In the latest episode of the Kaya Cast Podcast, we have a conversation with Betsy Morem and Mark Waller, co-founders and managing partners of Morem & Waller, CPAs, PLLC. They'll be unlocking valuable insights on the dynamic relationships between accounting and other crucial business departments within your cannabis business.
Covering an array of practical topics from understanding key financial statements to effectively maneuvering the challenges 280e presents. Dive into the importance of solid bookkeeping and documentation and discover strategies to audit-proof your business. An accountant's role extends beyond number crunching, they are foundational to your business operations. Learn how having the right accountant can facilitate proactive financial management and create synergies towards your business growth.
The episode ends on a high note with the absolute 'must-do's' for every business owner prepping to launch, scale or grow their business. Don't miss out, the world of finance isn't as daunting as it seems with Kaya Cast Podcast!
Mark R. Waller, CPA, co-founder and managing partner of Morem & Waller, CPAs, PLLC, has 15+ years of experience working as a public accountant as well as a controller in the private sector. He partners with CEOs, founders, and interested parties in the cannabis industry to help them stay compliant, achieve world-class financial records and financial reporting, and provide tax planning, preparation, and filing.
Betsy Morem, CPA, co-founder and managing partner of Morem & Waller, CPAs, PLLC, enjoys helping small businesses and start-ups create, maintain, and improve their accounting systems. She partners with CEOs, founders, and interested parties in the cannabis industry to help them stay compliant, achieve world-class financial records and financial reporting, and provide tax planning, preparation, and filing.
Find out more about Morem & Waller, CPAs at:
Betsy Morem: Find an accountant early on because it's much harder to go back in time and do cleanup work versus just hiring a good accountant before your operations start and creating a solid foundation for your accounting getting all your processes and procedures in place.
Tom Mulhern: Welcome back to the Kaya Cast podcast. I'm your host, Tom Mulhern, and today I have a fantastic conversation with Mark Waller and Betsy Morem. the founders of Morem & Waller CPAs out of Minnesota. we had a really interesting conversation about everything you need to know as a cannabis business to set up your business properly.
We talked about some of the most important financial statements that you need to be checking in on every month as a business owner. I always find it so fascinating, you know, CPAs who are working in this industry, working in amongst these changing regulations to make sure that businesses are staying financially
healthy, they're compliant, and that they're growing. So I hope you enjoyed this conversation with Mark and Betsy from Morem & Waller CPAs.
Tom Mulhern: Betsy Morem, CPA and co-founder and managing partner of Morem and Waller CPAs enjoys helping small businesses create, maintain, and improve their accounting systems. She partners with CEOs, founders and interested parties in the cannabis industry to help them stay compliant, achieve world class financial records and financial reporting, and provide tax planning, preparation, and filing.
Mark Waller cpa, co-founder and managing partner of Morem and Waller CPAs, has 15 plus years of experience as a public accountant, as well as a controller in the private sector.
He partners with CEOs and founders and interested parties in the cannabis industry to help them stay compliant, achieve world-class financial records, financial reporting, and provide tax planning, preparation, and filing. He's a graduate of the University of Minnesota Twin Cities. So welcome to the Kaya Cast podcast, both of you.
Mark Waller: Now Mark, as a CPA with over 15 years of experience, how have you kind of seen the cannabis in industry evolve in terms of, you know, dispensaries and taxes and all of that over the years?
We've been talking about cannabis for almost three years together.
It really feels like dog years. Literally, like every few months feels like a year has passed. Like, I, I have a hard time keeping track, honestly. So just, you know, things change so quickly. Dispensaries, cultivators, I think the biggest thing that is, evolving is just the new markets.
There's just kind of like a new market energy in every new state that you're working in. so now that we've seen a few cycles of other states that have become live New Mexico and Vermont, are two states that we've, we've worked in and we're from Minnesota, so now Minnesota's about to join the party.
We're starting to see those same patterns emerge. So it's really exciting. It's a really exciting market to be in at the forefront.
Tom Mulhern: Now looking at the industry as a whole, what are some of the unique challenges that cannabis businesses face when it comes to taxes and financial planning and all of that, they don't run into in other industries?
Betsy Morem: Certainly 280e is number one. So basically what that means for business owners is that they're going to be taxed on their gross profit line rather than their net income line. So most important thing about that is just understanding what the tax consequences of that is and planning for it as well.
Because It is a large number often making sure that business owners are setting side those funds. So that they're not surprised when their tax return gets filed.
Mark Waller: Beyond 280e and obviously that's, you know, the bread and butter of what accountants are looking at for cannabis, but there is a lot of overlap between accounting and compliance, accounting and hr, accounting and insurance.
we've co-founded a partnership called the Support Suite, where the goal is to kind of bring together accountants, Hr, Compliance.
And what we're seeing is there's a huge need for that overlap becauseAccounting cannot be in a silo. Accounting has to work with HR and it has to work with the other departments. There has to be some kind of overlap there.
If a cannabis business owner is hiring an accountant who never talks to this person, who never talks to this person, you're not really achieving kind of the synergy that you need to grow as an organization.
With all those moving pieces and the need for synergy, what are, what are some of the common mistakes that cannabis businesses make when it comes to their financials or tax planning?
I wish it was more complex, but honestly it's things like, I didn't file my taxes or I didn't do my payroll on time. It's the little things that become big problems when they're not done. And you know, unfortunately we see 90% of our clients who come to us they start by saying, I've been doing the QuickBooks myself.
And it, they're usually, their books are a mess. So that, I mean that's, you know, it's obviously 280e is a big thing, but it really starts on the ground level.
Betsy Morem: People tend to oversimplify bookkeeping or undervalue it. So they think, well, I'll just do the bookkeeping cuz it's just transaction coding. But it's a lot more than that. And you have to start with good bookkeeping because everything else is built off of good bookkeeping. The best thing that a business owner can do is really just offload those type of things to professionals. Which ultimately saves them time because what we found is that everyone has good intentions, but it's always the last thing that is on the list of to-dos.
Yeah. Because there's so many other things. We kind of help business owners take that off their plate and ultimately help them sleep better at night by knowing that their books are in good hands and they're staying compliant and they have good information to work with.
Tom Mulhern: What are some of the financial statements that business owners should be reviewing every single month?
Betsy Morem: Income statement, also known as a profit and loss balance sheet and statement and cash flows. And you're right, they should be reviewing those every month. And the reason why they wanna kind of look at those three statements.
Together is because they each tell a different story. So your income statement's going to give you a record of your revenue and expenses over a certain period. Your balance sheet is going to give you a snapshot of your assets, your liabilities, and your equity as of a certain day. So if you're looking at previous month's financials, it would be the last day of the previous month, and then your statement of cash flows is going to show you the actual.
Mark Waller: Inflow and outflow of cash over a certain period. And that's probably the most underrated statement, but probably the most important because we all know at the end of the day that cash is king. The cash flow is number one. Too many businesses I've seen have, underrated that part of it. And you never wanna be at a point where you're saying, oh crap, I don't have enough cash to pay payroll. Yeah.
What are some of the ways that businesses can minimize, kind of the negative effects of 280e? It starts with what type of business are you? So cultivators and manufacturers, they have. A little bit more they can pull from to deduct for against their gross revenue than dispensaries do. And that's mainly because they are in the business of manufacturing. So there's a little bit more that they can do to pull in those expenses.
That said, really the number one thing to watch for, to make sure that you're able to do that is having really good bookkeeping and really good accounting. So having strong documentation, having work papers that show, this is why I'm deducting these costs. In the back of your mind, thinking what's, what documentation do I need to survive an audit?
If this was, if my tax return is gonna be audited by the irs, or if you have financial statements that will be audited later. What, what documentation do I need to show a third party to say that this is valid? Because as we know, there's so much regulatory overhead with cannabis being a schedule one drug.
Is that it's, it's just that much more important to really be on top of that.
Tom Mulhern: So this seems like it, there's a lot of onus on the business owner to be proactive. Is there any other ways that business owners can be proactive financially to like secure the future of their business?
Betsy Morem: I would just say find an accountant early on because it's much harder to go back in time and do cleanup work versus just hiring a good accountant before your operations start and creating a solid foundation for your accounting getting all your processes and procedures in place.
Mark Waller: Betsy does a ton of like five year forecasts for new startup businesses. So that's a great way to, to kinda get an idea in the owner's head about what's, what's going to happen and what do the owners need to do to be successful now and in five years, and that's, you know, from cashflow to p and l to all of those things.
There's a lot of different inputs and outputs that go into that. Yeah. So, getting a forecast done with, your new accounting team at the very beginning is a really good way to kind of future proof you.
Tom Mulhern: I'm curious, how do you do those five year forecasts with the industry constantly shifting and changing and you know, new brands popping up and then being acquired?
One strategy that, that I use or that we use is creating multiple versions of the model.
Betsy Morem: Maybe a best case, middle of the road and worst case scenario. And typically factoring in some price erosion into those models. I mean, at the end of the day, any forecast is really just a guesstimate. We wanna be as accurate as possible, but we can't predict everything. So I think it's just providing clients with like a full spectrum of outcomes.
Tom Mulhern: Now looking towards the future, what do you guys see for the future of the industry? Like do you see bright things on the horizon? Do you see. See doom and gloom as some, you know, pundits say, like, what do you see as the future of the industry?
Betsy Morem: I'm more of a glass half full kind of gal. Yeah. So I am really excited about where things are heading. But I only have one perspective. I mean, there's so many dis different aspects of this industry and California's market is, you know, maybe not doing so well. Same with Oklahoma's, but then you've got these flourishing markets in Massachusetts and Vermont.
So I think that also just depends on where you're located and kind of what your own experience is.
Mark Waller: I would say too, that it's, it's still an industry in its infancy in many ways. So, there's gonna be ebbs and flows, and I think, you know, from what I've learned from other people that have been in other industries that have, you know, comparatively been kind of going through these types of growing pains there's always gonna be ups and downs.
But the, the thing that gives me hope is that there's still so much to be explored. So like, we're in Minnesota and we are seeing, you know, Minnesota is starting to talk about legalization, and there's a huge, exciting energy there that there's so much new stuff going on that even though, you know, in certain markets things are up and down there's still so much to be uncovered in this industry.
Tom Mulhern: Now, as business owners yourselves, I, I'd love to get the, you know, one tip for a cannabis business owner to grow or scale or launch a new business? what advice would you give to them? And I'd, I'd love to hear it from both of you.
I would say have meetings with your leadership team and hold them regularly and keep yourself accountable to them. It's like one of those things where I. It's the simple things that really matter the most. So that, that would be my number one thing.
Mark Waller: And you know, as business owners, that's what Betsy and I do all the time. And so try to keep ourselves accountable.
Betsy Morem: Put together a projection, put together a budget and kind of ground yourself so you really understand if you're just getting to the market, really understand what it's going to cost you. So that you can be prepared. And if you need to raise capital, you can do that. And then of course, having great financials all comes back to the financials.
Tom Mulhern: How do people connect with you and maybe, they're stuck and they need some, some accountants that really know what they're doing, like mm-hmm how do they connect to you guys?
Betsy Morem: Well, we do work with clients all across the country. So as CPAs we're able to practice in all 50 states and they can reach out to us through email. We have an Instagram, Facebook, I guess if they wanna reach out to us on social media.
Mark Waller: Our website as well?
Our website. moremwaller.Cpa. Yeah. that's gonna be the entry point for, for anybody who wants to get started with us. We have a great tool right when you get there for new cannabis business owners called Operational Checklist.
Betsy Morem: That's gonna give you a comprehensive list of everything that you need to be thinking about from an hr, accounting, and compliance perspective.
Tom Mulhern: Awesome. Well thank you guys for taking the time to talk with us and we'll have all the links in the bio and link to the checklist and all of that, but I really appreciate the time and it's been great to get to know you guys.
Mark Waller: Yeah, you as well. Thanks so much for having having us. Thanks so much. Yeah, thanks for having us.
Tom Mulhern: Now, If you're anything like me as a, as a business owner, as a person, taxes just stress me out, like preparing taxes, doing all of that. So my advice is to find an accountant like Mark and Betsy who can really take that anxiety away, who know what they're doing, know the changing legislations regulations are on top of it
it's gonna make you a better business person. So we have all the links in the bio if you wanna reach out to Mark or Betsy and find out how they can help your business, be, you know, financially healthy.
We also have a, an archive of a whole bunch of interviews we've had with other accountants if you have questions, so make sure you go head over to kayacast.Fm where you can find all of the episodes from the Kaya Cast podcast.
Thank you so much for listening to the Kaya Cast podcast for being subscribed to the Kaya Cast podcast. And we'll see you next week for more conversations just like this.