Does my Cannabis Cooperative or Mutual Benefit Corporation need a Chief Financial Officer? Before you ask about how to find a CFO, you need to ask if you need ask, Do I need a CFO? Unfortunately, for people with my background, the answer is Probably Not. Before I describe what a Chief Financial Officer does, and when a cannabis collective needs to engage one, you need to understand the role of a bookkeeper, accountant and other financial roles.
Bookkeeper: You need a bookkeeper. If you are in business, you need someone keeping the records of the funds you collect and disperse. Most firms separate this record keeping into 3 areas:
someone that tracks and records money coming in (known as Accounts Receivable),
someone that tracks money that is paid to vendors and suppliers (known as Accounts Payable),
and someone who puts these together into financial statements, a Bookkeeper.
Bookkeepers are detail oriented and focus on the accuracy of the information. While that makes them valuable and essential to the operations of your cannabis collective, it also means that their focus in NOT on giving you, the owner or manager, information they can use to improve the business results going forward. Your bookkeeper is focused on creating records that reflect the reality of the past events: Customer purchases, Payments made, Earnings and Cash available.
Accountant: Similarly, you need an accountant. For your future financial health, find an accountant who specializes in legal cannabis businesses. This professional takes the reports generated by the bookkeeper and files federal and state taxes on behalf of the marijuana collective.
Assuming you have a high quality CPA who is committed to staying on top of the tax issues related to the legal cannabis industry, he or she will help you stay in compliance with sales and income tax requirements.
Typically, the accountant you use for taxes is also not helping you manage your business on an ongoing basis. He or she won’t help you with industry benchmarking, nor financial advice. Accountants for marijuana collectives usually shy away from helping you prepare for raising money from investors.
Financial Consultant: While every business owner needs a bookkeeper (or a partner/spouse keeping the books) and a tax professional, the financial types are more optional.
If you are raising money from investors, a financial consultant can build or test your financial projections and help you prepare a “Pitch Deck.”
If you would like to sell your company, start working with a financial consultant to maximize the value of the company before you start talking to buyers.A few small changes can increase the value of the company.
If you want to improve your cannabis collective’s financial performance, or understand how it compares to others in the industry, a financial consultant is a great resource.
If you want to strategize with someone with experience and expertise and a fresh perspective, hire a financial consultant for an hour or two a month.
Controller: As your company gets larger, you are likely to find that you need someone on sight to manage the cash and your bookkeeping staff. That person, who is intimately involved with the cash and banking, is the Controller. In my experience, this is usually a bookkeeper with ten or more years of experience who has worked in several companies. Their strategic perspective can be hit or miss – some are eager to help with key performance indicators – but most are more interested in accuracy than usefulness.
Controllers (and experienced Bookkeepers) have a deep understand the numbers, where they come from, what they represent and what they mean. As a result, Controllers are often are poor communicators with the business owners who lacks the knowledge of accounting fundamentals.
From the Controller’s perspective, when they give you the financial statements of your cannabis collective, they have communicated. The life experience and the way the business owner's brain processes the information is different from the linear thinking of the Controller. Phrased differently, the information may not be in a form easily accessible to the business owner. There are software products that convert the numbers into graphics, text and colors - which helps business owners understand the key ratios and financial drivers of their business.
Chief Financial Officer: If your company has multiple locations, or multiple lines of business (real estate development or dispensaries in multiple states, for example) and you need strategic thinking on an ongoing basis, you need a Chief Financial Officer. A cannabis collective needs a CFO when the leadership team is deciding between multiple projects, is managing a variety of investors and lenders and/or needs complex financial models.
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The topic of how people of different backgrounds absorb, process and use accounting information is one of my favorites.
I'm a financial consultant, who as an equity analyst, studied over 1,000 companies in a wide variety of industries. I am interested in offering my insights to business owners and managers, in the legal marijuana industry, who want to improve the efficiency and financial performance of cannbis collectives.
Please click on the Green Box at the top "E.P. Blog" to see my other articles. I work with cannabis business owners, sharing insights they may not find elsewhere.
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