Erin Rulli, Founder, Accounting Professional, Alice & Fran LLC

Thinking Outside The Bud - Erin Rulli

Erin Rulli, Founder, Accounting Professional, Alice & Fran LLC

Erin helps Cannabis CEO's maximize their cash flow, minimize their tax burden and maintain federal/state/local compliance.

Having spent fifteen years as a senior finance, operations & administrative professional in the legal services, hospitality and food manufacturing industries she’s bringing her skills, experience and education to the cannabis industry. She has supported many CFO's, CEO's and COO's over the course of her career and understands the importance of being a proactive, innovative and involved finance business partner.


[00:00:01] You're listening to Thinking Outside the Bud where we speak with entrepreneurs investors thought leaders researchers advocates and policymakers who are finding new and exciting ways for cannabis to positively impact business society and culture. And now here is your host Business Coach Bruce Eckfeldt.

[00:00:30] Are you a CEO looking to scale your company faster and easier. Checkout Thrive Roundtable thrive combines a moderated peer group mastermind expert one on one coaching access to proven growth tools and a 24/7 support community created by Inc. Award winning CEO and certified scaling up business coach Bruce Eckfeldt. Thrive will help you grow your business more quickly and with less drama. For details on the program visit That's E C K F E L D

[00:01:06] Welcome, everyone. This is Thinking Outside the Bud. I'm Bruce Eckfeldt. I'm your host. And our guest today is Erin Rulli and she is a Founder and Accounting professional at Alice & Fran. We're gonna find out more about that company, about her background with that. Erin, welcome to the program.

[00:01:19] Thank you for having me, Bruce.

[00:01:20] So what do we start with a little bit of your background? I know that you've been involved in various things. Like many people, what kind of a space? So what are we here a little bit about professionally, how your background, how you gotten to cannabis? And then we'll talk a little bit about the accounting and finance side of cannabis business as an important and fascinating topic for various reasons which we'll get into. But let's learn a little about you. So tell us more.

[00:01:40] Okay. I graduated from the University of Massachusetts, Amherst, with a degree in anthropology and a certificate in international relations. I had the good fortune of starting my career at the Boston Consulting Group as an administrative professional supporting three different internal finance functions. And I enjoyed the finance pieces. So I decided to go back to school and I went to Suffolk University in Boston and got my MBA with a concentration in finance. My first job after grad school was seafood manufacturing. It was a fantastic job. Other than always smelling like fried fish, I had some very fantastic mentors at that position and I grew from a financial analyst there, moved on to a law firm and became a senior financial analyst and then moved into the manager of financial planning and analysis role at the law firm.

[00:02:42] Dan, I took a step back starting about 2012 when my mom was diagnosed with multiple myeloma.

[00:02:50] And I needed to I needed to focus on her. So I did some different contract positions in consulting positions. And then in 2015, after my mom passed away, I decided to do something I always wanted to do and I went to pastry school at the Cambridge School of Culinary Arts.

[00:03:09] I was the second oldest in the class, so I was not the oldest.

[00:03:15] And it was a certificate program. It was an incredible experience. I also was able to work in the industry for the rest of that year. Everything from fine dining at Legal Harborside in Boston to working and so for Bakery in Cambridge and ending that year with a firm baking job up in Ipswich, Massachusetts. Sure. And I decided it was time to go back into finance because 12 hour days on your feet after a certain date is a challenge. It's so and I had invested so much in my finance career and I really missed a lot of the aspects of that. So my husband and I relocated to Los Angeles and I took a job as the senior operations controller at Wolfgang Puck Catering. And it's while I was here in Los Angeles that cannabis is so normalized here compared to the rest of the country. And in the summer of 2017, I said, well, I'm going to get my medical card to see if I can experiment with CBD for, you know, just your usual, you know, work related living in L.A., traffic related anxiety. And it was it was phenomenal. And from there, you know, I looked back on this 15 year span of my finance career and said, am I going to stay in corporate and continue to pursue the next level, that director level into a CFO, into a CEO? Or do I want to go out of my own? And I really felt like I had such a varied background that my skills would be more useful and I'd be happier if I went out on my own and I transitioned out of Wolfgang Puck and what I was thinking about in industry.

[00:05:11] I had been thinking about getting into cannabis. And then my husband heard about the dope CFO program on a podcast just like you. It works. It does. And he said, Erin, I think that this is a really good fit. So it was about this time. Year that we we really started getting engaged in the cannabis industry with the California business conference that was in Anaheim. Around this time last year. And from there it's been a hundred and fifty percent complete immersion industry conferences and networking events and webinars and reading and the Dope CFO program and in talking to clients and not so straightforward journey. But I do feel like everything that I've done in the past has led me here. Yeah, yeah.

[00:06:08] I think that's that's often the case or from the story that I hear is that this is this is a chance to kind of pull together lots of different aspects of people's lives and to really the next phase of their career.

[00:06:18] And especially being an entrepreneur like that, that's when you're you're tested at all levels. Yes. So tell me, I like to ask this of folks that came out of, I will say, more kind of traditional or, you know, somewhat straight laced kind of industry is coming into cannabis would have been the real kind of challenges or transitions you've had to make either personally or professionally to be able to go from what has been some fairly well.

[00:06:44] So kind of straight, straight laced professions or backgrounds. You know, certainly BCG, you know, talk talk about the fairly traditional kind of industries going into cannabis. What are the what are the changes that you've had to make or the transitions you've had to make?

[00:06:56] Well, I think the one that's been hurt that's been most difficult for me is that communicating what my skills and background is effectively to cannabis businesses. There are a lot of folks like myself, I call us corporate cannabis who are certainly very familiar with your traditional accounting and finance within larger organizations.

[00:07:21] You have your accounting, you have your tax, you have your financial planning and analysis. But there's a lot of people in this space that are either entrepreneurs like myself or who have been operating in the industry for decades that maybe aren't as familiar with the finance and accounting function and how important it is to to running a successful business and being able to compete against those traditional businesses. I think from a personal standpoint, I'm used to very formal levels of communication and really tight deadlines. And I find that this industry is a lot more I don't want to say laid back, but informal and relationship based. So the same kind of communication that I've relied on for my whole career is not necessarily this style of communication that I need to use within the industry.

[00:08:20] Yeah, I think that's true. I end up working with a lot of companies who are growing very quickly and they're trying to bring in talent and often to recruit talent from like pharmaceuticals and things like that. And it is it's a transition that everyone can make. And the industry does have a certain style and a way of working on a different set of norms that if you're coming out of a really, really developed industry is really formal. Industry is not particularly coming out of law and accounting and pharmaceutical and regulatory stuff. It can be a tough transition time. I'm not surprised. So in terms of your focus now and where what are the solutions that you help companies with? What are the kind of problems or engagements? Well, how were you involved with the cannabis companies and what is the work that you do these?

[00:09:03] So Alison, Fran is a virtual controller slash part time CFO service. So what we do is we bridge the gap between the bookkeeper and the CPA. The bookkeeper enters all the daily transactions and you might run some basic reports, might do some light payroll, pay some invoices. And then on the other end, your CPA does your annual tax filings. Some of them may do quarterly returns. What we do is for smaller companies who aren't yet ready to hire a full accounting and finance internal team, we fill that role. So your reviewing the bookkeepers month and close monthly reporting packages, setting up a professional data room for all of the documents presentations. A lot of companies, as you know, get funding from investors. And so those investors want to see quarterly financials and projections. We do rolling cash forecasts. And these are all for plant touching businesses because they're subject to the Internal Revenue Code, 280 E to 80 E says is it's very short and it's businesses can't deduct.

[00:10:25] The normal cost of doing business is if they are plant touching it. They are any way involved in the processing or sale or transportation or cultivation of cannabis in those normal business expenses are marketing and sales and meals and entertainment advertising. Even rent in a lot of cases is not deductible.

[00:10:50] So that leads to a significant tax burden on these cannabis companies. And the only way to minimize that is to properly account for your cost of goods sold. And you do that through a series of you set up allocations for things like rent and utilities and security and maintenance and equipment. And depending on the type of business, whether it's retail or manufacturing or cultivation, we use those allocations to put costs into work in progress and ultimately cost of goods sold in a way that's consistent and will be seen as reasonable by the IRS. So I would say that the biggest problem that we help our clients with is understanding 280 E and understanding how to do, understanding why it's important to do the cost accounting for their cost of goods sold to minimize their tax burdens. Got it. That is our main business. I'm finding though, on a lot of the calls I've been having recently with prospective clients that it's a broader business kind of gap that they need filling. In terms of things like making sure they have workers compensation insurance and someone has completed OSHA training. So we help with those things too. Just because with my background, I've been involved and had exposure to those things. And it's been really it's been really interesting and it's been great because I like to use all of my skills to do a little bit of everything.

[00:12:33] So a couple questions. One. Oh, my gosh. What's your working model or definition for who who's gonna fall under these restrictions, the IRS restrictions around if you can deduct these ordinary business expenses?

[00:12:47] Is there a test that you use or is are testing industries around? You know, if you're gonna be subject to this.

[00:12:51] Yes. So it's whether or not you take possession of the cannabis. So if you are a cultivator, a dispensary, a manufacturer or processor in terms of, let's say, edibles or oils, tinctures or a distributor, if you're just, you know, picking it up and, you know, picking up the products from the manufacturers or the brands and taking them out to the dispensaries, they are all subject to 80. The only businesses that aren't subject to 280 are those like Alison friend.

[00:13:27] Yeah. Yeah. And service itself to ancillary businesses.

[00:13:32] How does someone like I was kind of curious if if you run into those. How does someone like like a testing lab, you know. So they they will handle the product for the purposes of providing the service. But they you know, does it qualify as taking possession of you run under these cases?

[00:13:47] I haven't run into the testing labs, specifically the network that I'm a part of accounting for cannabis. I think that there is consensus that, yes, the testing labs will be subject to 280 e, but with the manufacturers and the cultivators and most likely the testing labs, they have an advantage because more of what they do goes into the cost of goods sold versus a retailer where really the only cost for the retailer is the cost of the cannabis, not the security or the armored car or the or, you know, labor. So, you know, you have your sales and then you you have the cost of the cannabis and that's what your tax on.

[00:14:34] Yeah. So that's an interesting one, because I think I want to make sure people understand this point. So the way that Twitter is set up is that you can deduct cost of goods, you cannot deduct your other ordinary business expenses. But if you can basically track, allocate and assign some of these expenses to cost of goods, then you can actually deduct them. What do you need to do to do that effectively from boosting compliance or being able to deduct it from an IRS point of view? What does that process work?

[00:15:06] So that process. The first thing is you have to have gap generally accepted accounting principle financials and you have to have monthly financials. You know, the cost accounting can be done monthly or quarterly, but you have to show that you are completing financials every month, according to according. Gap and then you have to have a reasonable set of assumptions for documented to show exactly what you have included in your cost of goods sold in what you haven't included. Slow That process is something that, you know, a cannabis a cannabis accountant would work with the business owners to identify you. The square footage of, you know, the indoor grow facility that actually is grown and you can deduct the square footage that that's actually associated with growing the plant.

[00:16:05] But you can't deduct the front office or your shipping room and things like that.

[00:16:09] Correct. Correct. In the way. And it would be on a square footage basis. And then that's applied to your work in progress where the plants are. We have a client grow calendar. And what that does is it tracks all the different varieties, the number of plants, how long they take to flower, you know, using those allocations on space. And, you know, you may have an employee and all they do is water. So 100 percent of their time, you could theoretically, if you set up your allocations correctly, be included in cost of goods sold. It's really it's about documentation of your allocations. It's about consistency in your financials and it's about understanding your being taxed unfairly. Well, I mean, the feeling is that people are being taxed.

[00:17:04] I would agree, but I think that's a judgment.

[00:17:06] Yes. I mean, I agree as well. But you can't get around to 80. Yeah, a lot of people are you know, a lot of companies are out there and they're setting it up. Management companies and holding companies and complex structures hoping to be able to avoid 280 e. But we're seeing time and again that the IRS is they're using their own judgment.

[00:17:28] How cut and dry is this or you're dealing with kind of a situation of, you know, at the end of day, it's going to be dependent on, you know, how what the IRS kind of deems as being qualifying or not qualifying. It sounds like some of those being super buttoned up so that you don't run the risk that the IRS might come in and say, well, look, you didn't do this. Right. So we're not going to we're going to talk to you on all this income that you thought you were gonna be able to deduct.

[00:17:51] It's it's really the it's really the consistency and having someone. So one of the things about the accounting for cannabis and we all you know, everyone that's in my network, you know, we stress this is that you don't necessarily need to work with me, but you do need to work with a cannabis account. And because this cost accounting is the last time I had seen it was at Fishery Products. That was my first job on grad school. And it's not something that a lot of people do. It's not necessarily even a course that most accountants would take. So having knowing how to do the cost accounting, being up to date on the 280 and having that consistency is just so important, because I think the feeling is that it's not a question of if the IRS is going to audit candidates companies, it's when. And there was I mean, there was even a it was very recently the IRS had made a judgment on whether or not they could classify someone as a Schedule 1 company and hold them to 2 to 80 e, and that was upheld that the IRS does have the right to to make that judgment interesting.

[00:19:11] And it was something. Is there something you can do retroactively if you don't if you have in the same place for the year? Can you kind of figure this out historically or does it require this stuff to be figured out upfront or put in place up front in order to to have it work?

[00:19:24] We know it can be done to 20. 19 is definitely still doable. You know where we're in the second half of the year now. So I'm encouraging people not to wait much longer because, you know, the further along we get in the year, the more there is to fix. And also, the less time it leads to get ready for 2020 in terms of budgeting and forecasting and processes. But, you know, I mean, right now, I'm still talking to a lot of people who haven't filed their 2013 taxes and are still looking for someone to do those. Getting it set up upfront saves a lot of time and money.

[00:20:02] I mean, I guess like most things, like most things, you know, going in and being able to implement that cannabis specific chart of accounts for retail or grow getting quick books or zero or accounting sweet. I'll set up your cash handling policies in employee training manual, all the allocations. It really it just it puts you in a. Mission to compete based on your product or your service because you're not focused on all of the numbers, you're actually we try to let the CEOs and the CEOs focus on the business. And there are some CFO as we do work with on a support basis, because, again, as you know, most cannabis companies are their cash strapped. And, you know, they're just doing the best they can. So there's not a lot of resources for internal hires. Yeah.

[00:21:00] And I think it's an important point there, which is I think a lot of people end up looking at the books or their financials as kind of requirement they need for paying taxes and reporting to investors. But, you know, if done right or if done properly, they really become a great tool for managing the business.

[00:21:18] And I think a lot of lot of senior leaders kind of miss that in many industries, particularly in cannabis. I think there's a certain aversion to the numbers or a certain inability to kind of look at the numbers as a management tool and really see like, how is the business doing? Like, what is that? The numbers can tell you a lot about what's happening in your business. If you set them up right. And if you're looking down at them with the right lens, I mean, talk to us a little bit about how you work with the senior folks, too. Yeah, I guess use the numbers as a management tool, not just as kind of a reporting check box that you have to you have to close every month. But how can you use it to actually understand how your business is operating?

[00:21:53] Well, we haven't reached the point of that with most clients because most clients take a month or two of cleanup before we can really get rolling. Some of the discussions that I've had in the plans we have in place for the second half of the year are, you know, the industry is coming up on year two. So we're starting to have some data, historical data that, you know, can be useful. And I think the first step is to make this information useful is to figure out what the important metrics are in your business. I'm most familiar at this stage with retail. So knowing where your what day of the week is your biggest sales day? What's your slowest sales day? What promotions are you running that are doing really well? What is your what are your hours, you know, employee hours that are worked during the week? Are there opportunities to move some people around and, you know, are there opportunities in cross training different employees? And then there's also in terms of using the data correctly. A lot of companies right now don't have a rolling cash forecast. And it's particularly important for companies who either have investors or are, you know, self-funded to have a rolling cash forecast.

[00:23:18] You know, if you're brand new and you're really short on money, then I you know, I suggest a 90 day. If you're more established and you have some access to funding, I would suggest a six to nine month to help the executives plan what they're going to do. When if your sales are slow in March, then, you know, let's look at, you know, reducing labor hours. But you're gonna do great around the Fourth of July. That might be a nice time to do a a marketing push. But, you know, we identify, you know, a set of key metrics, whether that's price or sales, and they evolve over time in setting up key metrics dashboard. You know, it doesn't have to be complicated. I usually do the mix set in Excel or PowerPoint and it shows you how those key things are performing month over month and soon, year over year, quarter over quarter, so that they can take that information and make decisions on price store hours, promotions, staffing levels.

[00:24:23] Yeah, I think it's interesting. I mean, I don't think many companies actually do cash forecasts from Portugal. From what I've said. But it's a really powerful tool. Like if you actually sit down and figure out, OK, week by week, you know, what are the expenses or what were the payments we're going to make? What is the income we're going to have? Where does that leave us in terms of a cash balance? It can be super insightful either way. Like sometimes it's like, oh, my gosh, we are in six weeks. You know, based on how we project, we're gonna be running very, very short or potentially negative. What are we going to do? How do we defer expenses? Certainly increase. How do we move move income forward or how do we get revenue in sooner?

[00:24:57] And that could be around payment terms. It could be around promotions and sales. I mean, there's there's various strategies there, but that can be hugely insightful. In fact, it can be you know, it can be an extra central to you. If you haven't planned that and you run into that again, you realize that you're not going to be a little make payroll. That's good. Those are those are those are serious problems. But the flipside to is that I've I've seen situations where we do that and we look out, you know, three months, six months, and we actually see we're gonna have a big cash surplus.

[00:25:23] And, you know, that is an opportunity and it could be a waste of. If you don't have that map and you don't see that and understand how you're going to use that capital and you to drop the business, it could be know it could be really interesting. Once companies get good at mapping that out. So I highly recommend capital forecasting at some level either. I'd say at least a week to week is gonna be a good model.

[00:25:43] I think it depends on the size of the business and the type of funding. And you know, even for a mom and pop dispensary, you know, if you're doing a, you know, just a simple 90 day rolling cash forecast and you see that in six weeks that you're not going to be able to meet your full payroll or you're going into the red. It gives you time to consider what can we do? Yeah. Can we get a friends and family loan? Can we find investors? Or is it as simple as reducing your bud tenders to, you know, a part time schedule for a few weeks because people would rather be reduced to a part time schedule then let go. And those are the kind of things that understanding the numbers in and out in day to day. It's so powerful. Yeah.

[00:26:33] Yeah. You're having a couple of weeks to figure out that I was much different than figuring that on Tuesday when you got to make payroll on Friday.

[00:26:38] Other options open to ya or much greater because those those kinds of emergencies and those kind of issues there. What's keeping the with keeping people up at night. And it's what it's what they're focused on rather than, you know, maybe tracking. I mean, store hours, if you're tracking these things and no one's coming in after 8 o'clock at night. Do you need to be open till 10:00? That's two hours more security and utilities.

[00:27:03] Yeah. Not really. That's why I said I'd like if you have if you have a well set up chart of accounts that maps to sort of business decisions that you can make that change the outcomes like the numbers can be a really, really effective tool. I mean, if you've set up your your chart of accounts just being kind of reporting taxes, you know, it can often be very difficult to kind of tease out of that. What's the answer? What what are the management operational insights? I can understand about my business through my numbers. But if you set it up right. It's quite easy as I go. It's actually it's hard to miss once you once you do it right. You really start looking at the numbers if you set it up right. It can be pretty obvious.

[00:27:37] And that's what the great thing is about. The cannabis specific chart of accounts that we have is that we can do your monthly reporting. So you see your you know, your your profit and loss, your income statement as any quote unquote, normal business would. But then we also have the cost accounting to do the taxes for the cost of goods sold so that, you know, you have kind of both of those views because you know what the tax is. Yes. Or important. You have to get that right. You don't want to pay fines and penalties, but you also want to see how your business is doing from a perspective of its business, not just a cannabis business.

[00:28:15] Now, Erin, this has been great.

[00:28:17] If people want to find out more about you, about Alice & Fran, what's the best way to get that information?

[00:28:22] They can go to or send me an email at I'm also on Instagram. Alice and Fran underscore L.A. where we're based out of. And yeah, you're right. And you can head over to the website. Read the story of how we got our name.

[00:28:45] It's a fun story. If people have time, go check it out. It's very touching.

[00:28:50] Yes. And thank you so much for letting me share some information and just talk through some of the important accounting and finance.

[00:29:00] Oh, my pleasure. I think we've covered a lot of really good important things, I think, for. For anyone in the business. Even if you're not touching the plant, chances are you work with somebody who's touching the plant. So understanding what they're going through and kind of the dynamics there is really critical for anyone in the business.

[00:29:14] And I'll make sure that those links and e-mail address and the Instagram handle are on the show. Not so people can click through and get them. Again, Aaron. Thank you very much for the time. It was a pleasure. And I appreciate you being on.

[00:29:24] Thank you so much, Bruce. Have a wonderful day.

[00:29:28] You've been listening to Thinking Outside the Bud with Business Coach Bruce Eckfeldt to find a full list of podcast episodes. Download the tools and worksheets and access other great content. Visit the Web site at And don't forget to sign up for the free newsletter at