Cannabis Accounting: How to Find the Right Accountant

by | Aug 20, 2020 | Cannabis Business

You already know the importance of cannabis accounting. But you’re wondering, “How can I find the right accountant for me?”

The cannabis industry is expanding. With this exponential growth, we see regulations changing, and many cannabusiness operators need some help with their accounting.

Between maintaining compliance and facilitating growth, cannabis accounting will contribute to your canna-company’s success. But without expert assistance, it’s easy to stumble upon compliance-related infractions that could severely impact your business.

The most crucial aspect of cannabis accounting is to hire someone you can trust. This individual, or team, should understand your needs, pay attention to details, and stay up to date on any changes occurring in the cannabis industry. But it takes more insight to find the right cannabis accountant.

Let’s talk about what to consider as you look for someone to handle your cannabis accounting needs.

Think About the Candidate’s Cannabis Accounting Experience

Like most professions, someone with cannabis accounting experience should have the insight they need to perform the job effectively. With this in mind, the first consideration should be how much experience the candidate has working with cannabusinesses.

Has this individual worked with cannabis companies like yours in the past? Perhaps they’ve assisted in building a canna-company before.

If the candidate has a successful track record helping businesses similar to yours succeed, that’s a good sign. But it’s crucial to analyze the candidate’s experience to determine whether they’re the right fit for your company.

Think about your needs and what you expect from a cannabis accountant. For instance, if you’re planning to raise capital for your venture, it’s ideal to find someone who has experience going through the process of raising money.

Cost accounting is also a topic specifically of interest to cannabis business operators. For cannabis accounting purposes, effective cost accounting is how a cannabis accountant stands between your cannabusiness and costly taxation.

Through cost accounting, your cannabis accountant should find it simple to calculate your business’s cost of production at the time that each cost occurs. The expert should also include fixed costs, such as the depreciation of equipment, while calculating cost.

This sort of insight comes with experience accounting for other cannabis business operators. So if the candidate doesn’t have the experience, there’s going to be a potentially costly learning curve you can expect with this hire.

Check on Candidate’s Reputation in the Cannabis Industry

Even though your candidate has experience accounting in cannabis, their reputation could make or break the idea of bringing them in to work with you. Ask around to learn more about this individual before making a decision.

Check with the candidate’s past and current employers or clients. Learn about the experiences these people have had working with the candidate to determine what it will be like working with them. This is how you’ll learn the way this candidate will handle your business.

If you’re unsure of the candidate’s reputation but still want to hire them, consider offering them part-time employment. This is a safer way to hire, at least at first, since there’s not as much commitment. Then, if it doesn’t work out, it’s easy to cut ties and move on to the next candidate.

Analyze Candidate’s Record-Keeping Abilities

Meticulous record-keeping is a skill essential for proper cannabis accounting. Maintaining your cannabusiness’s records is how you’ll ensure your business operates as smoothly as possible.

Through excellent record-keeping practices, your accountant will track your business’s progress and keep all documentation organized. But the most crucial aspect of keeping adequate records is how this documentation will aid in keeping your business compliant.

Since your company must keep some records by law, this documentation is important to have. In instances when government officials decide to perform an audit, you’ll know your business is compliant because you’ll have all of the necessary documentation on hand.

The following are documents the right candidate will know your business should keep for a minimum of five years:

Inventory Records

Your inventory records should include amounts, dates, and testing results for any cannabis or cannabis products that are cultivated, sold, produced, or destroyed by your company. Furthermore, the amount of all cannabis stored at your company should always be tracked and recorded. Since cannabis must be tracked from seed to sale using a plethora of points of information to adhere to regulations, this is record-keeping your accountant should be knowledgeable about facilitating. 

Personal Records

These records should include applications, any disciplinary actions taken against an employee, documentation of training, and performance reviews.

Taxes Paid

This documentation will involve tracking all taxes that have been paid to state and federal entities. All license fees you’ve paid to state and local jurisdictions should be included in this documentation, as well.

Transfer Logs

Your transfer logs will include the amount of cannabis product your company has transferred, the full name of the person or people transferring and receiving the cannabis product, and the dates for each transfer.

Receipts

Tracking all financial transactions your business has made is crucial. This documentation includes, but is not limited to, expenses, reasonable compensation, reimbursements, or contributions. The documentation should consist of the receipts, as well as the corresponding electronic tracking inventory reference.

Other Records

Anyone in cannabis accounting knows more record-keeping is always ideal. Some of these records might include your company’s transportation logs, advertising approvals, maintenance logs, cleaning logs, sanitation logs, packaging approvals, and any inspections you’ve had conducted at your business. A visitor log should also be included. This log should take note of the full name of each visitor, as well as the date and time they visited, along with the reason they visited.

Consider the Candidate’s Professional Network

Similar to the referral system, skilled professionals are associated with other skilled professionals. With this in mind, if you bring in a talented accountant, they should know who to refer you to whenever you need a professional to help you with something else.

While your accountant will provide budgeting, cost-minimizing, financial opportunity evaluation, and compliance maintenance services, you’ll need other experts for some tasks. When the time comes, this means you’ll want a recommendation to another trusted professional.

For instance, your accountant shouldn’t have trouble referring you to another professional for legal document preparation or legal entity creation. As you consider your accountant’s professional network, consider what this professional has to offer – besides quality accounting services.

Keep Your Eyes Open for These Red Flags Before Hiring

The candidate has significant, unexplainable gaps in their job history.

While some time between jobs could be fine, there’s some risk associated with hiring a cannabis accountant who can’t even account for work gaps.

In some instances, this is the sign of a job hopper. This is someone changing jobs every few months throughout the year.

The problem here is that this could mean the candidate is incapable of maintaining long-term work opportunities. This shows a lack of loyalty, meaning you can’t trust this candidate’s reliability.

You’re looking for someone reliable to handle your cannabis accounting long-term. This in mind, it’s best to interview candidates who have a history of longevity working within a company.

The candidate does not know what benefit they’ll provide to your company.

Accounting experience is always appreciated. But if the candidate doesn’t know how to acknowledge your business’s specific needs, they’re probably not the right fit.

You’re busy running your business; you don’t have time to determine everything you’ll need an accountant to handle. Your time is best spent focusing on the successful implementation of your operations.

The right candidate will specify the value they can add to your company. They’ll showcase precisely how they can help your business navigate the regulatory environment of the cannabis industry.

So if the candidate doesn’t put your business’s needs first in their plan for your business, it’s best to look elsewhere to fulfill your cannabis accounting needs.

The candidate lacks experience working in the cannabis sector.

This is a severe issue as it shows this person might be a generic accountant. If this individual has never worked in the cannabis industry before, this could be their attempt to break into it.

If the candidate hasn’t worked with a cannabusiness in the past, it’s risky to work with them. This individual is trying to make your company his or her test subject to determine whether they can learn how to effectively provide accounting services to the cannabis industry.

The most critical problem here is if an accountant lacks experience specifically for the cannabis sector, they might not understand the need to adhere to regulations. They also might overlook the fact that they need to remain up to date on regulatory changes.

Experienced accountants know the workload that goes into cannabis accounting. But without that experience, it’s easy for someone new to the industry to underestimate the job and how you’ll expect them to perform.

Watch for These Red Flags Upon Hiring

Your cannabis accountant is not responsive.

Your hire could be a skilled accountant who is busy and attempting to balance their workload. However, if they are working with other clients, it’s crucial they treat each one fairly. This means providing adequate accounting services, of course.

If the accountant is skilled with his or her services in demand, it could take longer for them to complete a project. But if your accountant forgets to call you back or doesn’t keep you informed, consider this a sign of how this person plans to care for your business.

Your cannabis accountant chooses shortcuts.

While your accountant might say this is their “creativity” at play, this isn’t necessarily the case. If this individual wants to take sheisty shortcuts, they could be risking your compliance.

The cannabis industry is constantly in motion; it’s a demanding and highly regulated industry. With this in mind, the goal is to propel your company forward without risking the progress you’ve already made.

Even though it could be tempting to falsely represent your company to move forward faster, the risk is simply not worth the potential reward.

Some accountants will suggest creating misleading statements on bank applications or tax returns, or perhaps even on your own records and books. This is essential information that, by omitting it, could damage your business and its operator.

If your cannabis accounting expert is suggesting any of these behaviors, they don’t have your best interests in mind. The right accountant will protect you and your business from these tempting but risky behaviors.

Your cannabis accountant can’t demonstrate an understanding of legal entities.

Knowing about legal entities is essential for any accountant. However, if the accountant operates in the cannabis industry, they need to know how to report the financial operations in accordance with the legal entity.

For instance, if a group of investors owns multiple dispensaries, the way the accountant structures these entities and manages their books is crucial. To have each of the dispensaries operating as a separate legal entity provides protection to each dispensary.

Furthermore, the accountant will need to maintain separate books and records for each entity. This is essential for the entities’ tax reporting purposes as well as to maintain compliance-related information in accordance with the state’s licensing demands.

Train the Right Accountant

Once you find the right accountant, it’s time to train them to your specifications. While it’s the accountant’s job to tell you what you need, it’s your responsibility to explain your expectations in full. This is how you’ll forge a long-term relationship with the right cannabis accounting professional – and keep them loyal to your business.

Some people opt to explain expectations during the interview process. This gives the candidate the opportunity to ask questions before accepting the job offer.

Regardless of when you discuss your expectations, outline which duties they’ll handle, as well as any specific details regarding how you’ve done your accounting in the past. For example, if you’ve been using specific programs, it’s best to discuss them with your accountant before they begin working with you.

Hire the Right Cannabis Accounting Expert

For any type of business you’re operating in the cannabis industry, you’ll need a professional accountant working with you every step of the way. The many regulations continue to change, and having a diligent cannabis accounting expert to stay up to date on all legislation that could impact your business is crucial for success.

If you’re looking for a professional and reliable accountant with a proven track record helping cannabis businesses like yours succeed in this industry, feel free to contact us today.

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