With so many accountants out there, how do you decide which one to choose? By following a couple of tips, you’ll be able to find your perfect fit.
- Find a CPA with the right skills for your business. Cannabis was no one’s first job. We all started somewhere else and somehow ended up in the cannabis Industry. Before getting into cannabis, your accountant worked somewhere else, too. Audit, government accounting, financial advisory, corporate accounting, tax—those are just a few examples of accounting spheres where a CPA can practice. So, which of these skills transfers the best to the cannabis industry? It depends on what you’re looking for and what your company needs. If you are looking for an internal controller or a CFO, you will be better off hiring a CPA with an audit background. Your internal financial statements should be on the proper GAAP basis, and this accounting method is best learned by auditing the financials of other companies. If you are looking for tax preparation services, then you need to look for a Tax CPA. However, what if you are a small Cannabis startup that has little funds and needs both a GAAP and tax accountant but cannot afford them both? In this case, I would suggest hiring a regular bookkeeper to do your financials and then hire a tax CPA who will review your bookkeeper’s financials and also prepare your tax returns. Tax CPAs have enough knowledge of GAAP accounting since they use GAAP financials when preparing their tax returns.
- Ask your CPA for his/her Public Accounting experience. To get a CPA license, the accountant should work under another CPA for two years. Most of us get this work experience by working for other CPA firms. And this is what we call Public Accounting Experience. Working for a CPA firm is like going through tough military training—brutal hours, little appreciation, and not enough pay. But this type of experience makes a CPA a good, well-versed professional. You get to work on different clients, learn to solve problems, and think independently. Not all CPAs can handle pressure, and a lot of them get out of public accounting exactly after two years. So, when looking for a cannabis Accountant, you need to find someone who has as much public accounting Experience as possible. Four years is better than two. And six is better than four. You get the idea.
- Don’t go for Enrolled Agents. Enrolled Agents are knowledgeable in personal taxation, but they lack expertise in business taxation and accounting theory. They are not required to go through five years of accounting school and train under other CPAs. The Enrolled Agent Exam is not as difficult as the CPA exam. I know this through my own experience as I am a CPA and an Enrolled Agent, and I have gone through all necessary training for my Enrolled Agent License.
- Look for someone with inside experience in the Cannabis Industry if possible. It’s good to know the theory, but the theory is nothing without hands-on experience. You don’t want an inexperienced dentist to fix your cavity. For the same reason, you don’t want a CPA without inside cannabis experience to work on your financials. So, when hiring a CPA, ask if she/he has ever worked as an internal accountant for a cannabis business. If she or he hasn’t, make sure to ask them if they have any other cannabis clients. The last thing you want to do is to be a laboratory mouse.
- Ask for recommendations. If you have already consulted with a Cannabis Tax Attorney, call him back and ask for the phone number of his cannabis accountant. Most likely he is working with one.
- Test your cannabis accountant on knowledge of the 280E or cannabis excise tax. This is a very specific area of taxation and only a true cannabis accountant will answer your questions. I have already written a couple of blogs on these topics, and you can get a general idea of what to ask if you read one.
- Don’t look for a “YES” man. If your accountant tells you that you cannot deduct marketing expenses due to 280E limitations no matter how you push him, this is a good tax accountant. He stands his ground, knows his stuff, and will make sure that you are in compliance. If your accountant promises you a good tax refund and agrees to all of your requests, this person is here to please you and not to do his job. At the end of the day, you are the one who signs the return, and you will be the one to account to the IRS. You need to find a person who is ready to do their job right, even if it means they can lose you as a client.
- Shop around. Ask about rates and pay structure. Some accountants charge hourly rates. Some CPAs offer flat fees. Generally, bigger companies such as MGO incur higher overhead due to rent, advertising, and employee expenses. Solo CPAs charge less since most of them work remotely and do most of their work by themselves.
No matter the accountant you choose, make sure you have done your research and found the best person possible for the job.
Daria Nagal, Cannabis CPA