We don’t have to tell you that financial reporting in the cannabis industry is highly specialized due to the legal and regulatory complexities surrounding the production, distribution, and sale of cannabis products. Internal controls need to be established in this gray space where a legal substance at the state level is a Schedule 1 Substance at the federal level. Then there are the added implications of a canna business operating across more than one state. A CFO with expertise in this field is essential to navigating the challenges and ensuring accurate, compliant, and transparent financial reporting.

Monitoring and reporting cash flow is crucial in an industry with unique financial challenges and cash-based transactions. Proper data management and record-keeping must be ensured, especially for traceability and compliance with seed-to-sale tracking requirements.

Risk Management must be a regular exercise in this unstable landscape, identifying and mitigating financial risks, such as regulatory changes, market fluctuations, and legal challenges.

Forecasting the Future includes financial analysis to identify trends, opportunities, and areas for improvement. This may include benchmarking against industry peers.

Stakeholder Communication cannot be under-valued. Communicating financial results and insights to the company’s board of directors, investors, and other stakeholders, and addressing their financial concerns or questions will bolster confidence in their investment.

And it is a given that you must be audit bullet-proof!

BTA – By Example

At BTA Cannabis CPA Tax, we analyze the uniqueness of their business and then build a custom report set for them. This includes:

  • industry-standard reports such as balance sheet, P&L, and statement of cash flow
  • reports specific to the segment of the industry the client is in, such as cultivation, distro, or retail
  • reports specific to the client, e.g., if retail, reports include:
    • number of SKUs
    • sales mix by major categories
    • pricing trends for some standard products such as flower, vape cartridges, and pre-rolls
  • key performance indicators (KPIs).

We prepare the basic monthly financials with a quick turnaround so it can be used by management to analyze the month just closed.

We prepare the full management report package on a quarterly basis. This report set is geared for use by company management as well as investors or others outside the company.

The monthly reporting for retailers provides timely info to be sure their margins are in line. With an unstable market, prices may fluctuate daily or weekly. This way, adjustments can be made rapidly.

Our distributors face similar problems; however, for distributors, the volumes may be higher, and the deals are for a longer period of time. Our timely reports can position the distro operator to make adjustments in the deals and save profit margin.

Our cultivators have yet another view of the market. Their costs cycle with the harvest calendar. Each harvest must be reported on, and this cycle does not follow traditional monthly or quarterly time slices. So, we provide a cultivator reporting package that captures the cost per harvest.

For these reasons and more, having a CFO On Call brings guidance as to what to do with this routine accounting for your business to strengthen its overall performance.

If you need the expertise of a CFO, let’s talk. I can be reached at Bruce@CannabisCPA.Tax or 818-225-8022.

CFO Services

Why BTA Cannabis CPA Tax?

  • Subject Matter Expert sought nationwide
  • 30+ Years of CPA Experience
  • Cannabis-specific experience since 2018
  • Multi-state service area: 20 of the 24 legalized states (plus Washington, D.C.) as of 4/24/24

Tap the image to enlarge.

The striped overlay shows the 19 states (plus Washington D.C.) that BTA serves as of 11/12/23.

Map source: DISA’s Marijuana Legality by State showing legalization, medical use, and recreational use as of 10/31/23. https://disa.com/marijuana-legality-by-state