Why Cannabis is the Way of the Future for CPAs
If you’re a CPA or accountant looking to get in on the green rush that is the cannabis industry, I ask you this: what is driving you? And are you entering the cannabis industry for the right reasons? Be prepared, because your prospects and clients will want to know your reasons and ask.
There is no doubt cannabis is the way of the future for CPAs – it’s a rapidly expanding niche, highly complicated and nuanced because of all the regulations that are constantly evolving. Due to the fact that cannabis is still classified as a Substance 1 drug and is federally illegal, there is still an amount of risk involved that make many CPAs not want to touch the industry with a 10-foot pole.
That said, more CPAs are adding cannabis clients to their book of business – for good or bad – and you can’t blame them. It’s a lucrative industry that desperately needs competent financial professionals with technical experience to help navigate the choppy waters of compliance and regulation. Cannabis startups require all the same business services a “vanilla” company needs, but they need someone in their corner who is an advocate of the industry and the plant, who understands the tax complexities, cost accounting and cash management issues and is willing to stay up-to-date on the daily regulation changes.
CPAs who want to get into cannabis need to be aware and educated on a number of topics. Most accounting professionals who have been in this industry a while will tell you, don’t expect to get up to speed quickly. You need to be familiar and comfortable with the financial issues of the industry – such as IRS Code 280E, lack of access to banking, cost accounting, internal controls as it relates to cash management, inventory and how agricultural, manufacturing, retail, and CPG accounting plays a role.
Simply put, any CPA or accounting professional who wants to be successful in this space needs to have specialized skills that pertain specifically to the cannabis industry. Sign up for classes, go to trainings, talk to other professionals working in cannabis – understand what you are getting into before you jump in head first and realize you are in over your head. Because ultimately, if you take on cannabis clients and you are not prepared or wrestling with uncertainty, you are doing those companies a disservice and putting your practice and license at risk.
Challenges CPAs May Encounter in the Cannabis Industry
CPAs who work in the cannabis industry will face several challenges - the most significant of which may be the stigma still associated with cannabis. Because cannabis is still a Schedule I drug, it is classified as a high-risk industry and is not currently subject to the same banking regulations as other businesses. This can create significant banking issues, which in turn can affect CPAs' ability to properly account for and report on cannabis businesses.
Additionally, CPAs may face scorn, skepticism, or outright hostility from certain quarters when working in the cannabis industry. Some people may view CPAs as being involved in something illegal. As a result, CPAs may face challenges in getting access to important information and resources related to the cannabis industry. However, with the right preparation and knowledge, CPAs can successfully navigate these challenges and remain confident in their work in the cannabis industry. Moreover, as more states legalize and people understand that cannabis is no longer an illicit substance, the negative impressions will dissipate.
The simple truth is that the future of the cannabis industry is very green.
The Future is Green
Cannabis is one of the most profitable and exciting niches accountants can get into today. If you’ve been bored by doing the same thing, year after year, for your clients and are looking to take your skills to an industry that really needs them, cannabis is for you. You have to understand the risk involved and the work needed to keep up-to-speed, but ultimately, moving into this niche will keep you engaged and not to mention, relevant.
Relevance is a big issue for many CPAs as the accounting industry moves forward as a whole. Accountants need to move with the times and cannabis is a moving train - you’re either onboard or you’re not.
Prior history has shown that anytime there is a very technical issue or new changes within our financial world, where there is more risk and opportunity for bad accounting, there tends to be a demand for high-level services. Many CPAs understand that because cannabis is a high-risk industry, the technical accounting aspects are a great revenue producer. Highly complex issues lead to higher fees. These cannabis companies and startups don’t just need tax returns; they need a whole host of services that can keep a team of people busy at your firm.
If you are interested in the cannabis industry – good… the industry needs you! The practitioners who are already in this industry are overloaded. An overloaded CPA means client service suffers – and in the close-knit cannabis industry where word-of-mouth rules, that can devastate your reputation. Do your research, get educated and stay informed. Be a good representation of the accounting industry.
An important piece to remember as you consider coming into this industry is that there are no experts; we’re becoming experts as we go. Yes, there are experts within cost accounting and farming and manufacturing accounting, but we are finding they are all coming together now to service this industry – and that in itself is a learning experience. If you take the time to understand all the different elements to the cannabis industry – the cultivation, manufacturing, processing, retail and the science, and keep an open mind to endless learning, you will be on your way to success.
Cannabis Accounting Done Right – Indiva Advisors
Cannabis is the way of the future for CPAs for a variety of reasons. First, the industry is growing rapidly and there is a lot of demand for accounting services. Second, the cannabis industry is highly regulated, which creates a lot of work for CPAs. Finally, the cannabis industry is still relatively new, which means there are a lot of opportunities for CPAs to get involved and make a name for themselves.
If you’d like to learn more about opportunities for CPAs at Indiva Advisors, LLP, please get in touch.