Medicinal Mushrooms for Migraines: Shroompreneur Opportunities

Medicinal mushrooms for migraines are already a thing. Many medicinal mushrooms have been used for hundreds of years – or longer –

But can medicinal mushrooms for migraines be profitable?

Yes, and many shroompreneurs are focusing on bringing these therapeutic fungi to consumers in need.

In this post, we cover medicinal mushrooms for migraines, their efficacy, and answer some of the most common questions about their applications.

Medicinal Mushrooms for Migraines

Cordyceps and Migraines

Cordyceps and migraines, can they help? Many people have claimed beneficial effects.

There are three species of cordyceps mushrooms commonly used for medical purposes: Cordyceps Sinensis, Cordyceps Militaris, and Cordyceps subsessilis.

Cordyceps Sinensis is the most extensively researched. There are literally hundreds of studies on these fungi that have been performed over the past 40 years.

The evidence is pretty convincing that it can help with migraines, as well as a variety of other health benefits.

In fact, modern medicine has been using Cordyceps Sinensis for decades to treat respiratory ailments such as COPD and bronchitis because of its ability to increase lung function.

Cordyceps Militaris have similar health benefits.

With this being the case, we’re seeing more and more people turning to medicinal mushrooms for migraines. But what about the shroompreneur opportunity?

Medicinal Mushrooms for Migraines: The Shroompreneur Opportunity

Like any shroompreneur considering selling, distributing, or manufacturing medicinal mushrooms for migraines, you’re probably wondering what the market is worth.

The migraine treatment industry raked in a whopping two billion dollars in 2019. But this industry stands to expand to around 2.4 billion dollars by 2030.

Even just a small share of this market could net shroompreneurs millions of dollars in profits while serving people in need of relief.

Medicinal Mushrooms for Migraines FAQ

What mushrooms are good for migraines?

Several medicinal mushrooms have been shown to help with migraines, including cordyceps, lions mane, and reishi. Psilocybin mushrooms may also aid in migraine relief. However, more research is essential to prove their efficacy.

Which mushrooms are best for migraines?

The majority of studies on medicinal mushrooms for migraines focus on Cordyceps Sinensis – which is why it’s probably the best option. However, you should do your own research to find out what fits your needs.

Shroompreneurs are developing new medicinal mushroom products for migraine relief. And as more products hit the market, we can expect them to acquire a share of this multi-billion dollar industry.

Does Reishi help with migraines?

Reishi mushrooms and migraines go hand in hand. From anecdotal and scientific evidence, we know reishi can help with migraines.

In one study, after just seven days of taking reishi extract, migraine sufferers reported a significant reduction in pain and nausea.

The next step is to conduct more research on the use of medicinal mushrooms for migraines. Particularly, psilocybin mushrooms, especially with them being on the brink of legalization.

Can psychedelic mushrooms help migraines?

Researchers from Yale have recently published a study highlighting how psilocybin impacts patients with migraines. Beyond this research, survey data and anecdotal evidence also point to psilocybin helping migraines and cluster headaches.

Can mushrooms give you migraines?

There are reasons why people avoid medicinal mushrooms. One of the main concerns is that mushrooms can cause migraines or other allergies.

However, research shows this may not be the case. In fact, several studies have shown individuals with migraines getting therapeutic benefits from fungi. There’s probably no reason to worry about shroompreneurs distributing medicinal mushrooms for migraines.

Closing on Medicinal Mushrooms for Migraines

Medicinal mushrooms for migraines offer shroompreneurs a unique opportunity to earn a living while appealing to patients. Even though the research on medicinal mushrooms for migraines is limited, the insight available points at these fungi being an effective solution for some.

Shroompreneurs can expect demand to grow as more people try medicinal mushrooms for migraines. As the research continues, those interested would benefit from keeping their finger on the pulse of what’s happening in the industry.

So there you have it! Medicinal mushrooms can help with migraines and this is a huge business opportunity for micro-businesses to get involved in.

Keep in mind, once psilocybin becomes legal, the currently legal medicinal mushrooms are a great way to build a foundation in preparation for the end of prohibition.

Own a medicinal mushroom supplement operation and looking to scale? Northstar is here to help!

Contact us now to speak with one of our experts about how our financial services will grow your operation now.

Psilocybin Spore Legality

Psilocybin spore legality is increasingly coming into question as more and more states begin relaxing on the rules. But while consumers wonder, “are magic mushroom spores legal in my state,” shroompreneurs also have questions about psilocybin spore legality.

Keep in mind, psilocybin spore legality at the federal level is still not happening. But we’re confident this will change eventually, much like we’ve seen the cannabis industry progress.

In this post, we cover psilocybin spore legality, offer some insight into the future of magic mushroom legality, and explain the technicalities that are allowing magic mushroom spore sales in the US.

psilcybin spore legality

Are Psilocybin Spore Kits Legal?

Psilocybin spore kits and grow kits are legal and can be purchased online legally. These can also be openly sold in stores.

However, psilocybin and psilocin still maintain a prohibited status with the federal government. At this point, psilocybin spore kits allow people to cultivate their own magic mushrooms. Since these kits don’t contain psilocybin, they’re technically legal. But there are still some arguments to be had over this idea.

While some argue that psilocybin spore kits are legal to sell, the law states otherwise. Under the Controlled Substances Act, psilocybin is listed as a Schedule I narcotic.

This act bans the intentional “manufacture” of a controlled substance. The definition includes cultivating, growing, or harvesting a controlled substance. So, even though psilocybin spore kits don’t contain psilocybin, using these kits to cultivate magic mushrooms violates the act.

But what about the shroompreneurs looking to sell psilocybin spore kits? This is likely illegal, too.

These kits are drug paraphernalia, which is illegal under the CSA. This includes all equipment, products, and materials used with the primary intention or designed to be used in manufacturing or producing controlled substances. With no other use for these kits than to produce these illegal products, they’re likely illegal.

Furthermore, attempting or conspiring to violate the CSA is illegal. Thus, if someone is selling spore kits that cultivate psilocybin, this would count as an attempt to violate the CSA, regardless of whether or not psilocybin has been cultivated.

Aiding and abetting in the commission of a crime is also illegal. With this in mind, if someone who purchased a psilocybin spore kit from a seller gets convicted of producing psilocybin mushrooms, the seller also could face a charge, too.

If you’re curious about psilocybin spore legality, you likely want to understand the laws in each state. States have different laws but more of the regulations in place are comparable to the CSA.

Some cannabis-friendly states have exceptions for selling cannabis paraphernalia. However, the same does not apply to psilocybin paraphernalia.

Psilocybin Spore Legality By State

Psilocybin decriminalization is on the rise throughout the US. But there’s a difference between decriminalization and legalization.

Decriminalization means the penalties for psilocybin crimes are reduced. A state could decriminalize misdemeanor possession charges to a fine, like ticketing the user instead of arresting them. This is one step away from legalization, which means no penalty or jail time would be imposed.

So far, only a few municipalities in the United States have decriminalized psilocybin. But some states have outright made statements to deter psilocybin spore sales.

For example, in California, they released this statement:

”Every person who, with intent to produce [psilocybin], cultivates any spores or mycelium capable of producing mushrooms or other material which contains such a controlled substance shall be punished by imprisonment in the county jail for a period of not more than one year or in the state prison.

. . .

Every person who transports, imports into this state, sells, furnishings, gives away, or offers to transport, import into this state, sell, furnish, or give away spores or mycelium capable of producing mushrooms or other material which contain [psilocybin] for the purpose of facilitating a violation of the law shall be punished by imprisonment in the county jail for a period of not more than one year or in the state prison.”

While it’s illegal for now, we believe the law will change to allow psilocybin cultivation and sales. But as with the cannabis industry, this progress will take time.

So far, we’ve seen some impressive progress moving in the right direction. This includes some states allowing more psilocybin research. This research may hold the key that will change federal psilocybin spore legality.

Municipalities That Have Decriminalized Psilocybin

Three municipalities have decriminalized psilocybin so far, but this doesn’t mean shroompreneurs can begin producing and distributing legally just yet. Anyways, here are the three municipalities and a bit about the psilocybin spore legality progress being made.

Psilocybin Decriminalization in Denver, Colorado

Psilocybin spore legality in Denver changed in 2019 when legislators decriminalized psilocybin for personal use and possession. The vote was close, but it pushed 176,000 residents to make their case, with 50.6% of voters desiring decriminalization.

Even though psilocybin spore legality in Denver is still not legal, this change in local law deprioritizes psilocybin mushrooms on the list of law enforcement priorities for Denver at the city and county levels.

Psilocybin Decriminalization in Oakland, California & Santa Cruz, California

Within a month of Denver’s success with Initiative 301, Oakland’s city council voted for the decriminalization of psilocybin and other psychedelics from other plants and fungi. This includes peyote and ayahuasca. This time, the vote was unanimous.

Oakland no longer charges users for psilocybin possession, but lawmakers have not legalized psilocybin sales. Furthermore, Oakland residents cannot possess any of these hallucinogenic substances on any school property.

Once Denver and Oakland decriminalized psilocybin, Santa Cruz did the same in 2020. This was yet another unanimous vote.

Similar to the Oakland decision, Santa Cruz decriminalized psilocybin and other plant- and fungi-based hallucinogenic susbtances. But the main difference here was that the motivating force was psychedelic applications for addiction therapy.

Legal Psilocybin Mushroom Cultivation in New Mexico

New Mexico state’s Court of Appeals decided to change psilocybin spore legality. It concluded that growing these mushrooms is not banned under the state’s anti-drug manufacturing laws.

For New Mexico residents, this changed psilocybin spore legality. Residents can grow psilocybin mushrooms at home without facing felony drug trafficking charges.

Federally speaking, psilocybin spore legality isn’t where we’d like it just yet. But we believe this will change as time progresses.

At this point, traveling outside of New Mexico with these substances isn’t recommended. While someone in the state can take advantage of psilocybin spore legality, you cannot grow them outside of the state’s borders.

Keep in mind, cultivating magic mushrooms in New Mexico might be legal. However, it’s still illegal to possess dried psilocybin mushrooms. The state allows residents to grow psilocybin mushroom spore and consume the mushrooms. But preserving these mushrooms is still prohibitted.

When Will Psilocybin Spore Legality Change at the Federal Level?

At this time, psilocybin spore legality in the United States is limited to New Mexico state law. The federal government still classifies mushrooms and other plants containing this substance as Schedule I drugs.

We believe that all of this will change with time. This includes psilocybin spore legality, decriminalization, and even legalization efforts. The time is coming, especially with studies showing psilocybin might help people with depression, anxiety, and other ailments.

As more research is conducted on psilocybin, expect activists to push for its legalization across all fifty states. Those working in the field of psychedelic therapy are hopeful about these results and want to expand their efforts to reach others who could benefit from treatment.

Looking to expand your legal mushroom business? Northstar is ready to help!

We’re ready for the legal psilocybin marketplace, and when it comes, we plan to be the go-to for scaling psilocybin-related operations. Contact us now to speak with one of our experts about how we’ll grow your company with the right financial insights.

Accounting for Cannabis Inventory

Accounting for Cannabis Inventory

Accounting for cannabis inventory is essential for dispensary owners and retailers alike. This, of course, involves an effective and efficient POS system that offers costing methods for appropriate inventory valuation and management.

But what does accounting for cannabis inventory entail, exactly?

In this post, we discuss the 280E loophole, inventory valuation for a compliant inventory system, and cost of goods sold optimization.

What is the 280E Loophole?

If you’re in the cannabis industry, you’ve likely heard about the 280E loophole. 280E excludes normal business expense deductions from federal taxes for companies operating in the cannabis space.

So, what’s the issue here?

Well, this exclusion limits profits and makes accounting for cannabis inventory more complex than other operations.

With limited access to deductions and credits, some cannabis businesses must deal with an effective tax rate of as much as 80%. It’s easy to see why so many cannabusiness operators are looking for a 280E loophole. But equally important to keep in mind is that many of the Section 280E strategies you might hear about online are as risky as they are aggressive.

Costly infractions can come as a result of incorrectly allocating expenses into cost of goods sold and putting costs to non-plant lines of the operation. Some cannacompanies find themselves wrapped up in litigation over these practices, especially if they do not have a cannabis CPA handling their books on their behalf.

Managing Tax Liability & Attracting Investment

Managing Tax Liability & Attracting Investment

At Northstar, we optimize our clients’ tax positions with a firm understanding of tax laws. This involves improving inventory accounting and finance functions.

We establish consistent methodologies, detailed reports, and documentation to ensure our clients are always ready for an audit. Current cannabis accounting practices lead our efforts.

Through this approach, we address the 280E loophole while establishing a solid foundation to support long-term growth. Without this organization and expert accounting practices, tax liability remains high and it’s challenging for cannacompanies to attract investment.

280E Cost of Goods Sold FAQ

Business operators, including cannabis business operators, subject to Section 280E must check Sec. 471 to understand how to properly capitalize inventory and valuation methods, as well as how to allocate expenses and their impact on cost of goods sold. But you might have more questions.

Here’s a list of the most common questions we get asked about 280E cost of goods sold:

What is deductible under 280E?

Under 280E, taxpayers are not allowed to make deductions for a trade or business in which the operations are involved in the trafficking of controlled substances. Since cannabis is still federally prohibited, the IRS does not want to see business deductions that are related to this federally illegal activity.

Can dispensaries deduct expenses?

Section 280E of the Internal Revenue Code does not allow dispensaries to deduct expenses. This is because these operations sell a federally illegal controlled substance. Thus, any expenses that come about in the production, distribution, and sale of cannabis are non-deductible.

Does 280E apply to growers?

Every business involved in touching medical or recreational marijuana and its products throughout the supply chain are subject to 280E. This, of course, includes marijuana growers. While these operations might be operating in a state that has legalized medical or recreational cannabis available, 280E still applies to growers and other cannabis-related businesses because of the definition in place.

280E Depreciation

Since Internal Revenue Service code section 280E keeps cannabis businesses from taking deductions, depreciation falls under it, as well. For instance, if retail cannabis operations were allowed to deduct depreciation, they’d be able to deduct the depreciation of cash registers, leasehold improvements, shelving and display cases, and other assets.

Accounting for Cannabis Inventory Valuation

Accounting for Cannabis Inventory Valuation

For cannabis retail, inventory would be classified into primary, secondary, and tertiary categories. Here’s how this works:

  • Primary – Products bought to sell in the same form they were purchased. This includes cannabis buds, extract, and seeds, along with other products.
  • Secondary – Secondary products would include the products prepared on-site. This can be anything from edibles to pre-rolled joints and concentrates.
  • Tertiary – Tertiary products would include anything one might use to administer medicinal or recreational cannabis. This could be lighters, THC extraction equipment, pipes, rolling papers, and more.

During inventory valuation accounting for cannabis inventory, we methodically determine the total cost value of all products in stock at any point during the business’s accounting period.

By assigning a dollar value to the goods in stock, we know what a portion of the company’s current assets is worth. This comes in handy when handling financial statements for the operation and encourages better decisions when considering the available funds.

Inventory sold gives the business more cash flow. This allows the company to replenish goods and maintain appropriate stock.

From there, we add the value of all sold inventory and all associated direct costs to get the cost of goods sold. Then, COGS subtracted from the total revenue offers the gross margin.

We track inventory metrics like gross margin because this offers a clearer assessment of the company revenue and how much is available to cover operational costs. This also allows us to explore strategies to increase company revenue as we work to maximize profits.

Inventory Costing Methods for Cannabis Businesses

Inventory Costing Methods for Cannabis Businesses

Unfortunately, there’s no single inventory costing method that will work for every cannabis business. We must identify which solution will work best for the company.

Cloud-based inventory management systems leave a lot to consider. However, with cannabis inventory typically having an expiration date, these three methods usually work best:

  • FIFO Method (First-in, First-out)
  • LIFO Method (Last-in, First-out)
  • WAC Method (Weighted Average Cost)

FIFO Method

The first-in, first-out method of inventory valuation considers the items that were first put into inventory as those which will be sold first. Most of the time, we observe this inventory management technique being used in the food industry and other perishable goods sectors.

Through this technique, businesses sell the goods purchased first before selling the newest stock. Thus, this method ensures remaining stock will have the most recently purchased or made goods, which are then accounted for at their purchase cost and give us an idea of the current value of the operation’s inventory.

With this costing method, perishable cannabis goods remain fresh, allowing these operations to minimize waste resulting from spoilage. This also allows cannabis business operators to easily comply with state and local laws that regulate efficient seed-to-sale tracking and rendering of unsold products after expiry unrecognizable.

Since the cannabis industry is impacted by price volatility and the existence of its black market, the FIFO accounting method also gives small operations the ability to report lower COGS and higher net or gross margin by selling order (lower-priced products first followed by higher-priced products found in inventory). But for scaled operations that have higher-volume transactions, FIFO makes accounting for cannabis inventory challenging, which means the business may be better off using a simpler alternative method.

LIFO Method

The LIFO method (last-in, first-out) opposes FIFO’s methodology. This involves selling the most recently bought goods first and allowing older goods to stay in inventory for longer. With this method, you increase storage costs, spoilage risks, and the overall cost of goods sold.

However, using the LIFO method of accounting while checking for cannabis inventory has its advantages. It’s good for those looking to reduce their taxes by reporting higher COGS and lower profit margin. This also comes in handy for businesses with a high inventory turnover, looking to avoid higher costs of efficient inventory management, and wastage.

But cannabis businesses rarely use this solution. Since cannabis products are usually quite perishable and can expire before being sold, the LIFO method results in more wastage and losses.

WAC Method

The WAC method (weighted average cost) is the most straightforward method for inventory costing. This method calculates the average value of all inventory in stock. It does not matter when the items were purchased or will be sold. To calculate the weighted average cost per unit, it’s only a matter of determining the total costs of goods in inventory and dividing that number by the total number of units.

High-volume sales and volatile prices make this one of the quickest and most efficient solutions for cannabis. This facilitates inventory management in instances where multiple strains or cannabis flower batches are combined to make edibles or concentrates due to the difficulty calculating individual item costs. While using the WAV inventory valuation method, it’s crucial to consider seed-to-sale tracking to maintain compliance.

Cost of Goods Sold Optimization

The first thing we recommend for our clients is to considering setting up Inventory Control Standard Operating Procedures (SOPs). Initially, this will involve checking to ensure there’s enough inventory in stock to satisfy the demand. However, it’s crucial to avoid tying up too much money in your stock.

The following are the SOPs we like to put in place for our clients:

Purchasing Cannabis Inventory SOPs

Every week, the person in charge of purchasing must check each product to determine which ones are low in stock. Then, they order a month of supplies. Checking important inventory indicators should be included in this process to determine which products to order. If the products are aging or expiring, they should not be purchased. Or, those product purchases should be lessened significantly to minimize waste.

Consider the following for products that must be purchased each month:

  • Lead time – Lead time shows how long it takes to receive the items in stock from the time the purchase order is placed.
  • Safety – Safety described the absolute minimum number of days of stock for a specific product you’d like to have on-hand.
  • Projected monthly sales 30 – You’ll take your current inventory and multiply it by 30, then divide that number by your projected monthly sales. If this number does not equal or exceed the sum of lead time and safety, you’ll need to place a new order.
  • Purchase budget – Your purchase budget equals ending inventory (safety x projected monthly sales/30) + projected monthly sales – current stock on hand

Receiving Cannabis Inventory SOPs

For receiving inventory, you’ll need to:

  • Ensure that the amount and final price of the inventory being received matches the purchase order, stock receipt, and bill.
  • Account for the stock and check the documentation to determine that the amount received is properly documented.
  • Check the quality of each item to ensure they’re ready to be sold.

Cannabis Storage & Control SOPs

Cannabis product storage is essential for this space. These products must be stored safely and with the right temperatures to ensure freshness. This is where a regular cycle account comes in handy.

Each type of product should have an established cycle count. This establishes whether you’re experiencing a loss in inventory.

Poor inventory management policies typically contribute to inventory losses. For example, if your inventory is lost, stolen, or expiring constantly.

For cannabis storage and control purposes, you’ll have a team member perform a blind count of all inventory. Each product’s stock should be documented.

Inspections of the products is equally crucial. This involves checking to see which products will expire the soonest. These products should be the first to sell. Any products that are expired should be tossed and marked as a loss. Discrepancies should be reconciled and documented as a loss using the online inventory system in place.

Cycle counts should happen weekly. A KPI should also be in place to ensure inventory discrepancy remains less than 1%.

Security is equally important for cannabusinesses. Most of the time, security and cameras are enough to prevent theft. But if an operation needs to take additional precautions, having all staff sign a theft policy outlining what happens to people who steal can also discourage theft. Give your team the right to anonymously report theft, as well.

Cannabis Inventory Aging SOPs

We recommend doing an analysis of cannabis inventory aging weekly. A lot of the time, cannabis business operators will find part of their inventory is aged beyond 60 days. This means cash is tied up in inventory, and this isn’t reflected in the Profit/Loss statement but is in the Balance Sheet.

An inventory aging report will help to diagnose inventory issues. If the products are 60 days or older or close to their expiration date, they should be discounted to speed up the sales. If products aren’t selling fast enough, they should be removed from the inventory and the next order should request less.

Here’s a list of strategies we recommend for eliminating aging inventory:

  1. Offer discounts on aging inventory – This strategy should involve gradually discounting products to ensure they’re not a complete loss. For instance, products one month old can have a 20% discount and products 2 months old can have a 40% discount. The discounts should be more enticing as the products grow nearer to their expiration dates.
  2. Adjust the location of aging products – Repositioning your aging products to ensure more visibility can help them get sold before they expire. Try having them in a few different places throughout the operation. Many businesses will put these items at the register for an easy grab.
  3. Plan a sales event – Planning a flash sale event can help move aging products rapidly. These sales encourage quick sales through urgency, which can result in customers buying products that they might not have thought of trying in the past.
  4. Discount aging products – This strategy works, but it’s important to discount gradually.
  5. Offer items for free – Free cannabis products encourage customers to buy products, too. So, while you might be giving your products away for free, some customers will outright purchase other products during their visit. Keep in mind, this will not work in states that don’t allow businesses to give away cannabis products.

Closing on Accounting for Cannabis Inventory

Inventory accounting is a crucial part of managing any cannabis operation. The right tools and technologies should be used to ensure you’re having accurate estimations on all inventory levels, as well as aging reports that signify what’s been sold and the money made from the sales.

At Northstar, we’ll help your operation succeed while accounting for cannabis inventory. Contact us now to learn how we’ll scale your operation’s profits with proper inventory management SOPs and practices paired with financial services.

Accounting for Cannabis Growers

Accounting for Cannabis Growers

Accounting for cannabis growers is a hot topic among members of the cannabis community and accountants. As cannabis laws are changing in the United States, more people than ever are growing marijuana to cash in on the green rush.

But what does accounting for cannabis growers entail?

In this post, we cover the ins and outs of accounting for cannabis growers, outline some of the most frequently asked questions, and explain the benefits of bringing a CPA in to handle cultivation operations’ financials.

QuickBooks for Farmers, But What About Cannabis Cultivators?

Quickbooks Online for Cannabis Growers

QuickBooks Online (QBO) can assist in creating a cannabis cultivator’s chart of accounts. While this accounting software was expected to be a significant part of the cannabis industry, it does not replace CPA insights and Excel sheets.

However, for small operations, it offers a budget-oriented product. But its inventory features are sub-par.

Workarounds are essential for seed-to-sale products and it doesn’t adequately track the various cannabis taxes. QBO is limited when it comes to state excise and local taxes on cannabis.

QuickBooks Premier Desktop for Cannabis Growers

Alternatively, some believe that accounting for cannabis growers can involve QuickBooks Premier Desktop (QBPD). This can be a good alternative to QBO as the operator can choose between having it on a server in-house or have it hosted outside of their office.

Once this decision has been made, it’s time to learn about the features. Inventory management is possible for small cannabis grow operators. But for businesses with multiple verticals, this won’t work.

QBPD also allows for setting up and tracking of various cannabis-related taxes. This can include sales tax, city taxes, distro excise, and cultivation excise. All in all, this is a good software for financial reporting if you’re an owner, manager, or investor of a cultivation operation.

QuickBooks Enterprise Solution

QuickBooks Enterprise Solution (QBES) can help cannabis cultivators who have multiple lines or locations of their operation. For instance, if you handle cultivation and distribution, or have a full microbusiness.

Setting this system up allows all licenses under a single QuickBooks account. But there’s also the option to break them up into multiple accounts depending on volume and staffing.

Similar to Premier, QBES is a desktop product. It can be hosted on an in-house server or you have the option to set it up on a remote server.

Here’s a list of features that make QuickBooks for cannabis cultivators valuable:

  • Inventory system
  • Multiple warehouse locations, either physical or virtual, to allow for full accountability of inventory.
    • Easy transfers
    • Product drop-shipping capabilities
    • Price levels for products and/or by customers
  • Manage various taxes to include sales, excise, and local
  • Combined reporting across QB files.
    • Includes P&L reporting for the entity and all licenses
    • Offers Sales reports for various distro arrangements, or multiple cultivation locations
  • Allows for multiple users with over 100 access features
  • Works with the state METRC system

Accounting for Cannabis Growers FAQ

Does QuickBooks work with cannabis companies?

While QuickBooks can work with cannabis companies, it does not include cannabis industry charts of accounts. This also does not integrate with other cannabis software, which makes it challenging for CPAs and cannabis business operators looking to incorporate visibility into their finances.

Is QuickBooks an option for cannabis growers?

Even though QB is a good option for small dispensary owners, it’s also not the best solution when you’re looking to keep track of your inventory across multiple facilities. We recommend our clients document everything using Excel sheets. While we can use QB, it’s not robust enough for most cannabis cultivators.

Does METRC integrate with QuickBooks?

METRC integrates with Quickbooks. But cannabis growers will still need an inventory management software that integrates with METRC to make this work. Think of the inventory management software as a middleman bridging METRC with QB.

Is gusto cannabis-friendly?

Gusto is cannabis-friendly, facilitating payments from cannabis growers to their employees. It’s also quite easy to upload this information into accounting software. CPAs and other accounting professionals serving the cannabis space are even able to become certified partners with Gusto, allowing them to provide this solution to cannabis clients when they cannot find support elsewhere.

Benefits of Having a CPA Accounting for Cannabis Growers

For cannabis growers, having a CPA is an advantage. Even if you’re planning on keeping things simple by only using QuickBooks for your financial reports, having access to a proper chart of accounts and other features that are built into QB software will be beneficial.

Northstar’s CPAs can spot mistakes that may have been made in order entry or how data was input into QuickBooks. We have first-hand experience working with and without QB, allowing us to help our clients avoid these mistakes altogether.

Furthermore, when it comes to deductions, it’s challenging for cannabis growers to deduct their expenses. This is something we help with, ultimately saving our clients thousands – even hundreds of thousands – of dollars in taxes.

And then there’s the data and analytics. The software can provide some of this information, but without an experienced CPA analyzing the progress, it’s difficult to know what you’re looking at and the best course of action to take. Our CPAs take the guesswork out of scaling cultivation operations.

Looking to grow your cannabis grow? Northstar is ready to help.

Contact us now to speak with one of our specialized experts about how we’ll scale your operation with the right accounting practices.

Accounting for Cannabis Companies

Accounting for Cannabis Companies

Accounting for cannabis companies is becoming more and more necessary with each passing day. As legalization takes hold throughout the country, earnings are on the rise for cannabis companies.

As these companies grow, so does their need for financial professionals to give them direction.

Accounting is an essential part of managing any business, especially one with changing laws and new tax implications. It’s important to have a firm grasp of what changes are happening within the industry as well as how this impacts their clients.

In this post, we cover accounting for cannabis companies, how it differs across the space, and some of the top questions related to the topic. Let’s get started.

Accounting for Cannabis Companies

420 Accounting Services

420 accounting services manage the accounting needs of operating cannabis companies. Services included in this niche are the same as others; bookkeeping, accounting, payroll, tax planning, and other financial services.

The main difference between 420 accounting services and accounting for companies operating in other industries is the slough of complications that can arise while accounting for cannabis companies. One wrong move can be devastating for these operations, and without an experienced CPA holding onto the reigns, it’s quite easy to suffer unnecessarily from an avoidable issue.

With this in mind, let’s dive into some of the concerns you’ll face when accounting for cannabis companies.

What Is a Cash Basis Accounting Method?

Cash basis accounting is simply an accounting method that counts revenue when money comes in and expenses when they are disbursed. This means that a company’s books will tally income and expenses when cash from the transaction is received or paid out.

As you can imagine, there are a lot of complications that arise when counting expenses in this manner, especially when dealing with cannabis companies. Because cannabis remains federally illegal, banks remain wary of opening up accounts for these businesses due to concerns over legal ramifications.

Without an account, it is difficult to keep up with expenses and this can lead to major issues. Perhaps the most notable problem is that it’s difficult to pay taxes on time when one doesn’t have an account.

This means that companies operating in the cannabis space need to take extra steps when accounting for their expenses. And since they are often forced to operate through cash due to these legal concerns, they need to take even more precautions than other businesses.

Accounting for Cannabis Companies: The Extra Steps

Cash basis accounting means that it’s difficult to keep track of expenses and this can be a major issue for cannabis companies. As such, there are extra steps one must take when accounting for this niche.

The first and most important is to make sure that you have a solid accounting team. There’s no way around it: you’ll need to have experts working hard to ensure your compliance and guarantee your operation scales effectively.

Secondly, your CPA needs to be aware of all current laws regarding cannabis. This is especially important if you’re working in a state where cannabis has not yet been legalized. This way, your CPA can help you navigate the extra steps that need to be taken when dealing with these laws.

Your CPA should also have an understanding of how this industry operates. Given the increased scrutiny on cannabis operations, it’s important for a business owner who is looking to scale in the space to have a CPA that understands the ways in which these companies operate. This will ensure a more streamlined accounting process.

CBD Accounting vs Cultivation Accounting

CBD accounting is a subset of the larger cannabis space. In this niche, you’ll find businesses that focus solely on CBD-related operations; from CBD oil production and product manufacturing to retail sales, this niche is growing rapidly. And so is the need for CBD accountants.

Given the increased demand for CBD in recent years, companies have been popping up left and right to meet these high consumer demands. As such, there has been a large boom in CBD oil production over the past few years.

As CBD gets more mainstream attention, companies are scrambling for experts who can help them take advantage of the opportunities that lie before them.

With this in mind, it’s becoming even more important for a business owner looking to expand their operation into the CBD oil niche to have a CPA that specializes in CBD accounting.

Beyond their specialization, CBD accountants need to be well-versed in the types of expenses that come with producing CBD oil. Accounting for cannabis companies can be difficult and this is even more so the case when taking strict regulations into account.

Because of these rules, it’s important for a company looking for CBD oil producers to hire an accountant who can help guide them through the process.

Cultivation accounting involves a whole different set of expenses. These costs are related to the entire cultivation process from beginning to end.

In other words, this involves both the expenses related to harvesting, trimming, and curing, as well as those associated with packaging and shipping. Furthermore, it also includes things like grow equipment costs and security expenses.

The unique challenges that cannabis companies face when accounting for these types of costs should be a major consideration when looking for a CPA.

Given these challenges, it’s important that companies working in this space have a well-versed accounting firm that understands the process from beginning to end. An accountant who specializes in cultivation accounting will be vitally important when dealing with these considerations.

Accounting for Cannabis Companies FAQ

What is a cannabis CPA?

Cannabis CPAs are expert accountants who specialize in helping cannabis companies navigate the legal requirements and financial constraints one faces when operating a business within this niche.

What qualifications should I look for when hiring a CPA?

For CBD oil producers, it’s important to hire an accountant who specializes in CBD accounting, just as growers should bring someone in who understands the niche. In essence, they’ll need to be well-versed in the latest legalities surrounding these unique spaces.

What are some common pitfalls observed in the industry?

One of the biggest problems with navigating cannabis accounting is inconsistency. Given that these companies operate in areas where it’s still not legal, there is still a lot of ambiguity regarding how businesses should be operating. This leads to issues when it comes to things like tracking inventory and quality control.

Do dispensaries pay federal taxes?

Yes, dispensaries must pay federal taxes. The money earned in these operations is all income and taxable, meaning it will need to be included on your tax return. But since cannabis is still seen as a Schedule 1 controlled substance, Section 280E limitations make it more challenging for these operations to obtain write-offs.

Concluding on Accounting for Cannabis Companies

As the cannabis industry enters yet another year of growth, it’s important for companies to streamline operations in order to get ahead.

One thing that all operations should keep in mind is the importance of having an expert CPA on their team who can help them navigate these unique challenges. By doing so, companies will be able to expand more efficiently and effectively.

At the end of the day, a CPA will provide you with the support that can help your business succeed in this ever-changing environment.

Looking for expert accounting for cannabis companies? Northstar is ready to help!

We understand the nuances involves in accounting for cannabis companies, regardless of at which stage they are in developing. Contact us now to learn how we’ll use our accounting expertise to scale your operation.