Cannabis Accounting Opens Doors for Accountants Ready to Grow

The cannabis industry has seen incredible growth over the last few years, and it’s been an absolute delight to watch it from the inside. However, as I’ve seen firsthand, that growth comes with a unique set of financial management challenges. Dispensaries, grow operations, and other cannabis businesses face complex banking issues, tough regulations, and an often-confusing tax and reporting landscape. 

That doesn’t even take into account the differences between all of the interested parties, who may be partners, investors, or some other funding relationship—and how they expect to be paid.

Managing these financial elements demands specialized knowledge and careful oversight — and that means cannabis company owners don’t want just anyone with accounting software to manage their finances and advise them on decisions that could impact everyone around them.

This is exactly why accountants who specialize in cannabis accounting — and specifically, controllership — can set themselves apart. With the expertise to keep businesses on track while helping them avoid regulatory pitfalls, cannabis controllers are uniquely positioned to help companies thrive.

The opportunity for accountants in Cannabis controllership

Cannabis controllership is not something to decide to do on a whim—you do need to dedicate time to understanding the nuances of the industry as well as its rapid changes. That said, there is tremendous opportunity. 

On one hand, cannabis is one of the fastest-growing industries. Newer markets see exponential growth, while maturing markets need to understand how to survive market saturation. Businesses in both areas need advisors who can support their needs and profitability. 

On the other hand, cannabis regulations are complex. I'll explain more about that below, but accountants who understand the regulatory environment and its nuances are well-positioned to serve cannabis companies and set them up for success.

Understanding the complexities of Cannabis business finance

From a bird's-eye view, cannabis businesses have similarities with their non-cannabis counterparts when it comes to expense categories:

• Cultivators are similar to other agricultural operations.
• Production facilities are like other manufacturers creating products.
• Distributors are similar across the board.
• Testing facilities are like other laboratories.
• Dispensaries are simply a type of retail storefront.

So, while it may seem like an accounting professional or business consultant with expertise in the non-cannabis areas could serve you well, that’s not usually the case. They require specialized knowledge in cannabis finance because of the government's distinct requirements.

Two words — regulatory compliance. Cannabis is a Schedule I substance subject to 280E restrictions and seed-to-sale tracking and reporting requirements.

In a nutshell, the current scheduling of cannabis makes it difficult to get banking access. This means businesses are likely cash-only operations, and expenses aren’t federally tax-deductible, significantly affecting overall profitability.

On top of that, cannabis laws vary drastically by state and even municipality, so accountants must grasp multiple layers of compliance. Failing to do so can jeopardize business licenses, banking access, and even entire operations — I’ve seen this happen more than once.

Why outsourced controllers are essential

Cannabis businesses need more than just someone who crunches the numbers and can manage accounting software. While some may try to do it themselves, others may cut corners and go for the less expensive option—where, unfortunately, they don’t realize they’re in over their heads until it’s too late.

Cannabis-specific finance knowledge is a necessity for success in finance as well as operations, and helps business owners:

• Ensure regulatory compliance
• Mitigate risk in an inherently risky space
• Gain an understanding of how their bottom line relates to their goals

Accounting pros who excel here can build effective long-term relationships with clients. What’s more, because the demand is so high, doing a good job means you’re likely to get lots of referrals from clients and other industry professionals — business advisors, tax pros, attorneys, and so forth.

Candidly, that’s why cannabis businesses come to me and why cannabis tax professionals refer their clients to me. It’s far too easy to get things wrong if accounts aren’t set up appropriately from Day 1, which leads to time-intensive and expensive cleanup. I’ve spent years learning about these challenges and love helping cannabis businesses navigate them to truly understand their financial situation.

The role of Cannabis Controllers in financial health

First, if you’re not sure what a controller is or what controllers do, let’s define it.

I always tell people that controllers are crucial for maintaining a cannabis business's financial health. In the cannabis industry, specifically, they ensure accurate reporting, manage budgets, and navigate complex regulations like 280E, while also overseeing cost management and internal controls to keep operations compliant and efficient.

What this means for accountants: If you’re an experienced CPA or seasoned accountant looking to expand, offering controllership services to cannabis businesses means taking more of an advisory role, providing:

• Financial oversight
• Budget management
• Regulatory support
• Profitability guidance

What’s more, because you’re an expert in the cannabis space, you’ll be able to guide them by staying up to date on regulatory developments in a rapidly growing and changing industry.

Outsourced controllers provide cost-effective expertise

Clients can tap into your expert financial expertise without the full-time salary commitment. Instead of hiring an in-house CFO or entire accounting team, small, lean cannabis businesses get access to an experienced financial professional — that’s you — who knows the cannabis space and how to create a path towards profitability and success.

While many cannabis business owners balk at the expense, the reality is that by treating cannabis companies like proper businesses, they actually save in the long run. Compliance is non-negotiable, and it’s critical to have rock-solid data to make informed business decisions. Cutting corners could risk business licenses, banking access, and even the entire operation. Needless to say, it’s important to get it right.

Taking steps to succeed as an outsourced Cannabis Controller

Outsourced controllers offer cannabis businesses a way to thrive financially while staying compliant and reducing risk. With that in mind, if cannabis businesses are serious about growth, it’s time to suggest they go with outsourced financial management to elevate their operations and ensure long-term success.

Here’s how you can get started:

• Educate yourself on 280E, seed-to-sale tracking, and cannabis licensing. (I created this video series specifically for cannabis companies, and it also has a lot of good info for accounting pros.)
• Make connections with potential referral partners and clients.
• Attend cannabis specific conferences in your area.

What’s the bottom line? As the industry continues to evolve and more states legalize cannabis, I believe the demand will only increase. This is the perfect time to prepare yourself and your business.