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Why Cannabis Companies Should Consider Outsourcing

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According to a 2020 report published by the Cannabis Business Times, “financial management” is the third biggest business challenge plaguing cannabis business owners, falling only behind competition/declining prices and compliance. Notching the No. 3 spot for three consecutive years of reporting, it’s clear that proper financial management is a consistent burden for business owners throughout the industry.

Why? The reasons are endless.

For a highly-regulated cannabis operation, it’s essential to keep your financials in perfect order. Accounting functions are more complicated than your average start-up, with licensing, seed-to-sale reporting, compliance and taxation requirements as make or break priorities. You don’t get another shot at getting those details right.

While the basics like accuracy and up-to-date financials could have tremendous impact from a regulatory perspective, there are also several key long-term (and short-term) business impacts driven by financial data. Finances drive strategic planning and day-to-day decision making. Insightful KPIs and data can be substantial difference makers when owners make big decisions – like courting investors to grow their businesses – and smaller decisions like whether to add another full-time staffer.

It is often difficult to find reliable, competent and knowledgeable personnel to fill accounting and bookkeeping roles. Experienced, competent and reliable staff with knowledge of the intricacies of the cannabis industry can seem like rare unicorns – impossible to find. And, when you do manage to find one, even harder to keep.

If this scenario rings true to your business, it may be time to consider outsourcing your accounting and financial functions. Outsourcing has gained popularity as cannabis continues to become legalized in states across the country. It provides cannabis leaders with expertise and oversight on the financials, so they can focus on managing the business.

From CFO-level solutions to part-time bookkeeping needs, outsourcing can eliminate headaches and pain-points, gain efficiencies and reduce costs (to name a few immediate benefits). In addition, outsourcing allows businesses to fill whatever gaps they need – whether it be standard day-to-day management or high-level financial planning. An outsourced CFO, for example, can offer intangible insight on cash flow management, strategic planning and investment opportunities. They can simplify complex or technical financial functions to a non-technical audience, a critical benefit when pitching or briefing investors.

While the benefits speak for themselves, you may want to ask these critical questions to determine whether outsourcing could be right for your business:

  • Am I currently receiving my financial information in a timely and consistent basis?
  • Is my financial information accurate?
  • Am I constantly needing to scramble to clean up the books for MRA reporting requirements or year-end taxes?
  • Is assistance needed for high-level strategic planning or financial decision-making?
  • Do I need help with budgeting and projections?
  • Is my CFO spending time doing the daily accounting functions?
  • Are my bookkeepers expected to do functions generally beyond their capabilities?
  • Is there a need for cash flow analysis or cash projections beyond what I am currently receiving (if at all)?
  • What are the pain points in my financial workflows/processes?
  • Are my vendors getting paid late or not at all?
  • Does my accounting team file the necessary tax documents on time(sales, use, excise, payroll, or income)?
  • Are my bank accounts reconciled timely, and are there proper controls over cash? If this is a multi-entity operation, are the books appropriately separated and managed?
  • Does my tax accountant need to move many transactions around each year for section 280E compliance?

If you answered “yes” to some of the questions above, outsourcing may be a worthwhile investment for your business.

Maner Costerisan is deeply invested in Michigan’s cannabis industry, and we understand the complex challenges cannabis business owners face daily. We are committed to helping our clients stay compliant while building a sound financial strategy to support their growth. We are proud members of the Michigan Cannabis Industry Association and supporters of the Marijuana Regulatory Association’s social equity program. We know cannabis, and we can help.

Gain the benefits of a trustworthy, detail-oriented team and who is up to speed on the complexities of the cannabis industry – including special compliance needs and 280E, cost accounting, risk management, and more by partnering with Maner.

Tim Bograkos

tbograkos@manercpa.com

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