Outsourced Cannabis CFO vs. Hiring In-House

June 23, 2020 Cannabis Business, Cash Flow, Financial Strategy

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.