The wrong way to handle small business accounting

Last night I finished the messiest and most stressful small business accounting job ever encountered in a 30+ year career. They will keep their bank financing, but at enormous personal cost to all of us.

I just finished billing a bad stress-filled accounting job that took most of my time for the past two weeks. Preparing the invoice took more than four hours yesterday on a Sunday; I finish halfway through the Eagles game. There were many hours of computer works, dozens of emails, long phone calls, and text messages at all hours.

In the end, nobody was happy. My wife is upset that I charged so little and was unavailable all of this time. The client is upset that I charged so much and acted startled by my summary and invoice despite our many communications on the topic. Other clients are upset that I delayed their work projects for two weeks. My sub-contractor accountants are upset that I dismissed them midway through the project for not having the skills necessary for this difficult job. I’m upset that I violated several of my own business practices in an effort to help a client caught in a difficult situation. I haven’t been to the gym for weeks. My own business marketing plan is decimated this month; my business coach is frustrated and the money already invested there to build momentum is wasted. There are likely to be other “fallout” negative effects including being unprepared for legal cases this coming week. I don’t know yet, but my lack of faster action might have triggered complications in another client’s tax penalty.

I agreed to take the job only to support the company’s treasurer. I like him as a person and empathize with his business goals. He had his back against the wall facing pressure from his board and his bank. I see the loyalty and the “get ‘r done” aptitude that I bring as keys to the success of my practice. In the end, we will meet the primary goal: the business will keep its bank financing. We will both survive to battle another day. But what a tortuous way to accomplish what could have been a routine business process. Now, in the post-analysis, it is easy to identify ways we could have done better.

This was a learning experience for sure. It hammers home one idea: hourly rates are not workable for small business accounting! Short term accounting function by a treasurer are not a substitute for a stable long term controller. I am making changes to my practice to avoid a repeat of this stress ever again.

Another earlier blog post on this topic:

Looking past decriminalization

20191117_140520000_iOSThis coming week our federal legislature will take up a bill to decriminalize cannabis. Most states, including ours, are attempting similar measures. But my form’s focus isn’t on these proceedings. In fact, we have little confidence in the near term outcome. That timeline really doesn’t matter in the big picture.

What we know is that eventually cannabis will be decriminalized. What then? That will be a beginning, not an end to huge numbers of civil prosecutions of growers, sellers and their supporters. Many entrepreneurs will make mistakes that will cost them small fortunes in payments to the government. My firm is specifically focused on representing the tens of thousands of local entrepreneurs who will face civil tax prosecutions and business license penalty cases to follow that will require an adviser to offer tax expertise, representation before authorities and large picture financial coaching for recovery.

Some call the situation “Prohibition 2.0”. Others see it quite differently. See my short video “Eight Inconvenient Truths About the Cannabis Industry (that nobody is talking about)” for discussion on the current situation.

The news coming from California gives us some insight in what will come here on the east coast. Cannabis is already decriminalized in California. Yet government prosecutions are on the rise. Now it’s all about collecting the money. Approximately 85% of the entire industry remains unlicensed and untaxed. The risk of raids on growers’ events like farmers markets, arrests for selling without a license, and tax prosecutions are a part of daily life for more than a million people in that state alone. The cost of those prosecutions will be devastating to many. Yet it isn’t the end of the world*.

My work focuses on dealing with these post-decriminalization issues that leaves millions exposed to new types of business and financial problems. I’ve always been useful in representing those accused of violating government rules.


*I don’t mean to belittle the several tragic cases starting with cannabis and ending in suicide or police shootings. Rather, I’m focused on the majority of civil prosecution cases that will be life-altering but not insurmountable.


November 2019 update on cannabis in NJ

Here’s where we are with the insanity and injustice of cannabis law in our part of New Jersey right now.

The state’s next dispensary will open in about a month here in Vineland. Initially the facility will be open for training; its locally grown cannabis supply won’t be available until next year. The facility is financed and supported by some of the area’s most well-connected community leaders.

The state legislature in Trenton is again trying to decriminalize cannabis this month. The effort seems doomed to fail. Some legislators want to delay the decision until after the question is addressed in the 2020 election. New Jersey voters overwhelmingly support decriminalization but have not yet actually voted on the issue.

Meanwhile someone is arrested on cannabis charges every 14 minutes in New Jersey, according to a new analysis by the American Civil Liberties Union of New Jersey. Most of those arrested are minorities. Local police activity reports show that cannabis possession arrests are still common and Cumberland County Prosecutor’s Office continues to prosecute cannabis cases as crimes. Legislation to end the 30,000 annual cannabis arrests is eventually expected to also expunge the records of those convicted in the past.

Eight Inconvenient Truths About the Cannabis Industry (that nobody is talking about)

CPAs in the cannabis industry are not being candid, honest and straightforward in talking about the cannabis industry. While I’m not suggesting that there are any easy corrections available for current positions, I do think that it makes sense for us to address the facts directly and honestly.1

A headline in a CPA newsletter today caught my attention: “CPA Andrew Hunzicker Creates Course in Cannabis Accounting: ‘This industry is very underserved by accountants.'”2 I strongly disagree; that position is not supported by evidence. In my Delaware Valley region (southeast Pennsylvania, southern New Jersey and northern Delaware market) the industry is already oversaturated. The CPA industry serving legal cannabis is overcrowded here with more well qualified CPAs than there are firms with cannabis licenses.

The cannabis specialty interest group within the New Jersey Society of Certified Public Accountants has over a thousand members. A recent local industry convention had four larger CPA firm exhibitors at a time when there was only six cannabis licenses issued so far in the entire state. CPAs are flocking to the field en masse while regulators are growing the legal cannabis industry at a snail’s pace.

To gain any meaningful insight into the industry trends, we need to consider the illegal cannabis market.

The truth is this:
1) 100% of the cannabis industry is still illegal under federal law. That includes derivatives like CBD used as food additives that are not approved by the Food and Drug Administration.
2) Close to 100% of the cannabis industry is illegal under state laws. Even in California that has the largest legal cannabis industry, almost 90% of the industry is still illegal.
3) Trends in decriminalization are causing the illegal cannabis industry to grow. The largest growth will come in illegal operations, not in licensed legal ones.
4) Despite licensing and decriminalization, the large majority portion of the cannabis industry will remain illegal.
5) The needs of the illegal cannabis industry are underserved. Economic profits are not certain, either for the legal or illegal cannabis industries.
6) The risks of serving the illegal cannabis industry clients are substantial. Legal, financial and professional constraints dominate.
7) CPAs don’t even want to talk about serving the illegal cannabis industry; the entire topic remains wide open.

I’ve decided that my own future professional opportunities lie in representing those with struggles in the illegal cannabis industry, just as I represent illegal clients in the farming, food processing, fisheries and construction industries. 4 All of these industries have high rates of noncompliance with accounting laws. That doesn’t mean that they don’t deserve a good accountant, but it does mean that their future accounting problems are likely to be higher than average. I’ve developed the business structure, tools, temperament and skills to be effective in this environment. I see big demand ahead in this area.

Reforms in the cannabis industry will continue to march forward at an awkward gait. Accountants will not be immune from the angst.

1 I took a similar stance in pointing out and documenting inconsistent positions within the profession in response to CPA statements and actions following enactment of the Affordable Care Act. These discussions are uncomfortable but still useful to ourselves and the industry.

2 Nothing in this post is meant to be disparaging to Mr. Hunzicker, a respected leader in this profession.

3 CPAs are governed by a core principle in the AICPA Code of Professional Conduct requiring us to avoid acts discreditable to the profession. Some interpret that to mean that no public discussion should be made of illegal, off-color or nonconforming opinions. However, that is not an accurate interpretation of the professional standard.

4 I’m not a user, proponent or impassioned by the cannabis industry itself. However, I have a strong track record of representing independent businesses in their struggle with government.

Cannabis banking bill passed by House

Today the U.S. The House of Representatives passed a cannabis reform bill for the first time. The new law would permit cannabis businesses to access banking and financial services.

The bill passed in a vote of 321-103. A total of 230 Democrats voted in favor of the bill while 91 Republicans also voted for the legislation. 102 Republicans opposed the bill despite overwhelming support by U.S. voters.

Next the bill advances to the Senate where it ia also expected to pass and then to the President for passage into law. This is really a major step forward for the industry.

Federal cannabis banking law introduced

This coming week the U.S. House of Representatives will introduce H.R. 1595, the SAFE Banking Act of 2019 that is intended to legalize cannabis banking. The bill has already cleared the Financial Services Committee and is expected to be voted on through a process known as ‘suspension of the rules’ that requires two-thirds of the chamber (290 members) to support the bill for passage.

It is uncertain what outcome we should expect but the bill already has 206 bipartisan co-sponsors.

The role of the CFO in the marijuana business

The role of the small business Chief Financial Officer (CFO) is typically described in four distinct functions. I describe my own CFO role as filling five functions in the emerging marijuana industry.



The CFO has primary responsibility to assemble, safeguard, manage and store the financial records of the company. This basic but necessary service is best handled by a person focused and experienced on business records. This may sound straightforward, but I find that almost every business faces challenges keeping and managing necessary records.


Internal controls

CFOs add value by designing, monitoring internal controls. This happens to be the area where management tends to have the least experience and so this important function might be otherwise overlooked, leading to financial losses that could have been avoided. Management often underestimates the risk of fraud and misappropriation; the CFO must keep that risk control front and center.


Communication and reporting

The CFO communicates internally to management and to external stakeholders.

A business needs accurate timely data to make good management decisions. The always-changing type of data, the format, timing and the method of delivery are all important components to consider as part of this function. Management may also need to know how the company is doing compared to the competition or benchmarks established by investors. Managers typically want to know the business is doing now compared to earlier periods.

CFOs also oversee duties related to owners, investors and shareholders and are the primary control of risks related to management fraud and disclosing financial information.

Sometimes the CFO must develop forecasts of future performance and utilize industry benchmarking data.



Every company has compliance issues to address with government, and the CFO oversees many of them. Filing and paying taxes is obviously one major burden, but not the only compliance requirement. Marijuana businesses face strict non-financial recordkeeping burdons.


Advocate for management and the industry

The modern CFO is often active as an advocate, negotiator and representative of the company in dealing with new potential customers, government regulators, and investors. I often find myself active through industry associations that leverage the power of small independent businesses.

I am pleased to discuss how an experienced part-time CFO can help your business. Please use the chat box below to send a message or the scheduling link on the right to set a time to talk.

Caution with CBD products

(hold for CBD banner advertisement photo)

I talked with two local small business owners this weekend who recently started marketing CBD products in their shops. One is a local health food drink maker and the other primarily markets beauty products. Both were completely unaware of the risks they take in selling CBD products. They are considered MRB (marijuana related business) under the law. They didn’t know that they are subject to some of the same harsh law enforcement actions as a street corner drug dealer.

The implications of being raided by law enforcement are scary (think about Eric Garner, the unlicensed cigarette seller killed by police in a takedown raid) and the many whose lives were ruined by overly aggressive marijuana prosecutions with slim and questionable evidence. Not even to mention the cases where false evidence was introduced to cover up an officer’s action who initiated an improper action and arrest. Today’s MRB entrepreneurs like to think “this couldn’t happen to me”. I presume that’s what Eric Garner thought before his fatal encounter with law enforcement.

Then yesterday there was a case reported where police in Maryland arrested and jailed a middle aged business guy for more than a month. He had no criminal background and police later admitted what they thought was an illegal substance was simply a bad lab test result. 

So call me paranoid, but I’m concerned that the risk of selling an unapproved product could be worse than the seller imagines.

One otherwise flawless small business had thousands of dollars in merchandise confiscated and their shop left in shambles after a raid during business hours (not to mention the embarrassment and damage to community reputation). Law enforcement is not responsible for financial damages caused by their actions without lengthy, difficult and expensive legal actions. Another young small business owner faces prosecution action by the local health department for introducing a CDB flavored product into his lineup. Either one could possibly lose their insurance, their banking, their business lease, etc.

I say again and again:

  1. Know the law
  2. Know your business position
  3. Be prepared with a risk management plan
  4. Do not expect everyone in government to agree with your position no matter how well legally grounded.

In summary, selling CBD products is not a decision to be taken lightly. DOn;t assume that becasue hemp products are decriminalized where you live that you are ‘in the clear’. I am pleased to discuss the issue with anyone who has concerns.

Sara’s advice for entrepreneurs

My business relationship with Sara Rosenberg, the Connector-in-Chief, is one of my greatest blessings. This excerpt is taken from one of her recent social media post as a sample of why I say this:

“When you’re first starting out, and money is tight (or let’s be real, non-existent), you can do the following things for free, or damn near close to it, if you’re willing to learn:

1. Build a website (Wix and Godaddy are super easy and cheap.)
2. Create marketing collateral. (Canva and MS Publisher!)
3. Build a network and work it. (LinkedIn and Brynne Tillman’s book.
4. Learn a sales process (Book Yourself Solid)
5. Learn how to do social media the right way. (Gary V’s $1.80 Method)
6. Keep everything straight (ASANA or Trello)1
7. Keep track of your money (Freshbooks or Quickbooks)2
8. Everything else…. Google and Youtube are an entrepreneur’s BFFs!!”

Simple, right? In reality there is so much more and Sara stresses constant learning. Aligning with the best people can make a huge difference. All of the people and resources mentioned are top-notch.  

If you are planning a business or trying to ramp up your existing business these tools can be invaluable. I’d love to hear what’s working for you and where you see a need for improvement. Use the chat button below to send a message or use the scheduling link at the right to plan a free, no obligation introductory call.


1 As a small business accountant I spend a lot of time on this topic. It’s the single most important ingredient to business success. In a Microsoft Office 365 environment (mine and most other professional firms) I rely heavily on OneDrive and OneNote to keep information available, safe and organized. Pipedrive and Lastpass are also essential information organizers for me. I’ve written about and offer consults on each of these crucial starting block tools.

2 Yes, I’m Freshbooks and QuickBooks certified. I also offer simpler tools for start-ups. But, bottom line, if you aren’t devoting 1% to 2% of your time and money into financial management then you are headed toward disaster.