Welcome back to Count Me In the podcast
that brings you inside the fascinating

world of management accounting.

Few industries have more interesting
or infamous background than cannabis.

From a management
accountant's perspective,

it's the story straight out
of the wild west of business.

Joining me today is
Simone Cimiluca-Radzins,

a leading consultant in
the cannabis industry.

We discuss our unique journey from a
big four CPA to bringing accounting and

finance order to attain
businesses in cannabis country.

Let's start the conversation.

Simone, thank you so much for
coming on the podcast today.

I'm really excited to be talking about
cannabis and cannabis and accounting and

accounting in the cannabis
industry. But to start off,

I wanna find out how did you get into
this industry and what's your story?

I'm so excited to also be on. Thank
you so much for the opportunity.

You know, I am an accountant by nature.

I grew up in a family where my dad is
an accountant, a controller, you know,

did the whole kind of accounting
route and it just was the thing that

just made sense going up in college.
I was like, oh, accounting's easy.

Let me go do this.

And then got recruited
pretty young in university to

be part of PWC.

And then it almost felt like my
career path was kind of just set,

maybe luck, maybe opportunity, you
know, the combination of all of that.

And I did,

I did a few different corporate
accounting type of jobs.

Got to travel the entire
world, which was amazing.

Doing internal audit for one of the large
studios down in Los Angeles and then

moving to Paris for a few years and being
able to do international consulting.

I've always focused on accounting,
right? So internal control development,

processes, you know, process improvement.
But it was nice because at that point,

at the very end of my corporate tenure,

I guess we could say it was an
opportunity to really see how I could

truly be an advisor and truly implement
things instead of just telling people,

Hey, you know what, you've got all of
these control problems and see you later.

Here's your audit report.

And so that was a really nice kind
of end towards my corporate tenure.

And yeah,

I think you probably hear it often that
some people just get burned out and

doing international consulting. That's
how I felt like it was, you know,

and it's funny saying it cuz it
was such a dream when it was there,

but then at the very end, it
was like two weeks in Paris,

two weeks somewhere else in the world.
And you're battling jet lag. You're,

you know, I'm in my mid
twenties at this point,

almost like late twenties I guess.
And you're kinda like, well, hold on,

I wanna hang out with people. I wanna
have friends. Like, this is so fun.

But at the same time, I feel like
there's something more. And, you know,

I decided to quit my job and I
lost my visa living in Europe.

I lost my visa and I went back
to the US and started freelancing

from one of my, you know, previous jobs.

So it was a really great freelance
gig and that started to get me into

freelance and understanding, well,
okay, this is really cool. Like,

I have to do my deliverables and I can
kind of just maybe build something on my

own.

And that's when I think the
entrepreneurial bug started
where I was like, Hmm,

you know, I think that
there's something more,

but I didn't know what that
more is. And in the end,

I think I'm just getting there, right?
And so that's like, oh, this is a while.

So I guess to any listener who's feeling
that it's okay to feel like you might

not really know exactly what you want,
but that there is something more.

And freelancing, it was
just a great opportunity.

I can make great better money than
I was making in my corporate gig.

And I had just moved to LA
and so I got a subscription to

magazines. I don't know if
if if people still get that,

but when you move into a new place,
you can get all these, these magazines.

And I got this one. There
was on the front cover,

women in the marijuana industry. And I
was like, what? Now I'd been in Europe,

I'd been in finance I
hadn't thought about,

and it was marijuana then I call
it cannabis now. It's, you know,

the real term that you wanna use. I
hadn't thought about weed, cannabis,

marijuana since I was in high school.
And I was like, Hmm, this is interesting.

And I started really diving
in into what is this industry?

And at that time it's 2015.
And so if we just roll back,

there's not even two states
that have legalized adult use

and some obviously have, have legalized
medical use. But, so it's all brand new.

I'm in California, which is the Wild West,

which is the biggest
market in the entire world.

And I just started doing this research
about like, what is, I'm an auditor.

I was like, okay, let me understand the
ecosystem just like I would a business.

I was like, okay, let me understand
the players, what is happening?

Like what is the supply
chain and all of that.

And I just thought to myself, okay,

I think this is the
industry that I wanna be in.

And before I even got on
my own, I thought, okay,

but how do you really learn it?
You learn it through the numbers.

Just like I learned every
other business, right? Like,

you can understand numbers, you can
understand how everything works.

So I approached a CPA firm
that was very cannabis, like,

it was very clear they were working in
the cannabis industry, which is not,

you know, was not at that time something
that you would promote. And I said,

Hey, I can help you. I can help you with
your sales, I can help you, you know,

build, you know, a better
process. And I had a year,

a little bit less than a year working
with them until I felt really confident

that I could just go out on my
own and start kind of building my

own business and start kind of working
on different projects in the cannabis

space. So that's how I got in.

Wow, that's amazing. So when you got in,
it was still largely a cash industry,

right?

So I can only imagine how crazy
that was because everything is

digital currencies and all that stuff
and the world of business today,

even in 2015, it still was. And now, and
in that time, how did you manage that?

Well, so the interesting thing
is, so there's twofold. There's,

I got 80% of businesses still
lack banking today in 2022.

So you really have to have a
good set of internal controls.

And working with those businesses
even in 2015, you know,

you could just spoil
it back to the basics.

But what's fascinating is
that they're, you know,

there's almost something that
you could call legacy industry,

meaning operators that had been in
the business before it was quote,

unquote "legal" in that state. Right. So
had probably got involved in, you know,

if you think about California, there was
an ability to truly build a business,

even though it was a cooperative model
starting in 1996 when there was the first

dispensary. But from
a federal perspective,

and there's still a lot of federal issues,

they were not supposed
to hold their receipts.

They were supposed to erase everything,

which is an accountant's worst nightmare.

Wow. I can only imagine.

Yeah, so it was a lot of education
and it still is a lot of education of,

and I almost think this is
a small business of, hey,
we have to save receipts.

Now when it's cashed,
we don't have the law,

we don't have bank statements that can
get sucked up into the accounting system

to even know what completeness
is. No. We had to, you know,

you really have to show people
like this is very important.

So I mean, the process was a lot of
education and then system building,

but very archaic is the
thing that comes to mind.

But very simple system building
because you know, it's,

this small small business
owner, well just,

I would say like limited business
systems with the businesses that we're

operating on. So it's just,

it's really focused on
the simple education,

the easy to do type of, Hey,

how do you upload these receipts type
of thing. But what's interesting,

are you aware of IRC § 280E?

I've heard it. I'm not aware of it.
I'm not aware like the define it. No.

So this is one of the most
draconian laws you can ever imagine.

It was put into place in 1982
because a drug dealer, you know,

filed his taxes and he was dealing with
like meth, you know, like bigger drugs.

And this is like, this is, you know,

predating what the cannabis industry
is now. But it hasn't changed.

And the rule is that if you are
trafficking in a controlled substance,

the schedule one or two substance.

And so cannabis is a one which is really
insane because heroin is a one and

there just needs to be some
push at the CSA and getting this

descheduled. But if you're trafficking
in a controlled substance, one or two,

yeah, you cannot deduct
anything. No business deductions.

Now there's been higher rate tax
law that allows a business to deduct

their cost of good sold. So it's
actually from the federal level,

the only deduction that
a business can take

is a deduction to gross receipts,
which is cost of goods sold.

So it's at a state level, it's different.
Every state will say, Hey, you know,

we allow you to take all the full
deductions like any other business.

Like that's how a state should do it.

So these businesses are really hit
hard because of working all in cash.

Oh, I'm forgetting to save all my
receipts. But at a federal level,

they're still struggling because
they can't deduct everything,

meaning cash flows impacted.

Wow.

So your cash flow is greatly impacted
and you can't take advantage of all the

great FinTech that's out
there for accountants.

And so what are some of the nuances
that you have to do? You know,

so obviously uploading receipts is a
big one to try to get them in there.

But then also there's also the stuff
that they do on the side. I don't know,

there like, there's so many different
intricacies in there. How, how can you,

as like, how do accountants help?

How can accountants help these small
businesses as they get in there?

Well,

I think the first thing is the accountant
needs to adopt the mindset that I am a

true business advisor here. And I'm an
educator. I'm not just doing bookkeeping,

I'm not just doing accounting.
I'm not going to be reactive.

If they haven't sent me
something, I'm not gonna do it.

It's like a very proactive approach to
being a true business advisor and part of

the team. So that's like the
first thing and that, hey,

we're gonna solve the problem.

And so I think if you are thinking
about building your accountant toolbox,

you're like, okay, well I'm aware
of these bigger blocks, right?

So the IRC § 280E, okay,
that's federal taxes.

Then really understanding state taxes
and then getting them set up immediately

on a business system, right? And so
a lot of operators that, you know,

I don't work as much now with
operators in doing accounting.

I do a lot of fundraising,

but a lot of operators when I was working
with them really are even struggling

to have like an accounting system in
place. So these basic, basic things,

so the first thing is understanding
the business and then understanding

inventory,

because inventory is everything
and it's how do you manage?

So being very, you know, up to date on
cost accounting, management accounting.

Because if you're working with
a cultivator or manufacturer,

we've got a lot of different
inputs in our inventory, you know,

versus a reseller where it's
just like, okay, I bought this.

If I have to add on maybe some freight,

then I'll add on freight to
get to an inventory cost.

So there's a lot of just the first,

the basics and being able to
go in, roll up your sleeves,

work with the CEO as I consider
you a profit advisor and

getting, just getting
the systems dialed in.

And then training is so important,

really being able to delegate
those roles to the business

operators or somebody on the
business operations team.

Like I've seen accountants
that have been like, oh,

I'm gonna take on everything. I'm gonna
do the invoicing I'm gonna do. No,

you can't.

You have to make sure that you really are
taking the role of a profit advisor if

you're just, you know,

bookkeeping or doing freelance
kind of financial consulting,

that you really can almost
segregate your duties

with somebody else on the team.

Yeah. Well that goes back to having
setting up good internal control.

And I'm sure that those small businesses
as they're getting into this industry,

especially if they were
doing stuff beforehand and
then it's suddenly legal and

they were like, oh, I'm gonna
get a legitimate business.

I don't think they had good
internal control set up.

They probably didn't have very
good business practices set up.

So it's almost like as a business
partner, you're coming in as the CFO,

as a financial analyst, as a data analyst,

you're coming in as all the roles
that an accountant does in an

organization that like a
management accountant does.

And you're having to set all
that up for this business.

And I can't imagine that's easy at all.

It's not easy.

And I think the big thing that I learned
was like setting boundaries and setting

expectations. Setting
boundaries. And so, you know,

one thing that in the
industry specifically, because
there's so much innovation,

there is something new, there's
something changing all of the time.

There's new states that are onboarding
and there's, you know, there's so much,

it's very easy as entrepreneurs
in that space to get caught up in

all of the shining objects.
And so as an accountant,

if you kind of follow that suit,
you're not really helping the business.

And so it's very important to, you
know, set the expectations, be nimble,

like the, you know, be nimble
because you know, there are pivots,

it's all of it is the startup culture,

but really practicing
discernment and having, you know,

almost a plan, right? The project
plan of, okay, here's where you are.

Well this is where we can try
to get to you in 12 months.

And bit by bit going there with,

it's just the focus of really
building internal controls.

I think that was the coolest thing when
I got into the industry. I was like,

oh my gosh, this is like
all of my corporate tenure.

It like all of what I've learned, you
can actually apply into this space. So,

but for me it really is internal controls.

I mean that's great. So IMA,

Institute of Management Accountants is
one of the core founders of the COSO,

which is the Council on
Sponsoring Commissions,

which came out with that internal control.

And so we're big into internal
controls here. And so like,

I think management accountants
could be a huge into this

industry. And so what if somebody
wanted to get started in this industry,

you know, should they go find a
small cannabis shop and say, Hey,

can I come and be your accountant?
Or should they, you know,

be an entrepreneur like you?
What, what would you recommend?

Well, I first recommend getting educated.

So making sure that you feel
very comfortable about the state

taxes, the federal taxes, what systems
you would use and kind of your game plan.

And then you made a really great point
is that within that education, you know,

the cannabis industry is quite complex.
We're talking agriculture, manufacturer,

retailers, right? And so being
able to service all of these,

well all of these different license
types or parts of the supply chain,

they have very different viewpoints
and they have very different, you know,

even accounting,

if you think about it like an agricultural
business is gonna have very different

accounting than a retail business.
So first understanding, you know,

where do you want to play in this field?

And then if they decide to go, you
know, the job route, oh my gosh,

I always have Indeed. Like I have a
RSS feed, Indeed cannabis accounting.

There's tons of jobs, you know,
there's always tons of jobs.

So there's an opportunity to do that.

Or if you're thinking about the
freelance route, then, you know,

finding kind of an approach to reaching
out to somebody in your local area.

I know there's a lot of remote accountants
right now, which is, I mean I'm one,

I'm in Portugal at the moment, and yeah.

And I think that the coolest thing for me

about being in the industry was being
able to connect locally with business

operators.

And because you're really
heavily involved if you're in an

emerging market, which would
be like New York for example,

like licensing is about to
happen, regulation is passed.

Like there's just this environment of
like what is happening then you really,

if you can, you wanna be there
and you wanna be part of it.

You wanna go to local events that are
organized by community organizations.

You want to, what was so cool for me is
like getting involved in the politics.

Like this is something where you
have an ability to, you know,

talk to legislators about, you know,
do you really like the regulation?

Is the regulation set up for success
from an accounting perspective?

And it's something that I'm
even working on even remotely.

But I would say if somebody is in a
state where there is adult use or medical

use, try to find out what's happening
locally and just get your feet wet.

Just how I did it. You know, be that,

be that researcher under ask so many
questions because this is like from

a business perspective,

such a fascinating industry
from an accounting perspective,

such a fascinating industry. But from
a health and a wellness perspective,

it is just fantastic of what you can be

part of by supporting these
businesses that are, you know,

helping people with their pain,
helping people with their anxiety,

helping people, you know,
with feeling better.

And so there's so much that somebody can
do just if they're interested is just

get involved locally.

That's great.

I think that's a great way to get started
is just kind of start where you are

and then kind of go from there. I mean,

that's how everybody gets
started really. I mean,

you just find people to talk
to, get involved in events,

find local things that
you can, local shops,

local conferences that are happening.

Cuz I know it's all happening all
over the place, which is amazing.

And what I was thinking
as you were talking,

the more good accounting that
can get into this industry,

that set up a good foundation
so that someday I hope when

federally they finally say, you know what?

We should take this off the
schedule one or whatever it is,

that there'll be good accounting in
place so that way when the federal

regulations come into play, the
accountants be like, we got this.

Exactly. Exactly. Well, not only that,

if you think about just small
business and some of the statistics,

small businesses tend to go out
of business within five years.

Like I think it's like more than
80%, which is a devastating number.

And I believe operating
in the cannabis industry,

it's even harder because of the
punitive taxes, because of, you know,

the cash flow issues.

And so having good accountants in this
space and helping these small businesses

withstand the storm of still we're
in federal prohibition, right?

Federal prohibition to get to in a day,

and hopefully it's a year very soon
where there is an opportunity where it's

completely federally legal would
be great for the small business

owner, right. To be able to like,

be part of this industry and make it
all the way to federal legalization.

And I believe accountants that are true
profit advisors are the ones that can

actually do that.

Yeah. Well, and it's funny,
you're, as an accountant,

you're kind of forced to go back to
your, your roots of, like you said,

like the first things you did
when your corporate accounting,

even just things like
cash flow management, like
something as simple, you know,

it's a very popular course at IMA
cash flow because people still have to

remind themselves, okay, like it's
crazy. But when you're dealing with cash,

cash flow it's actual
literally cash in and out.

Yeah, yeah. Right. It's cash flow,
it's cash management. Like, you know,

what are we actually going
to do with this money?

But then it's also safeguarding assets.
Think about it, cannabis businesses,

tons of cash, tons of cannabis.
Frauds happen to all, we already know,

small businesses have
a lot of fraud. Yeah.

And so imagine if you're in a cannabis
industry that has limited cannabis

business that has limited
internal controls, it's a
haven. It stresses me out,

honestly, as a as a former
auditor. I was like,

just like the lack of controls
and the opportunity to,

to commit fraud.

And then what is really interesting
and quite negative in the fact of being

interesting is that IRC § 280E well what,

you cannot deduct anything
besides your cost of goods sold.

So you cannot deduct losses.
So if there's shrinkage,

if you have a loss that's not cost
of goods sold, that is a loss.

And you can't at the federal
level actually book that loss.

So exactly. So it's, it's,

to me it's getting as many accountants
educated to help get those businesses

profitable to with, you know, to really
to make it towards federal legalization.

Definitely. Well,

and I can only imagine the hardship
that that would put on a small business,

especially if there's fraud. If there's,
I mean, even for individual consumers,

if you get wire frauded, the bank
says, well, sorry, that's the,

that's our little loophole and FDIC,

we're not gonna help you
because you were wire frauded.

There's nothing we can do if
we can't get the money back.

And so I feel like when fraud happens,

there's not much help out
there for many people.

No, no.

And I think that and that is such
the very sad part of the equation.

And I think the silver
lining to that is, well,

education and preventative controls and
really educating somebody about that.

And I think that what happens in
small business and in cannabis

is all small business and startup,

is that people don't wanna prioritize
that because it's not sexy.

And that's why the accountant
have to be proactive with it.

And we had to make it fun. And I
think just showing people like, Hey,

we can work together and I can
actually help you save money,

meaning more profit for
you, that's the big thing.

I agree. Anything else you wanna share?

Well,

I think that you wanna share with every
listener just a little bit of a history

about the cannabis industry,

because that was one of the interesting
things when I got involved with it,

I really learned a lot, I
learned a lot about politics,

I learned a lot about health, and I
learned actually a lot about myself,

which is not the point of the
history of cannabis, but you know,

it's been federally prohibited
for a very long time. And in 1995,

there wasn't a single dispensary in the
United States like California legalized

medical use in 1996.

And then from there we have seen
like such accelerated growth.

And one of the most important
things that I've seen with new

legislation is that there's
a lot of things, you know,

a lot of rules or programs
in place that really help

with what had happened with the
war on drugs because minorities,

people of color were really impacted
by the war on drugs. And, you know,

by receiving a federal, like if you
are impacted by the war on drugs,

what's that mean?

You might have had to go to jail just
for having a small amount of weed on you.

And now that's completely
legal in most states,

but what happens with
that is that if you have

gone to prison, you can't vote. So there's
a lot of interesting things for that.

The cannabis industry and legalization
of the cannabis industry is bringing from

a political perspective that I just
wanted to share with everybody that it's a

really cool opportunity to be part of
an industry that is a game changing,

that is like, the rules
haven't been fully written yet,

and you have an opportunity if you care
about politics or if you care about,

you know, making a change in the
system. The cannabis is like a very,

very cool industry to do that. And from
the the health perspective, you know,

if you don't know much about the plant,

it's much more than just getting you high.

Like people have been able to
help and cure cancers, you know,

just like end their
stress and their anxiety.

And there's kids with epilepsy that
have used cannabis that now don't have

seizures. And like the
list and list goes on.

And what's very cool
about the cannabis plant

is that research,

like there was a bunch of Israeli
researchers that in the 1990s discovered

in our body the endocannabinoid system,

which is similar to like your pulmonary
system or your nervous system,

like it's a system in your body that
has been discovered since the 1990s

that helps you build homeostasis
in your body. And cannabis,

THC being the primary, you know,

molecule into cannabis is
something that actually, you know,

binds to our endocannabinoid system. So
what's really cool about this is that,

you know, growing up in the finance world
and being part of corporate finance,

it was a heavily drinking culture.

I really didn't open my mind to
these other, you know, plants,

medicines, and like, what, you know, what
are the opportunities? And so I just,

you know, if you're curious at all about
that, just do some Google research,

endocannabinoid system and what are the
benefits of cannabis because it's so

much more than, you know,

eating weed brownies and like
stoning out on your couch.

Like it's really a plant
that can save lives.

And I hundred percent agree
with that statement. And Simone,

thank you so much for
coming on this podcast,

which it's been very educational and I
hope our audience enjoy it as much as I

did.

Awesome. Thank you so much Adam.

This has been Count Me In,

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