How to Win in Cannabis in 2019

cannabis accounting Jul 26, 2019

Learn How to Maximize Your Efforts

My goal with this blog is to explain how to win in cannabis in 2019 as an accounting professional. We get countless emails from people that want to try to do it the hard way, and that’s fine. But if you really want to maximize your efforts, you’re going to want to pay attention. As you may know, we provide cannabis accounting training to professionals all over the United States. This knowledge is unique in the cannabis industry right now, and is a way to add REAL VALUE (listen up all of you not knowing how to express value for fees to CEOS) to Cannabis CEOs, and add 10x to your fees to those that listen.

In most of the feedback that we receive, and among many of our students, I still see that most accounting professionals are “missing the boat” around 280e. The goal is simply to do it right, pay the tax, and not “beat” it (that is the losing strategy).

The advice attached is CONTRARY to what many...

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Do’s and Dont's of Cannabis Cost of Goods Sold Accounting and IRC 471-11

Cannabis cost accounting tools

To be able to do effective cost accounting for your clients you will need some very important tools, if you plan to take advantage of the maximum tax benefit. For starters, a very good cannabis Chart of Accounts that is  QBB/Xero/ready (specific for grow, processing, edibles, and retail operations). You will also need a client inventory template to accumulate monthly/quarterly counts, weights, estimated yields and estimated percent complete, and finally cost accounting templates to perform the calculations. 

We have all of this in our program, which was developed after 2-3 years of working with other CPAs, cannabis farm personnel, cannabis tax attorneys, and bookkeepers.   

Diving in to Cost Accounting for 280E

  1. To effectively do cost accounting you will need to allocate some of the P&L costs out of expenses and into Inventory/COGS. Use the Trial Balance at any ending reporting period to determine which costs to allocate, and...
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How to Successfully Invest in Cannabis Startups: A Message to Cannabis Investors

We here at DOPE CFO have been speaking at national conferences and to the press, CEOs, and accountants for quite sometime about how to do things correctly in cannabis accounting. But, we’ve been getting questions from investors, as well: from the billionaires (yes plural) who call us asking how to “fix” a bad investment with poor or no corporate governance, to the local millionaire wondering why he’s getting hit with a big cannabis tax bill, but no distribution from the company, to the average “Joe” on the street who wants to know how to win big in cannabis. We’re here to help. Here are some quick thoughts if you are dead-set on investing in this new industry.

First of all, I get it that right now you can make good money…even on the companies with horrible operations (ie without dropping names like “Med Men”). I also get it that you can make insane money on better run companies, even though they are spending (and losing)...

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Software Management Problems in the Cannabis Industry

The cannabis industry lacks a comprehensive software solution

Cannabis friendly software solutions have posed many challenges to accounting professionals, owners, operators, and investors. In order to remain in compliance in today’s cannabis world, there are monthly, quarterly, and yearly reporting requirements at the state and federal level which include required bank reporting, consolidated financials for investors and lenders, and  others that can be laborious and hard to keep straight without centralized software systems that integrate. Coupled with complex entity structures, cannabis reporting requires specific software tailored to the cannabis industry, which means general business solutions will not work. Popular accounting systems like Quickbooks and Xero don’t have cannabis industry charts of accounts, nor do they integrate with other cannabis software, which poses a unique challenge for accounting professionals and cannabis owners alike that are looking...

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Tax Strategies for Cannabis Companies

tax accounting webinar Apr 16, 2019

If you’ve paid attention to what’s going on in the cannabis industry, you’ll have noticed a number of decisions that have been handed down from the US Tax Court regarding how cannabis companies are improperly managing their tax strategies. Due to 280E, cannabis companies are extremely limited in terms of what they can deduct from their taxes. Because of these limitations, taxes are a much heavier burden on cannabis companies than most typical businesses and start to eat away at profit margins. There are legal ways to properly minimize tax liabilities for cannabis companies, but most unspecialized or untrained accounting professionals aren’t aware of them and can potentially get their clients into tax trouble. Every entity is different and must apply the rules in different ways, using different strategies. Here are a few strategies that we use to support our clients and share with our community of cannabis accounting professionals.

 

Cannabis Business...

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The Worth of World-Class Cannabis Accounting to CEOs

Determining the value that you provide your accounting clients.

 The idea of value can be a tricky and very misunderstood topic for accounting professionals and CEOs alike. Determining the services that you want to offer and what to charge for those services is the key to building a successful, competitive practice that will create the most ideal scenario for accounting professionals: to work remotely and under less stress, command higher fees, and have more freedom to work as you see fit. The key to understanding your value is to first understand the difference that your services will make in your clients’ business, and how to communicate it to a CEO so that they understand the level of service that you provide and how it will be a catalyst for their business growth. You have to realize your potential value first; otherwise, you may run into trouble getting and retaining clients - or, in some cases, trouble being compensated fairly for the value that you are providing.

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The Top 5 Pitfalls of Cannabis CEOs (and their Accountants) are Still Making

Cannabis companies are being shut down, fined, and handed down punishments at an alarming rate.

Have you seen the news lately? Cannabis CEO’s are getting in big, BIG trouble, and it’s only going to get worse. The cards are stacked against cannabis businesses in this current political climate. Even with that being the case, some businesses are able to figure out how to not only be profitable, but to do so without getting into hot water with the feds or local authorities.  

Others are cutting corners, cheating the system, or simply not following the rules. While they may get away with it in the short term, there’s the simple fact the crackdowns are only going to get worse and more frequent.

For those that want to run a legit cannabis business, avoid crazy fines, and really lead the pack in operating a cannabis business during this time of growth and opportunity, listen up.

We’re going to discuss 5 common, avoidable mistakes that are getting folks into...

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Harborside Case Review and Lessons for CPAs, Dispensary CEOs & Investors

Background: Harborside Marijuana Facility Runs Into Trouble

The IRS just handed down yet another decision that further cements their position on the cannabis industry and how these businesses must deal with 280e and the other tax laws that restrict them from the same benefits that most other businesses use to save money. Here’s what happened.

Harborside Health Center, owned by Patients Mutual Assistance Collective Corporation, was one of the largest dispensaries in California. This action followed an unsuccessful civil forfeiture case where the federal government wanted to force them out of their lease (citing 280e). Harborside then decided to use the government's lack of action to their advantage, which ultimately didn’t work out in their favor in the end. Harborside sold many products other than medicinal cannabis, and also offered classes and services to their clients. Based on the wide range of products and services offered, Harborside wanted to be able to make tax...

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Understanding Cannabis Growth Processes to Maximize Tax Deductions

accounting gaap Jan 28, 2019

What does a pound of weed cost to grow?  What are the production factors involved, and how does that affect recordkeeping procedures for growers and their accounting professionals?

In order for cannabis growers to take advantage of maximum allowable deductions under 280E, accounting professionals must understand how to properly determine the true cost of growing/producing their client’s product. The actual operations of a grower is important for accounting professionals looking to serve cannabis companies, as resource allocation during different cycles of a grow will affect their ability to claim allowable deductions. Opportunities abound for accounting professionals to maximize deductions throughout the seed-to-sale process; from labor all the way to distribution…

… and this is where GAAP Accounting comes into play.

What is GAAP for cost accounting?

Under generally accepted accounting principles (GAAP), absorption costing is required for external...

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World Class Cannabis Accounting Practice Operations and Systems

Whether you have cannabis accounting clients or are looking to specialize and service this industry, you’re going to need a special set of tools and processes. If you haven’t had a chance to check it out, we’ve created an infographic that sort of outlines all of the tools that we use to provide services to our clients. You can check out our cannabis accounting tools here.

In terms of running a thriving cannabis accounting practice, there are a number of challenges that we are faced with. Without proper systems for managing clients, it can create more trouble than it is worth, and eat into profitability.

We get a plethora of questions daily as to how to overcome the challenges that both CEOs and accounting professionals are faced with in this nascent industry that is in hyper-growth. Some challenges include:

  • Accounting software isn’t friendly to complex cannabis entity structures 
    Cannabis business structures are highly complex. Accounting...
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