Megan Budd has a warning to Connecticut’s seedling cannabis companies and established firms alike: do not skimp on accounting.
Budd is a CPA and the New England Cannabis Industry Leader for Marcum Accountants and Advisors. She works with over 20 cannabis companies of all sizes throughout New England, including multiple firms in Connecticut.
With adult-use stores set to sweep through the state, the time to establish proper accounting procedures is at the beginning when they can be worked into the fabric of how business is conducted, she said. And being a cash business, there are extensive security protocols auditing needs to be tied into.
“The same principles apply whether your goal is to just build your own company and have the best product out there and just continue to grow or if you are setting this up for an eventual exit plan,” said Budd. “At the end of the day, you still need the same foundation.”
A poor foundation can gum up future opportunities, Budd said. The adult-use market brings in more money and along with it the possibilities for expansions, mergers and even being listed on the Canadian stock market through a Canadian shell or acquisition company.
Budd said she’s worked with companies that had to undertake costly and timely re-audits ahead of major business deals. Companies can avoid these situations by establishing procedures early and integrating them with the sales and inventory management sides of the business, she said.
The right accounting work also opens doors to possible tax breaks, Budd said. For example, some cannabis companies may be eligible for the federal research and development tax credits, which incentivize companies — including startups — to invest in their business processes, products or components.
A cannabis accountant is central to setting up this foundation to tap into tax structures, said Budd, and will put the company in a better position if there ever is an audit.
“Going with a low-cost provider might seem like the right decision in the beginning, but it will cost money in the end,” she said.