when clients demand your expertise.
by liz gold
cannabizcpa.pro
kim walker came into the cannabis industry by what she describes as happenstance.
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in fact, she was merely following the needs of her clients.
walker, who has 35 years of public accounting experience and runs her small practice in las vegas, said it was her wealthiest business clients who brought her into this niche. they came to her with new licenses to start growing medical marijuana and were jumping in fast because of the potential for profitability.
once they obtained the licenses. however, the question remained: now what?
her clients looked to her for answers, so she started learning about the laws.
“the interesting thing about nevada is that the people who obtained the licenses tended to be wealthier – because they were very expensive to get – and had no background in growing or farming,” said walker. “they were insurance agents, bankers, attorneys or an eclectic group of businesses owners that said, ‘let’s get a license.’”
that was two years ago when medical marijuana licenses were going for upward of $300,000 a pop in nevada. and the payment had to be in cash.
as someone who had no personal experience with marijuana, walker never expected to be involved in the industry but is excited about the opportunities and growth that continue to emerge.
“the biggest surprise for me was that i just didn’t realize how big and sophisticated it was because i never paid attention,” she said. “so, when it was legalized here, i realized i should know something about it.”
cannabis clients – who are currently only growers and distributors – make up a small percentage of walker’s client base, which covers southern nevada, western arizona, and southern california, but she includes listing cannabis/medical marijuana accounting services on her website. her other clients are family-owned businesses or partnerships across a spectrum of industries with one to four owners and fewer than 50 employees. she has a full-time tax preparer on staff and hires a part-time cpa to help during tax time.
“it’s fun having something brand new, it’s captivating,” she said about the industry. “after so many years in this, it reinvigorates. i like that about it a lot.”
since taking on cannabis clients two years ago, walker said there are three main challenges she sees her clients facing from her work in nevada – aside from section 280e in the tax code and the questions around the federal government’s stance:
- limited education about the industry. the money will get you a license but that does not guarantee success. there is a lot to know about a growing facility and its operations. “the thing that surprised most of my clients is that you don’t just stick a plant in the ground and it grows. there are lighting issues. there are nutrients. just from an agricultural point of view, there’s a tremendous amount to learn.” and then you have to find someone to manage the agricultural process – and the hiring issues that come along with finding someone who knows how to grow. because it’s a new industry in nevada, it’s likely this person will come from out of state because of the slim labor pool.
- extra expenses. walker said once her clients started opening their facilities they didn’t realize the extra costs that would surface. for instance, the high utility bills for growing – lighting and electricity – and the physical assets to create the proper environment. “so, in addition to an expensive license there is expensive capital required to keep it under speed,” walker said.
- no access to banks. her clients, well-established business owners, with bank accounts and banking relationships, can’t get accounts open for their cannabis business in nevada. “their bank is telling them, ‘if we find out you have an account related to marijuana, we are closing all your accounts, even if they are unrelated,’” she said. so, as a result, cash management is a huge issue. she has one client, for example, who has to physically go over to nevada power to pay their utility bills (lighting and cooling, for those blistering 100-degree summers) in cash. nevada power has a limit on how much cash it will accept each day, so you have someone going over every day to pay off their bill.
still, she said, after some roadblocks and a big learning curve, her clients are now becoming profitable – and they are very pleased.
“when cpas work with any client, regardless of industry, we need to know about their industry. this industry is no different,” she said. “we want our clients to stay within the law and operate legally, and they are being looked at harshly by agencies in the industry, so we have to be extra clean. we can’t be afraid of diving into marijuana.”