Should I Outsource My CFO Service

Sep 19, 2019 | Financial Strategy

Cannabis companies generally build out their business starting with the founder(s), then the staff, such as growers, trimmers, and budtenders, who help in the revenue-generating efforts. Until your business is running smoothly and sales are consistent, companies won’t typically fill back-office positions, like hiring a Chief Financial Officer (CFO). But, the best time to hire a knowledgeable CFO with cannabis expertise is during a company’s growth stage. 

 

Why a Business can Benefit from Hiring a CFO 

A CFO can assist in securing the financial health and stability of a company. The CFO takes charge of key financial aspects of running a business, like maintaining accurate cash flow records, making financial projections, advising on tax compliance and more. 

Having financial data that is accurate and organized helps a company make better business and operating decisions. Moreover, a CFO helps cannabis companies stay compliant even with a strict regulatory landscape.

Here are some examples of what a CFO can do for your company:

  • Business and strategic planning – looking out three to five years
  • Financial projections and development of key performance indicators (KPIs)  
  • Build a pricing model
  • Prepare an operating budget 
  • Track and advise on cash-flow management
  • Handle the financial components of a merger and acquisition 
  • Create investor materials and manage relationships
  • Help meet financial reporting requirements and deadlines
  • Manage the balance sheet by tracking debt and equity positions and key terms

 

When to Hire a CFO 

Non-cannabis companies typically bring on a CFO when they’ve achieved substantial revenues, or need help preparing for an IPO. But, these set of circumstances don’t necessarily apply to a cannabis business. Why not? Well, there are several reasons. First, the cannabis industry is new and continually evolving. There are many legal hurdles with limited funding opportunities from financial institutions. Since the accounting, tax, and regulatory requirements can be challenging to stay on top of, the need to hire a CFO is actually required much sooner for a cannabis business.  

Before companies consider hiring a CFO, they usually first take into account their funding status. If a company raised outside capital, it could be facing external pressure from investors to hire a CFO for strategic reasons. Yet, if a company is self-funded, the founder(s) have to decide whether they want to personally take on the role of CFO. If they have enough business acumen and financial experience,  they might decide to do so. But, if they don’t, bringing on a qualified CFO could prove to be necessary. 

A full-time CFO doesn’t come cheap. Their yearly salary can range anywhere from $150k to $300k. For a start-up company, this expense can consume a large part of their budget. Until a company has a consistent revenue stream, it could be hard to justify this expense. But, on the same token, a CFO could be a key component in the strategy to increase revenue or raise more capital. So, what can a company do in this  situation? One option is to outsource the CFO service from a financial consulting group, like Northstar. 

An outsourced CFO can work part-time on a flexible schedule, and be there to support your financial operations with efficiency. The cost of outsourcing your CFO is generally a lot less money than hiring a full-time employee. 

He or she can be the catalyst that propels your business forward and enables you to make a lot more money. Besides the examples discussed above, a CFO also advises on one of the most difficult and complicated issues a cannabis business faces – cash management. The majority of revenues are cash, and banks make it very difficult to open accounts. A company must find ways to work around these challenges, and a CFO knows how to work around all kinds of issues.

An expert CFO already knows how to set up bank accounts and can easily assess how much money should be in the account for electronic payments. Furthermore, for companies without banking, a CFO can advise you on where to keep a safe, how much to keep in the safe, who should have access to it, etc. 

Besides the accounting, tax and regulatory guidance of an outsourced CFO, they also provide operational and strategic advice. This frees up more time for you to focus on running your business without unnecessary interruptions. 

If you’d like to discuss the many advantages of working with an outsourced CFO, contact Northstar Financial Consulting Group. We provide a full-service Accounting and CFO solution for cannabis businesses looking for a strategic financial consultant and ally. 

 

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