TWR Podcast: Episode 84 - Cannabis Accounting: Greener Pastures

It wasn’t that long ago that cannabis possession, consumption, and commerce were illegal throughout most of the United States. Now, it’s an industry that is quickly expanding and needs specialized support from accounting firms.

In a recent episode of the Woodard Report Podcast hosted by Joe Woodard and Heather Satterley, two pioneers of cannabis accounting shared their insights on this incredible expanding market: Naomi Granger, founder of the National Association of Cannabis Accounting and Tax Professionals, and Bruce Anderson, founder of CannabisCPA.Tax. Together, the group discussed the unique challenges and immense opportunities for accounting professionals within the cannabis industry.

Granger, who has been involved in cannabis accounting for about seven years, highlighted the industry's dynamic nature as a key attraction. Coming from a corporate accounting background including work at a Big Four firm, she found the constant changes and complexities within cannabis accounting to be intellectually stimulating and far from monotonous. “When I started the cannabis industry,” she said, “I felt like ‘Oh, this is something that I'll never get bored of because it just keeps changing.’”

Anderson's journey into cannabis accounting was influenced by his son, who had established connections within the industry. Initially a traditional small business accounting firm, Anderson's practice ventured into cannabis accounting in 2018 when recreational use was legalized in California. He pointed out that while national and regional firms hesitated to engage with the cannabis sector due to its legal ambiguities, local firms like his could carve out a niche by leveraging local expertise and personal connections.

Regulatory hurdles

The group also discussed the regulatory landscape, which is complicated by the varied legal statuses of cannabis across state lines. Both speakers emphasized the importance of understanding each state’s regulatory requirements, which can differ significantly. Granger and Anderson also addressed the practical aspects of cannabis accounting, from banking challenges to tax preparation, highlighting the need for rigorous documentation.

Another significant topic was the risk and insurance considerations for accountants entering this field. Due to the federal illegality of cannabis, not all insurance providers are willing to cover cannabis-related services and those that do often charge higher premiums. Challenges like these reflect the hesitations in the broader professional community regarding cannabis, which is still overcoming social stigma as well as legal hurdles.

Big opportunities for accounting firms

Despite these challenges, the potential opportunities are substantial. The cannabis industry is not only growing rapidly but is also proving to be resilient. As Granger pointed out, during the COVID-19 quarantine, many states classified cannabis-related businesses as “essential,” underscoring its importance and potential for continued expansion.

Both Granger and Anderson are optimistic about the future of cannabis accounting. They believe that with more states moving towards legalization and potential federal rescheduling of cannabis, the industry will only continue to grow. Accountants currently building expertise in this area are well-positioned to benefit from its expansion.

To hear more insights about accounting in the cannabis industry, listen to the full podcast below and be sure to subscribe to The Woodard Report Podcast on Apple Podcasts, Spotify, Amazon Music, or Stitcher so you don’t miss an episode!