5 Signs Your Cannabis Business Needs a Fractional CFO (Not Just an Accountant)
Cannabis finance is not a simple thing. Even the most accounting-savvy operator will sooner or later realize the value of having a qualified cannabis accountant in their corner to inform strategy, cash flow management, and compliance.
But there may come a point when you realize that an accountant alone is not enough. Engaging a fractional CFO is a way to access high-level, forward-looking strategy without the six-figure salary of a full-time CFO.
Fractional CFOs are outsourced executive-level financial professionals who will work with you on a project basis, part-time, or on demand, providing you with the advanced insights you need to achieve your business goals.
When you realize you need more financial leadership than your accountant can provide, it might be time to bring in a fractional CFO.
Five Signs You Need a Fractional CFO
Here are a few signs that indicate the need for CFO-level expertise.
1. You are challenged to manage your cash flow
Managing cash flow in the cannabis industry is tricky business. With limited banking options and much of your business transacted in cash, tracking revenue, staying compliant, and managing day-to-day operations are challenging.
While your accountant is likely excellent at maintaining financial records and preparing statements, a fractional CFO sees the bigger picture. They can help you build cash flow forecasting models, develop systems for handling large amounts of cash, establish relationships with cannabis-friendly financial institutions, and help you plan for seasonality or unexpected market downturns. A CFO can also set you up for success if you plan to expand.
So, if you find yourself worrying about your liquidity or how you’re going to handle essential costs like payroll, inventory, or compliance, a fractional CFO can get you through the hump and set you on a path to long-term success.
2. You are facing complex tax and compliance issues
Tax compliance is a fact of life in the cannabis industry. IRC 280E is the bane of every operator’s existence, inflating taxable income and preventing companies from thriving as they can’t deduct even the most basic business expenses. Tax rates in some sectors (retail, especially) can be as high as 70%, which means you’re walking a fine line just to maintain those paper-thin margins.
Any tax missteps can be devastating, and compliance is essential. While your accountant will ensure you file on time, a CFO brings a layer of strategy and planning that can help you:
· Structure your business to maximize deductions
· Create long-range financial models that account for your tax liabilities
· Mitigate risk and reduce the chances of frequent IRS audits
· Include compliance costs in the broader financial strategy
Whereas an accountant keeps you compliant, a CFO keeps you compliant and profitable!
3. You are considering taking on investors/your investors are asking for advanced reporting
If you intend to (or already have) taken on investors, you’ll quickly find they expect a lot more than just simple financial statements. They’ll want to see projections, budgets, and other financial narratives that indicate where your business is headed.
Fractional CFOs can help you prepare these reports for your current investors or compile investor-ready packages for your pitch. They can also build models that demonstrate your growth potential and give you the intel you need to answer tough investor questions with confidence.
Without this level of forward-looking financial expertise, you risk losing credibility with the people you most want to impress. So, if you’re getting ready for a funding round and your accountant doesn’t have what it takes to satisfy these complex needs, a fractional CFO is the solution.
4. Your business is growing faster than your system capacity
Scale often happens quickly. If you are unprepared, you run the risk of overwhelming your financial systems. A CFO can support your growth by implementing better financial controls, standardizing organizational processes (especially critical if you’re considering adding a location), forecasting capital needs for the expansion, and advising on the type of financing to pursue.
Without this kind of expert oversight, you could face cash shortfalls, compliance challenges, or your business might fail. You need to prepare the runway before you fly, or your launch won’t be nearly as successful.
5. You want to thrive, not just survive
If you feel like you’re constantly in survival mode, worrying about payables, chasing tax deadlines, and putting out compliance fires, you need a reset. Your capable accountant is skilled at keeping your books in order, but they might not be able to tell you what you need to do to dig yourself out of that hole.
You don’t just need a fixer; you need a financial roadmap that will help you focus on the right things as you grow.
A fractional CFO can help you understand the business activities and markets that drive profit in your niche, develop key performance indicators (KPIs) to inform decision-making, and benchmark your performance against the industry at large.
CFOs rely on data to inform their strategy, ensuring every decision made is based on solid intel and financial best practices. It’s about much more than just having a trusted advisor (although they are that); it’s also about understanding your strengths, liabilities, and being able to capitalize on opportunities that will take you where you want to go.
The Bottom Line on Fractional Cannabis CFOs
Whether you’re preparing to scale or in a place where you feel that your growth is outpacing your ability to manage your business, you need a scalable financial solution that will grow with you—not just a temporary fix that will get you through to the next crisis.
Though the cannabis industry is complex and challenging, with the right financial leadership, growth is possible. Fortunately, the expertise you need is close at hand. Growise has been providing fractional CFO services to the cannabis economy since the first state legalized. We understand the landscape and can provide you with the services you need to achieve your vision.
To learn more about our fractional CFO services, set up a call today.
