In July, industry behemoths Trulieve Cannabis Corp. and WM Technology (parent company of Weedmaps) experienced a C-suite shakeup when their chief financial officers resigned. Maybe they learned what every other CFO figures out pretty quickly when they start to work the books in cannabis: In this industry, the role is as challenging as it is frustrating, with enough hurdles and hazards to test the best bean-counters in the land. Those who can’t adapt rapidly will find themselves overwhelmed.
As CFO for Wana Brands, one of the largest edibles companies in the industry, Sandy Li has learned a few things about how to navigate a complex financial environment while implementing new strategies that help streamline day-to-day business operations.
Here are her suggestions for smoothing out the wrinkles all CFOs face.
What are some of the challenges confronting CFOs in this industry?
We don’t have access to the normal capital market. And even if you do have access to quality capital, guess what? It’s at a very expensive interest rate. Secondly, there is a lack of access to data and analytics. With a traditional business, you have a lot of data from enterprise resource planning (ERP) and other systems. But in cannabis, you scrape the data from different sources, put them together, and do your analytics. The third challenge would be attracting top talent. There is still a stigma and people don’t understand the cannabis space that well, so it can be challenging to attract and retain top talent.
Getting paid on time—or at all—is an ongoing problem for everyone. How do you get business partners to resolve invoices in a timely fashion?
It is a common challenge, especially in the current market. We are seeing a little bit of a challenge, but we’re very proactive. We work hard to find good partners in the markets we’re pursuing, so they align with our culture and have the financial capability—and there’s a lot of pre-work we do [before ever starting to work with a company].
One of my key initiatives and a top priority is to work on our cash flow and figure out what our working capital looks like. But compared to a lot of companies, we are in much better shape in terms of our accounts-receivable collections just because of the pre-work we have done and the process and communications we have in place.
What processes and systems did you put in place to build better financial and accounting practices?
We really focus on talent development throughout the company, and a lot of people come to us because of their passion for cannabis. So I’ve implemented financial education, because we want everyone to know the role they play in Wana’s financial health, and then they feel even more passionate and proud to be part of the company.
In my department, we produce a lot of analytics and numbers, like key performance indicators, but that’s not part of a story or a strategy initiative. The team is everything, beyond all the numbers. So let’s look at the story the numbers represent. That’s the kind of education that is coming into place.
What part do budgeting and data analysis play in decision-making?
When your company is growing, you’re drinking from a firehose. Actually, one person recently told me we are drinking from Niagara Falls. You want to watch where the market is going today, but if we don’t have good systems and processes in place, we could get in a panic and make questionable decisions because of emotions. So I spend a lot of time updating our ERP system, and we also built a data warehouse with more analytical tools.
Most importantly, we’re in a place where we have a very good process of budget forecasting, financial reporting, and organizing all the data. Every department knows exactly what their budget is from month to month, the budget for the year, and how they spend what they’re allocated. We train our leaders to look at all of this and our overall financial health.
What advice would you give others who are considering a CFO role?
Cannabis can be very volatile, and not everyone has the mentality to go in somewhere and be scrappy and adaptive. I think it takes a certain personality to do that, but the industry represents a great opportunity. There are a lot of hurdles, a lot of roadblocks, a lot of headwinds, but I love it because I learn new things and deal with new situations and new people every day. So I would say, “Hey, keep an open mind, check cannabis out, and talk to people who have been in the space who can help you along the way.”
One important thing is knowing your business, and CFOs have a lot of analytical skills. We know how to put numbers together, how to crunch numbers, and how to do the reports. But at the end of the day, beyond the numbers, you really need to know your true north. Know the business, where the strategy works with your executive team, and where you want to go with new strategies. (Full Story)