How to Transition from Your Corporate Job to Owning Your Own CFO Firm

becoming a cfo cannabis accounting cannabis cfo how to become a cfo Aug 15, 2023

Becoming a Successful Cannabis CFO in Just 6 Months

You’re dreading the start of the week: the soul-crushing commute to the office, the long working hours that resemble more like a 5-9 than a 9-5, and the monotonous day to day grinding, crunching numbers for the same thankless clients — does this daily routine resonate a little too much with you? Have you ever envisioned breaking free from the rigid corporate cycle and embarking on a more prosperous, fulfilling path but aren’t sure where to turn? If so, then it’s time to take a closer look at the Cannabis industry for a career change.

The Cannabis industry’s growth has been remarkable; with financial forecasts predicting the market to top $33 billion in 2023 and hit a staggering $57 billion by 2028, it’s easy to see why so many people are joining in on this booming industry.

With this type of potential and exponential expansion, dispensaries, distributors, growers, and manufacturers are in dire need of trained accounting and bookkeeping professionals who can navigate the complex landscape of regulations and laws to keep their businesses both compliant and profitable. Companies that do not follow the proper guidelines or act in accordance with certain federal laws can face profound consequences, which means Cannabis companies can’t afford NOT to have an industry expert look after their accounting.

If you're a CPA or possess accounting experience, this industry's tight regulations and high demand for industry specific expertise mean that a flexible, lucrative career could be within your grasp. With the proper instruction and high-level training, your dreams of ditching the draining day job and embracing an exciting career in the Cannabis industry are not only attainable but a lot closer than you might imagine.

Complexities of the Cannabis Industry: The Need for Accounting Experts

The Cannabis industry offers a unique and promising environment for experienced accounting professionals. Helping Cannabis companies and their stakeholders operate within both state and federal guidelines and adhere to tax codes specific to companies that sell Schedule I substances requires a robust accounting background and specialized understanding of the Cannabis sector. Here are the most important challenges Cannabis companies need to navigate:

Tax Codes (how they can and cannot be applied):

IRC 280E - Due to this federal regulation, Cannabis companies are unable to benefit from common tax deductions or credits due to Marijuana being classified as a Schedule I controlled substance. Having to pay state and federal taxes on 100% of income without any legal deduction significantly diminishes profits for businesses, making it extremely difficult to remain competitive and profitable. Furthermore, uninformed tax accountants trying to get around this tax code are costing their clients major fines and penalties. In this particular case, the tax court imposed a 20% penalty.
IRC 471 - This tax provision relates to the accounting methods for inventories and allows Cannabis companies to capitalize certain indirect and direct costs in their inventory. Understanding and properly applying IRC 471 is crucial, as it helps in offsetting some of the restrictions imposed by Section 280E, legally. Navigating and understanding the various codes rolled up into 471 enables Cannabis businesses to include certain costs in the Cost of Goods Sold (COGS), thus reducing taxable income. However, a wrong application could lead to non-compliance or loss of potential savings, emphasizing the need for specialized accounting expertise.

GAAP- Generally Accepted Accounting Principles refer to the standardized set of accounting principles, procedures, and standards for consistency that companies and organizations within the U.S. must follow when putting together their financial statements. Cannabis companies MUST adhere to GAAP for access to capital and to meet licensing requirements. The specialized nature of the Cannabis industry, with unique taxation and legal challenges, necessitates the expertise of an industry-specific accountant to ensure financial operations are handled accurately, which mitigates risks and ensures the vitality of a Cannabis business. In other words, a traditional small business can get away with having someone do their accounting that isn’t a degreed professional with experience, but a Cannabis company cannot. So if you see someone’s half sibling, or some other part-timer that isn’t trained in this stuff doing the day to day bookkeeping and accounting, you can bet that there’s going to be issues that will require cleanup in order for them to get compliant so that they don’t get penalized.
Cost Accounting- To capitalize on the maximum deductions permitted under Section 280E, accounting experts working with Cannabis businesses must accurately ascertain the genuine costs involved in cultivating and producing their clients' products. The intricate operations of growing Cannabis to getting finished products to end consumers play a vital role for accountants in this industry, as the allocation of resources throughout various stages of cultivation has a direct impact on the deductions they can rightfully claim.
Seed-to-Sale - This software is a specialized tool that’s mandated for all Cannabis companies in states that have legalized medical and recreational-use licensing programs so that they can monitor the entire supply chain and keep products off of the black market. This system follows the lifecycle from planting to the final sale to the consumer, ensuring that everything is tracked, regulated, and doesn’t cross into the black market while enabling the state to manage taxes, distribution, and enforce laws. State-mandated providers like Metrc, Leaf Data Systems, BioTrack, and others are common, but they can be prone to glitches and human errors. Accountants need to ensure compliance, correct data input, and be ready to resolve software issues. These systems are known to go down frequently, so you can’t rely on integrations or tools for accuracy. With the right systems and procedures in place, your accounting team can help ensure that your company is taking the necessary precautions to prevent being flagged for audit. Even if the state audits your records, having those systems in place will help business owners make their case and get through it quickly.
ERP- Enterprise Resource Planning software plays a crucial role in agriculture, manufacturing, and making finished goods. In an industry heavily regulated and monitored, ERP systems centralize, store, and integrate data throughout an entire enterprise, ensuring accurate tracking and reporting. For the Cannabis sector, this means adherence to state mandates on seed-to-sale tracking, accurate inventory management, taxation, and regulatory reporting. Due to the complex nature of these systems, particularly in the Cannabis industry, having a skilled accountant who understands the intricacies of ERP software is essential. This professional can resolve syncing and integration issues, prevent data contamination, and make sure that the system functions in alignment with the legal requirements, ensuring compliance and preventing potential liabilities or financial losses. Unfortunately, since the industry is so new, there isn’t a system to rule them all yet, so you’ll need your accounting team to know what to look for in order to ensure everything is working the way it should.
Integration Problems - Integration difficulties between Point of Sale (POS) systems and seed-to-sale tracking software are common in the Cannabis business. Errors can arise with synchronization, inventory discrepancy, data transfer glitches, and user adoption. While it’s often recommended not to connect systems to avoid disruptions, an industry-expert accountant would be able to conduct regular checks and audits to ensure accuracy and adherence to proper procedures and functionality.
Lack of Accounting Tools- Reliable, efficient tools for accounting in the Cannabis industry are also hard to come by as some vendors, like QuickBooks Online, are still reluctant to engage in the market. This can complicate bookkeeping and jeopardize compliance and profitability. An accountant with expertise in the field will be able to select the right tools and develop workarounds if necessary. Within that software, Cannabis specific charts of accounts, workpapers, SOPs, etc are also key in getting all of the tools setup properly, doing tie-outs, reconciling, etc. The DOPE CFO Cannabis Accounting 5.0 program has over 100 workpapers and tools to help professionals get up and running on day one of serving a new client.

Transferring Your Accounting Experience to the Cannabis Industry

If you are a CPA, enrolled agent, attorney, or accountant, especially if you've worked with large firms like the Big 4 or other enterprises grappling with complex accounting issues, your work experience can pave the way for a successful career as a CFO in the Cannabis industry. If your background includes accounting expertise in manufacturing, growing, agriculture, or retail sectors, transitioning to this field can be quite seamless with the specialized proper training. Here are some popular skills individuals possess that make transferring to the Cannabis industry even easier:

Financial Analysis and Reporting: The ability to analyze financial data, generate clear and concise reports, and interpret complex financial information is crucial for any CFO role. But it takes on particular significance in the Cannabis industry. Understanding the unique financial dynamics and industry trends is vital for making informed strategic decisions.
Budgeting and Forecasting: Managing budgets and creating accurate financial projections are at the heart of steering a company's financial course. In the Cannabis business, this requires a keen understanding of market fluctuations, consumer behavior, and regulatory changes, all of which directly impact financial planning and forecasting.
Risk Management: The Cannabis industry is known for its evolving legal landscape, making risk management an indispensable skill. Identifying, evaluating, and managing risks, including regulatory and compliance risks, is integral to safeguarding the company’s interests. This is especially true in an industry that is subject to constant legal liabilities.

While the Cannabis industry can be intricate and multifaceted, demanding a deep comprehension of laws, regulations, and specialized accounting rules, the experience and skills from various accounting professions can be effectively transitioned to meet these unique demands.

Perks of Owning Your Own CFO Firm in the Cannabis Industry

Starting and running your own CFO firm in the booming Cannabis industry is an opportunity filled with incredible potential; here’s why:

Choose Your Own Clients: You're no longer tied to working with whoever walks through the door. In your own firm, you have the power to choose clients who align with your expertise and values. Say goodbye to mismatched business relationships and hello to a client roster that you actually want to work with.

Work Remotely: You’ll never waste another day commuting to a depressing office space; imagine managing your firm from a beach in Bali or a cabin in the mountains. The nature of the Cannabis industry and accounting work allows for flexibility so that you can operate from anywhere in the world, granting you an unprecedented work-life balance, freedom, and the chance to explore different surroundings.

Earn More Money: Specializing in the Cannabis industry means diving into a complex accounting landscape that some professionals may shy away from due to its demanding need for niche expertise. Because Cannabis accounting is more challenging and involved, requiring deeper industry insight, this allows you to command higher rates than counterparts in other sectors.

Whether it's choosing clients you connect with, working from preferred locations, or reaping financial rewards that reflect your true value, owning a CFO firm in the Cannabis industry might be the exciting career change you've been looking for.

Get the Training You Need to Prosper in this Niche Market

If you’re ready to take the leap into a prosperous industry that can literally change your life, it’s imperative to get the training and education you need to expand your knowledge and become an expert. While some Cannabis companies may be complacent working with accountants or bookkeepers that are unaware of industry rules and regulations, it’s only a matter of time before costly oversights and accounting errors result in losses and other severe consequences, such as fines and even jail time.

For accountants, bookkeepers, or anyone with a financial mindset who wants to make the transition from a corporate job to becoming the CFO of their own firm, DOPE CFO offers a comprehensive program to help individuals attain their goals. Through this training, participants will learn how to navigate complex tax codes such as 280E and 471, conduct niche accounting methods for optimizing GAAP, and utilize effective tools for more efficient accounting in the Cannabis industry.

This streamlined program outlines the 5 keys to building the foundation of a successful CFO firm in the Cannabis industry in just 6 months, providing individuals with everything they need to become experts in the industry.

Enroll in the DOPE CFO program today and take the first step towards owning your own CFO firm; click here to get started!