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The cannabis industry needs CPAs. Why? It’s a rapidly growing industry, with an economic impact that’s projected to react $70 billion by 2021. However, it’s also one of the most tightly regulated industries in the country, since cannabis is a Schedule I controlled substance, making it illegal under federal law, even though it has various levels of legality in over 30 states.

Cannabis companies need qualified, experienced CPAs to manage their taxes and accounting, as well as their business structuring and inventory management, in the face of strict federal and state regulations. Without professional accounting services, cannabis businesses have trouble staying afloat, since the IRS often targets their finances and bookkeeping to find ways to fine or penalize them, or even shut them down.

If using your accounting skills in the cannabis industry sounds like an exciting challenge to you, here’s what you should do to become a California cannabis CPA:

Educate Yourself

To work with cannabis clients, you need to teach yourself about the cannabis industry. Learn about Section 280E of the Internal Revenue Code, and how the IRS has been enforcing it recently. Make sure you understand Cost of Goods Sold (COGS), which can be used to help cannabis companies claim tax breaks. Find out about political and tax issues surrounding cannabis, including recent court cases. Teach yourself about using cannabis accounting software solutions. You should take advantage of Dope CFO’s cannabis CPA education programs, which seek to teach CPAs about the intricacies of accounting for cannabis. Learning as much as you can about the cannabis industry and effective accounting methods for it is the best way to make yourself a solid resource for any cannabis CEO.

Connect With Other CPAs

As a CPA, you know what your accounting strengths and weaknesses are. That’s why you should reach out to other CPAs as you work your way into cannabis accounting. Gathering partners and colleagues will help you offer well-rounded accounting services to cannabis companies. If tax planning and tax preparation are your strengths, you should partner with a CPA who has strong controller skills to balance things out. If you connect with enough of your fellow accountants, you can start your own cannabis accounting firm.

Reach Out to Cannabis CEOs

Whether you’re acting independently or as part of a cannabis CPA firm, you should begin joining Facebook and LinkedIn groups for cannabis startups. Once you’re a member, begin reaching out to cannabis CEOs with targeted messages and emails. Make sure your messages address pain points that would be important to a cannabis CEO, like tax planning, cash flow management, and compliance measures. State your qualifications and explain how your proposed solutions can help them navigate the complex space of cannabis accounting.

Find an Industry Niche

Carve out your own cannabis space with your accounting and industry knowledge. You could focus on accounting for medical dispensaries, or for retail storefronts, or you could focus on accounting for an entire supply chain. Whichever path you choose, stick to it and become as knowledgeable and experienced in that niche as you can. Finding a niche will allow you to develop expertise, which will help you serve your clients to the best of your ability.

California Cannabis CPAs You Can Count On

At GJR Consulting, we have placed ourselves on the cutting edge by offering cannabis accounting services. We push our work to a place where few accounting firms will go because we understand that cannabis is a legitimate industry, and the companies within it deserve access to top-quality accounting services. If you are interested in our cannabis accounting services, contact us today.

Accounting for cannabis is a complex task. On one hand, the cannabis industry is growing rapidly since 11 states have legalized cannabis completely, and 34 states have legalized medical marijuana. On the other hand, cannabis is still a Schedule I controlled substance, which means it is illegal under federal law. Since they are selling a controlled substance, cannabis companies have an extremely difficult time receiving tax breaks and getting banks to take their money.

Because of these restrictions, cannabis accounting must be accurate and tightly managed. If a cannabis company’s finances are not accurately managed, they can be penalized, fined, or even shut down, according to Dope CFO. Even in California, where cannabis is completely legal, cannabis companies must comply with Section 280E of the Internal Revenue Code, which prevents companies whose business “consists of trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act).” This is what prevents cannabis companies from receiving tax breaks, since the IRS sees them as drug traffickers rather than legitimate businesses. The IRS is currently enforcing Section 280E quite actively, which leads to the fines, penalties, and shutdowns mentioned above.

If you want to succeed in the cannabis industry, cannabis CPA services can help you structure your business so you can deliver your product from seed to sale while remaining within strict federal regulations. A California cannabis CPA service like GJR Consulting uses the following tools and strategies to help you do that.

 

Careful Tax Planning

When you work with cannabis accounting professionals, they will help you find and implement tax strategies that will comply with federal regulations while giving you room to access tax breaks where possible. For instance, they can help you implement Section 471 of the Internal Revenue Code, which governs taxes and accounting inventories. They can also help you with business structuring by handling the financial side of setting up cannabis and non-cannabis sides of your business or minimizing your tax liabilities with vertical integration. Working with a professional accounting firm to implement cannabis tax strategies will help your business secure a stable future.

Cannabis Accounting Software

While it’s not specialized exclusively for cannabis businesses, you can use QuickBooks to your advantage. Work with your cannabis CPA to draw up charts for the farm, chemical, and retail aspects of your business. This type of software solution will allow you to improve your inventory management.

Accounting Policies and Controls

Work with your CPA to create a summary of these policies and controls that clearly state how cash, insurance, inventory, and other financial aspects of your business will be handled. This will create trust between you and your CPA, and it will outline all parties’ responsibilities. This can help you down the road if the IRS scrutinizes your business or if you face a lawsuit from an investor.

Cannabis Compliance with GJR Consulting

As an entrepreneur in the cannabis industry, you will need high-quality accounting services to help your business grow, thrive, and survive under strict federal regulations and potential scrutiny. At GJR Consulting, we pride ourselves on staying on the cutting edge of the accounting landscape by working with cannabis clients. Not many accounting firms will reach out and help cannabis companies manage their finances during this period of great industry growth, but we are one of the few who will. If you are interested in our cannabis accounting services, contact us today.