Cannabis Industry Accounting

Some CPAs bill hourly, they charge you some dollars per hour depending on how much time they put in. It’s also common to charge fixed fees for individual projects. Your CPA might do your tax return for one price and prepare another estimate for the next project. Another popular price structure is the yearly fixed price agreement. Your CPA might say, “I’m going to provide this range of services to you, and I’m going to give you unlimited phone calls and unlimited meetings, and I’m going to do that all for $X amount of dollars per year.” That dollar amount would most likely be billed monthly.

We typically recommend relationships which are not hourly. Fixed fee billing encourages communication between the client and the CPA. The more the CPA knows about the client’s business and their life and what’s going on, the better advice they can give. When clients are uncomfortable with picking up the phone, afraid they’re going to get a big bill, they are less likely to pick the phone talk to their CPA when they have something on their mind.

What you should expect from your CPA depends a lot on your business objectives. If you’re a very small business and you’re not planning to grow much in the near future, maybe all you need is someone to prepare your tax return. However, perhaps you have a growing business. You need someone who can consult with you on employee matters, management issues, accounting system set up and design. These are some things to consider when imagining the level of commitment you need from your CPA.

I typically coach my clients to put together a wish list of things they want from us. Of course, the more commitment a client needs from us, the larger the engagement will be, which will increase costs. Starting from the maximum and working down, though, is always the best bet. We can coach you on which items on your wish list will be the most impactful to your business and which ones might be less important.

So list out those specific objectives you want to accomplish with your CPA. “This is what I want out of that relationship.” Don’t be afraid to make that a pretty long list. What you want to do is pretend money is no object. List everything that you wish to get out of this relationship. From that position, you can start to prioritize that list and say, “these six things are most important in this relationship that I’m going to have.”

So how do you know who you need to hire? Should it be a bookkeeper, an accountant, or a CPA? What’s the difference? The most important thing is just that you know that these records are being kept and that you feel confident in the person keeping them.

A bookkeeper maintains your accounting records. They enter all transactions, and they balance your funds. Accountants specialize in finances, taxes, budgets, business operations, payroll, and money management. But know this, there are different types of accountants who specialize in various areas of business. In other words, if you break your leg, don’t go to the dermatologist.

You want to make sure that you find the right person for your small business. Puff Puff Accounting has bookkeepers and accountants on staff. This way. When it comes to monthly transaction processing, our bookkeepers can do it for a lesser fee. When we’re talking about money management and tax planning, you have a CPA ready to step in.

What is step number one of becoming profitable in your business? You’re going to need an accountant. Now you don’t have to hire us. You can hire in house. If you engage in house, who should you get? There are a lot of options and many different budgets out there that you need to be aware of. You don’t want to get the wrong person for the wrong job description.

The first person you’re going to hire is your bookkeeper. This is the data entry specialist. Depending on where you live, you’re going to pay a different amount for this person. If you live in Idaho, for example, you might be on the lower end around 18 to $20,000 a year. But if you’re in New York or California, you could be upwards of 40,000 or even $45,000 a year for the same position. Know that this person serves a specific role. They’re not going to be strong at creating reports for you or doing business analytics or accounting processes. Their job is to get data into the system. And if you’re a new entrepreneur, likely, you’ve been doing this yourself. It’s smart to offload some of the heavy grunt work of accounting, which will allow you to begin analyzing the reports. A bookkeeper is a good hire for anybody ready to expand their business, but not prepared to invest in the high top tier accountants just yet.

The next level up guys is the accountant. Now, a lot of people think bookkeepers and accountants are the same. They’re not. It’s very, very different. You’re going to pay a higher amount for somebody that’s an accountant. Your bookkeeper has been putting data into the system all month long. Your accountant typically is helping to oversee that process. Then, at the end of the month, your accountant will do some of the more heavy lifting tasks which require reconciling your trial balance and making month-end journal entries. They will also do some of the accrual work that’s going to need to happen in your financials.

In some cases, an accountant will help create financial statements. They are at that month’s end position. For an accountant, depending again on where you live, you can expect to pay anywhere from maybe $30k up to $60k/year.

The next level up is the controller. The controller fills the process of overseeing the whole accounting system. They get to orchestrate what’s happening and when. They make sure the data is getting into the system on time, and that the month and general interests are happening on time. The controller is responsible for the final product that’s coming out of the accounting system. That is the balance sheet, the income statement, and the cash flow statement. Those kinds of documents rest on the shoulders of your controller. This is a more expensive position to fill, and it should be. This person needs to have a lot of experience, should at least a bachelor’s degree in accounting, if not getting into their master’s degree. I would expect to pay anywhere from $45k to $85k/year for this person.

Now we’re going to talk about the King or queen on top of the mountain. This is your CFO. CFO stands for “chief financial officer.” They hold a C suite position in your company. This person’s expensive. You want to be careful when you hire a CFO because not all CFOs are created equal. Everything up to this point has been task-related, focusing on just journal entries and debiting and crediting. When you step into a CFO role, this requires strategic thinking. Not all accountants have that capability. If they’re not able to see the big picture and create plans that are business development related, they aren’t qualified for the job. They should translate the work that the rest of the team is doing into goals for your company. Your CFO needs to make sure that you’re hitting the targets you need to hit with the right amount of money behind each goal. For a CFO, you can expect to pay anywhere from $75k to $250k/year. That is typically what I’ve seen nationwide for somebody of this caliber.

Last but not least is the CPA. The CPA stands for “certified public accountant.” If you’ve started your company, you know that you need a tax guy, right? That’s the CPA. His job is to do two things. One is to prepare your tax strategy. That is to take everything you’re doing throughout the year and prepare it so that you are not spending more than you need to on taxes. That’s the main goal. However, a CPA often fills the role of an auditor where they come in as an independent party. They make sure that your books are accurate and clean and reflective of what’s happening in the real world. In terms of cost, you’re going to spend anywhere between $125 an hour to upwards of $450 an hour for a qualified CPA.