Financing & Accounting for Craft Cannabis

Luke Biles, Kayla Mann, and Dan Mallett are all Chartered Professional Accountants with experience specific to the cannabis industry.

They discussed the importance of bookkeeping, cash flow, and staying on top of your records to ensure the survival of your business.

You can watch the full episode here.

For those who don’t have time to watch the full episode, here is a summary of some of the points discussed.

• There are lots of entrepreneurs entering the industry who are willing to take risks

• The craft industry has lots good products, making it possible for craft to compete, as well as a strong sense of community

• If you don’t have solid financing from the start, the product will suffer

• The Chamber of Commerce could be a good supporter for the industry

• In the craft industry, B2B sales are bad... It’s hard to deal with big companies who set the prices and are very aggressive

• Best success cases occur when micros create strong relationships with specific processors.

• It’s hard to depend on the BCLBD - a strain may be in demand and then they’ll reject it because they don’t trust there’s enough supply.

• Just because something is in demand, doesn’t mean it gets to the shelves.

• Producers don’t know where their product ends up, and therefore can’t tell customers.

• They want to sell info about where their product is to the growers, which is a cost many can’t afford.

• It’s hard to get funding once you tell a bank you’re in the cannabis industry - stigma still exists.

• The cost of Insurance keeps increasing

• Expect not to have credit options and for bank accounts to cost much more than other industries

• Canadian banks try to appease the US and don’t want to deal with cannabis as a result.

• Even banks willing to work with cannabis companies will still not give a line of credit

• From an accounting perspective, cash flow is the most important thing in starting a cannabis company

• 90% of craft producers don’t have a bookkeeper - this can lead to big problems down the road.

• For monthly reporting, CRA and Health Canada don’t talk to one another, which can be frustrating and makes record-keeping that much more important

• Many accountants and auditors have poor communication skills, leading to confusion when getting audited.

• If auditors are not being supportive, you can ask to speak to their managers.

• Changes to excise tax structure need to come from the government, and as an industry, we need to speak to leaders to make that happen.

Watch the episode on YouTube.

This article was written in tandem with Mike F.