Cannabis accounting: Revealing the complexities with Andrew Hunzicker, CPA of DOPE CFO
Andrew Hunzicker, CPA, Founder of DOPE CFO, wants accountants to understand the complexities of working with the booming cannabis sector. DOPE CFO offers education for accountants to better serve cannabis clients.
Cost accounting is crucial for clients in the cannabis industry. Other important considerations are banking, payment processing, and tech stacks.
DOPE CFO is launching a franchise opportunity for accountants looking to zero in on the cannabis industry. According to Andrew, cannabis is more than a niche—rather, it’s an industry with many niches.
In 2010, Andrew Hunzicker, CPA was heading into semi-retirement. Fresh off the sale of a startup that he co-founded, he was ready to finish out his career doing CFO work in Oregon, where he liked to go on rock climbing vacations.
But by 2015, the cannabis industry had exploded in his home of Bend, Oregon. Someone asked for his help with due diligence on a cannabis lab, opening Andrew’s eyes to the wide world of cannabis accounting. He fell in love with the industry, finding the young innovators of the cannabis industry invigorating.
“I'd been working with some of those high-tech startups. The first thing any high-tech CEO tells me is they're smarter than me on accounting and tax, and certainly on software and IT. It was great to go into cannabis and work with CEOs that actually value what we're bringing to the table,” Andrew shares of the transition to working in cannabis.
After observing the industry’s unique accounting needs, Andrew developed DOPE CFO in 2017. Today, accountants can use DOPE CFO to become specialists in all aspects of cannabis accounting within 90 days.
And Andrew doesn’t see cannabis accounting slowing down anytime soon.
According to him, “Cannabis is not a niche. This is the birth of an industry. We have many different verticals that each have their own niche within the industry: dispensaries, retail, farms, chemical processing plants, product manufacturing, labs, distributors, and wholesalers. It's the fastest growing industry in the US. It’s a great time for accountants to get in.”
On episode 45 of the Accounting Leaders Podcast, host and Karbon CEO, Stuart McLeod, chats with Andrew about all things cannabis accounting, like what special considerations must be taken for cannabis and market trends.
Blue, red, and green states
Contrary to popular belief, it’s not people seeking the ‘high life’ who are pushing legislative changes around cannabis. Instead, it’s the medical industry. While cannabis has been used medically for centuries, research now supports its benefits in treating a wide variety of ailments.
That boom in research has given states and many countries the leverage needed to make cannabis more accessible. Pharmaceutical companies like Pfizer are now investing in the space, signaling that the best is yet to come for industry growth. Andrew predicts much of the new growth in the United States will be east of the Mississippi River, where adoption has been slower.
“It doesn't matter who's the president. It doesn't matter if your state is red or blue. Every year, it moves forward,” Andrew says of the turning tide of medical cannabis.
The interest in increasing access to medical cannabis isn’t only with special interest groups. Popular opinion seems to lean in favor of the changes as well. Andrew attributes some of this to the opioid crisis and the damage it’s wreaked on society in the US in particular. Compared with opioids and other controlled substances, cannabis has relatively low side effects and proven benefits.
Andrew refers to Nebraska as an example. Nebraska is currently on the cusp of opening legislation for cannabis. In the 2020 Nebraska Annual Social Indicators Survey (NASIS), 83% of Nebraskans were in favor of medical marijuana. Even in more conservative states, cannabis is rolling forward.
Accounting for Mary Jane
Regulations and policies for cannabis vary widely across regions. What’s legal in one place can be prohibited in another. Because of these discrepancies, accountants and other players in the cannabis industry face many unique challenges. Here are some of the things that DOPE CFO educates its Certified Advisors about.
Cost accounting
Andrew shares with Stuart how some cannabis farmers have mistaken growing weed as happening for free. You take a seed, put it in some dirt, grow it, and harvest it—all for free, right?
Andrew encourages them to think of the bigger picture. That’s where cost accounting is crucial for anyone in cannabis.
“Over the six months that the seed grows, we need to allocate some rent, water, utilities, and labor that will go into that pot as it grows. It may end up costing $1,000 for a pound. You've got to do the cost accounting,” he says.
Payment processing
Many payment processors don’t want to touch anything cannabis-related. This means there’s a lot of cash flying around in the industry. But in today’s credit card-based world, there has to be some legal way to handle payment processing for cannabis.
It's kind of a complex game because there is a real fine line. What is money laundering and what is fraud? And are we trying to trick the bank?
An example of how a transaction might look: A customer buys pot on Dutchie, an online ordering system for medical cannabis. That customer’s bank is Wells Fargo, which isn’t a cannabis-friendly bank. Dutchie pays the cannabis bank, and the cannabis bank then works with Wells Fargo.
With money changing hands so many times, it can get suspect. But to date, there isn’t a better workaround—so payment processing is something that cannabis accountants must consider.
Banking
Andrew is mostly based in Oregon, where the climate is very friendly toward cannabis. Numerous credit unions there support the cannabis industry.
The same can’t be said for the rest of the country. A cannabis farmer, dispensary, or distributor might struggle to find a bank to support their business.
This will likely change as more states loosen regulations around medical cannabis, though banks are notoriously conservative.
Recommended reading: Your clients are switching to the wrong banks
POS systems and tech stacks
Accountants working with cannabis-based companies may notice that their clients’ tech stacks are incredibly varied.
Accounting software can include the typical players, like QuickBooks Online. But the industry requires compliance software, which has three basic options: MJ Freeway, BioTrack, and Metrc.
Then come the hundreds of POS options. Why so many?
Although QuickBooks is the preferred POS system for most US small businesses, it opted out of working with cannabis—leaving the industry to develop its own solutions.
This led to the boom of hundreds of cannabis POS software companies, all of which come with their own pros and cons.
So between cannabis companies, there will rarely be a matching tech stack, adding more complexity for accountants to navigate.
Recommended reading: Cash, cannabis, and client education with Moxy Accounting’s Katye Maxson-Landis
Growing across the country
DOPE CFO helps accountants make sense of the ever-shifting landscape of cannabis accounting. It was born from Andrew’s limited experience with cannabis businesses.
“This totally started out as a side hustle. I was just serving clients and I got these calls from accountants. ‘Hey, Andrew, I heard you had a dispensary chart of accounts—can I buy it?’ or ‘Do you have a cost accounting template?’” Andrew shares.
Now, DOPE CFO has served more than 500 accountants in all 50 US states. It shows them the keys to making sense of all the tax implications, regulations, and diverse tech stacks.
Today, DOPE CFO isn’t just training individual accountants. It also offers franchising opportunities for those interested in focusing on cannabis clients. The new program serves all the verticals within cannabis and is a great way for accountants to get in on the ground floor of this quickly-growing industry.
Semi-retired? Hardly.
Though Andrew started the DOPE CFO journey by accident during his semi-retirement, he now plans to work past the age of 65. Because his team is global and remote, he’s still able to easily enjoy his preferred pastime: rock climbing.
“I actually love what I'm doing right now. I intend to work at least until I'm 70. I can do what I want now. I've got my group of rock climbers. We go climbing every Wednesday afternoon, and every Saturday. We have our own schedule and have a good time. The industry is super fun and allows that,” Andrew says.
Fuelled by a rewarding work-life balance, Andrew and DOPE are poised to keep growing and supporting an exciting, dynamic industry.