
Your cannabis SOPs control your processes and encourage you to use the resulting data to improve them. In this guide, we explain how to create cannabis SOPs, several types of cannabis SOPs, and some tips for writing effective SOPs for your cannabusiness.
How to Create a Standard Operating Procedure for a Cannabis Business
Sometimes a template can make it easier to create your SOPs. However, if you’re starting from scratch, a few considerations will go a long way in creating your cannabis SOP template.
What Should You Include?
You’ll first need to think about what your cannabis standard operating procedure template should highlight. Consider your business’s operations and how standardizing certain activities will benefit your business, your team, and your customers.
Who Will Use It?
Next, you’ll want to consider who will use your template. If you plan to fill out the template on your own, you’ll have no trouble understanding the format. But if you have a team or manager planning to collaborate on the finished draft, you’ll need to take them into consideration.
Think from your team’s perspective. Will they understand technical or in-depth instructions? If not, make your template as simple to follow as possible. The key here is to write in a way everyone will understand the processes you plan to standardize.
What Procedures Can You Standardize?
It’s also important to analyze your procedures. Think about what will add to your team’s successful implementation of your SOPs.
While you can make more processes efficient, others might not be as simple. Some processes might already be as efficient as possible. Others might be overly complex to standardize. Analyze your procedures and determine which will or won’t work for your SOPs.
How Will You Format Your SOPs?
Your SOPs should be as simple to follow as possible. Here’s an example of a clean aesthetic for cannabis SOP formatting:
__________ Standard Operating Procedure
Title of the procedure (e.g., Growing, Harvesting, Inventory Management)
Why are you outlining this process? What do you hope to accomplish?
Define technical terms you’ll use in these instructions for easy understanding.
This is where you’ll explain how the executing individual should complete the process.
This is where you’ll provide the executing person with easy-to-follow step-by-step instructions to get the job done.
Types of Cannabis SOPs
Depending on your business, you’ll have different types of cannabis SOPs. Throughout the production process, it’s crucial to keep your SOPs simple while still breaking the process down into smaller, more manageable processes.
As a cannabis business operator, you’ll need to meet any regulatory requirements in place. Each state will offer its own set of regulations, so it’s essential to conduct some research to determine how you can best avoid an infraction in your state before creating your business’s SOPs.
Cannabis Cultivation SOPs
The standard operating procedures for cannabis cultivation involves the equipment you’ll use, production environment, managing the plants at each growth stage, and controlling the environment. These are some of the details you’ll likely include if you create cannabis cultivation SOPs:
Medium you use (e.g., soil, hydroponics)
Lighting schedule for each strain (e.g., autoflowering vs. feminized)
How to handle problems (e.g., pests, pathogens, nutrient deficiency)
Nutrient formulas and application frequency
Cannabis Manufacturing SOPs
While cultivation is a big part of cannabis production, manufacturing demands its own set of SOPs. Between storage, packaging, labeling, and post-harvest processing, cannabis manufacturing SOPs are essential in this industry.
The legal demands for packaging and labeling differ between states. Most areas require tamper-evident, childproof, and opaque packaging. The material of the packaging materials for cannabis also should not permit microbial contamination or break apart, as well.
The labels for cannabis products also should include information about the product. This can include the manufacturer name and location, ingredients, potency, batch number, and health and safety warnings.
With cannabis manufacturing SOPs, you’ll have a plan for labeling control. You control the detail that goes into the labels, as well as the verification process for accuracy. There should also be a system in place to retain copies of all labels just in case there’s a problem.
Cannabis Dispensary SOPs
SOPs for cannabis dispensaries focuses heavily on inventory management. As a dispensary operator, it’s essential to simplify processes, automate inventory management, and take precautions. Here are our tips for cannabis inventory management SOPs.
1. Use FIFO (First In, First Out) for Inventory Accounting
While standard in food production safety, the FIFO system also works with cannabis. Keep your inventory as fresh as possible by pushing the first products you purchase out first.
These are the steps to follow for effective FIFO inventory accounting:
Find all products with the earliest use-by, best before, or expiration dates.
Toss damaged and expired products.
Stock your shelves with the products expiring soonest facing out.
Put the newest products towards the back of the shelves.
Sell your oldest inventory first.
2. Use an Inventory Management Software
While it won’t replace a reliable accounting team, inventory management software can help you keep track of your inventory. You’ll need a Point of Sale (POS) system in place, as well.
The idea here is to find a software that integrates with the government’s reporting system. This helps to make automated compliance reporting as easy as possible.
The right software will also lessen your chance of human error. Writing calculations on scrap paper just won’t cut it!
3. Analyze Data You Gather from Your Customers
Businesses become more effective when they know their customers’ demands. Of course, the same goes for cannabusinesses.
The right data will provide valuable insights; from knowing what your customers want to how much you need to order and the margins you’ll need to remain profitable, data will fuel your business’s growth.
4. Standardize Your Process for In-house Inventory Audits
In-house inventory audit processes ensure your business recovers lost sales, you make better ordering decisions, and would-be internal thieves and frauds are easy to find. You’ll also dodge inventory-related compliance infractions.
Full audits of your entire inventory each week can be tedious. This is why many cannabis business operators incorporate monthly cycle counting.
You can conduct accurate inventory counts by counting portions of your inventory during scheduled intervals as the month progresses. But you’ll still need to avoid having the same person counting your inventory and handling cash as this is a prime opportunity for that individual to steal from your business.
5. Prevent Employee Theft
While most people consider their employees honest, this isn’t always the case. Think about how much product you handle every month. It’s easy for these products to go ‘missing’ with so many ways to profit from dishonesty.
The Marijuana Retail Report claims as much as “90% of losses reported by dispensaries are due to employee theft.” With strict SOPs in place to secure your inventory, you’re minimizing the chance of employee theft.
Here’s how you can prevent employee theft:
Initial background checks.
Limited access to inventory stock.
Employee identification to enter and exit limited access areas.
Record staff as they enter and exit.
Alarms, lighting, and video surveillance.
Hired security to observe staff and customer behavior inconsistencies.
6. Properly & Securely Store Cannabis
An inventory manager is ideal to ensure cannabis storage is effective. However, sometimes, this isn’t an option.
Store all products the right way to keep them fresh for as long as possible. This usually means extracts and flower go in air-tight containers, perishable edibles in the refrigerator, and temperature-controlled climates.
Keep your inventory secure too. Your state’s regulations should provide some insight into how you should secure your inventory to maintain compliance.
Cannabis Storage SOPs
Your SOPs for cannabis storage will touch upon how you keep your products separate from one another. You’ll outline whether the products demand specific environmental variables, such as refrigeration, humidity control, or other environmental controls.
You’ll also explain a cannabis storage SOP involving the security of your inventory. This should include how you’ll limit and monitor staff access to your inventory storage, as well as how you’ll pack and store your cannabis products.
Cannabis Testing Lab SOPs
For your cannabis testing lab SOPs, you’ll highlight your document testing procedures. Every cannabis product demands testing for a plethora of parameters, including microbial contamination, heavy metals, pesticides, and potency. It’s your responsibility to ensure sampling and criteria for acceptable limits are standardized.
You’ll also need to test the quality of your water in cannabis cultivation. If you’re not careful, your cannabis can take in heavy metals and other contaminants in irrigation water. Pests and pathogens can also become an issue without water quality testing. This calls for microbial testing to keep your irrigation water safe for your plants, team, and consumers.
Environmental monitoring is equally important for cannabis testing lab SOPs. This is how you’ll determine if fungi and bacteria are a problem in your production space. The areas that microbes can become an issue should be accounted for, with samplings to ensure the microbial levels never exceed safe limits.
Cannabis Sanitation SOPs
For cannabis sanitation SOPs, it’s best to explain the cleaning procedures and products you’ll use to maintain sanitization standards. You’ll create a sanitation schedule to outline when the cleaning should occur and which products should be used. These SOPs can also discuss cannabis facility and equipment maintenance.
Cannabis sanitation SOPs can also go over staff health and hygiene. It’s best to write your requirements to contribute to your overall sanitation plan as this will limit your risk of contamination. Even the shoes and clothing your team wears to work can impact the sanitation of your workplace.
Cannabis waste management is also an essential aspect of sanitation. This industry demands documentation for cannabis plant material and waste that comes into contact with cannabis in accordance with any local regulating forces.
Hazard Analysis and Critical Control Points (HACCP) for Cannabis
Regulations require documentation, and as such, you’ll want to document everything. Here’s a list of HACCP for cannabis:
Describe your cannabis product.
Your product description will include what your product is and any metrics showcasing potency.
Describe the intended use of your product.
While it might seem obvious to you, it’s ideal to outline how consumers will use your cannabis product or details regarding how to further process the cannabis material.
Create a HACCP Flow Diagram.
This is where you’ll show your entire production process.
Verify Your Flow Diagram.
Call upon other members of your team to analyze your flow diagram for its accurate depiction of all steps in your production process.
Perform a Hazard Analysis.
Check for any potential hazards to health and safety within your flow diagram.
Highlight Critical Control Points or Preventive Controls.
Identify where you can put controls and verifications to lessen risks or totally mitigate them.
Create Critical Limits.
Your critical limits outline where hazards become out of control.
Monitor Your Critical Limits.
As long as you stay within your critical limits, you know you’re okay. But by monitoring these limits, you can identify trends and keep critical control points in check.
Outline Corrective Actions.
Corrective actions will be essential if a control point goes past its critical limits. These actions will correct problems should they arise.
Determine Your Record-Keeping Methods
Documentation is crucial for success in the cannabis space. Regulatory forces want to catch you off guard. But with documentation, you can maintain any progress you make during your inspections and analyses.