What Are the Common Misconceptions About Accounting for Cannabis Businesses?

FREMONT, CA: The legal cannabis, CBD, and hemp sectors are sweeping the nation, and numerous potential legislation to legalize cannabis at the federal level are now being debated. Given that the majority of Americans support medical cannabis in a society split by practically every other issue imaginable — it's not surprising that cannabis is rapidly approaching full legalization. Cannabis is poised to become legal for adults in Minnesota. Many states begin slowly, but as the effects of additional jobs and tax dollars for cities and counties rise, as does demand, people will see pressure to speed things ahead more quickly.

With federal cannabis legalization in uncertainty and individual states authorizing cannabis sales and production, professionals such as CPAs find themselves in a difficult position. On the one side, cannabis businesses require accounting support to remain compliant and maintain their licenses.The truth is that thousands of businesses are springing up all over the place, and there aren't enough qualified accountants to go around.

The primary misconceptions around offering accounting services to the cannabis and CBD/hemp sectors are listed below:

This is the "all-cash" industry. Actually, credit unions and banks serve cannabis businesses in various states. Businesses generate a large amount of cash. Thus, cash controls and processes are crucial for preventing fraud and theft. Furthermore, many cannabis business owners possess two to ten non-cannabis firms, such as a real estate or equipment company, which have better access to finance.

The federal government is now reviewing the SAFE Banking Act, and cannabis businesses should soon have simpler access to banking and merchant services.

Cannabis must be a terrible "niche" for CPAs: There are currently very few CPAs in the niche, so there is a huge opportunity. Many surveys have shown that solo CPAs suffer the most when obtaining exceptional clients, and if that's the case for specific companies, this could be their opportunity to discover high-paying clients effortlessly. Many people will spend in the six figures for world-class accounting, tax, and CFO services.

When one considers that a modest mom-and-pop cannabis firm, whether a farm, dispensary, or vertical integration, can soon grow to a $10-$20 million company, these clients are willing to pay high prices for reliable accounting and tax services. Cost accounting is complex, and the founders and investors value accuracy.