Listen to this articleBelow is a recent interview with Lorenzo Nourafchan, CEO at Northstar Financial Consulting Group:
Q: Hey Lorenzo, could you give our readers a brief introduction to Northstar Financial Consulting Group?
A: Sure. Northstar Financial Consulting Group is a full-service CFO, accounting and tax firm specializing in the cannabis industry. When I founded Northstar in 2011, we were originally focused on the tech and entertainment industries. Over the past three years, Northstar has focused primarily on the cannabis space.
We help operate cannabis companies, and act as the full accounting and finance team for our clients. Each client receives a dedicated team that can include a bookkeeper, accountant, controller and CFO at a fraction of the cost of an in-house team. This saves our clients a ton of money, especially since we know the industry inside and out.
Hiring us means little to no onboarding costs, plus we know the complicated tax laws that go along with selling cannabis really well, so that gives them assurance. For companies that have a pre-existing infrastructure (e.g., already have a CFO), we can help fill in the gaps and source out just a controller or accountant as needed.
Q: Nice. It sounds like Northstar is a super valuable asset for cannabis companies, especially when it comes to cannabis accounting. Can you give a complete breakdown of all of the services you provide for clients?
A: Definitely. Northstar offers accounting and financial services tailored to the cannabis industry, including bookkeeping and accounting, to controllership and outsourced CFO services.
Our primary goal is to ensure our clients have audit and investor-ready financials, are tax compliant, and management receives timely information in order to make informed business decisions.
Accounting for cannabis and hemp businesses can be overly complicated, and we help ease the stress and confusion that goes along with trying to figure it all out.
Recommended: Q: Why do you find that your clients need an accountant that specifically specializes in cannabis instead of j ust a regular accountant?
A: Mainly because there are extremely nuanced accounting and tax regulations to which cannabis companies must adhere. It can be a legal and regulatory landmine if the accounting team lacks the requisite cannabis accounting experience or expertise.
Any operating cannabis business across the vertical: cultivator, manufacturer, distributor, testing lab, or dispensary deals with various complex tax laws. These include IRC 280e, and knowing how to deduct every possible expense adhering to IRC 471 (IRC 471-11 for cultivation and manufacturing and IRC 471-3 for distributors and dispensaries), which can make or break a business.
Since cannabis legalization, having a specialized accountant who understands the tax codes inside and out, and knows how to properly deduct expenses and a tax return, can mean huge success for some businesses and bankruptcy for others. Dispensaries, for example, need specific dispensary accounting and someone who has the skill set to figure out their dispensary organizational chart. You can’t j ust hire anyone to do these jobs.
The landscape is obviously difficult for any company in this market, especially given Covid-19, yet with the right infrastructure and financial and accounting team, companies can still thrive.
Recently, a client who’s the CEO of one the largest recreational cannabis brands in California
said to me, “Lorenzo, my goal in 2020 is to make $1.” I eagerly replied “And it’s my goal to make sure we add quite a few zeroes after that 1.” Just one quarter into 2020 and we’ve already succeeded. I’m really proud of that.
Q: What’s an example of a solution Northstar Consulting provides that deals with the issues created by IRC 280e, since we know that’s quite involved?
A: Most accounting and finance firms provide advisory work and year-end tax support to clean up financials, etc. but most firms don’t assist companies with the day-to-day and monthly operations.
To lower or avoid 280e, a cultivator and/or manufacturer must do cost accounting and inventory on a monthly or quarterly basis. An operation can get fined or completely shut down if inventory and accounting are only calculated once a year.
We ensure detailed reporting is meticulously completed as needed so clients are able to take their COGS deductions.
Defining a 280e strategy is one of the many complexities of running a cannabis business. We act as a 280e management company more or less, and because we know the industry inside and out, this really relieves our clients.
Having and maintaining a clean cannabis business formation and being able to provide the best records possible to the IRS will basically keep you out of trouble.
We know dealing with 280e can be quite overwhelming, so that’s why every Northstar client has a dedicated team to work with, and we’re always available to contact at any time.
We consider ourselves true partners in implementing corporate structures for cannabis businesses, without the high overhead.
Recommended: Q: What’s next for the company? Do you have plans to grow, expand or diversify Northstar Consulting?
A: Big plans. Our goal is to be the go-to firm for all cannabis businesses at all stages of growth.
We want to bring the highest level of professionalism and compliance to our clients and the industry as a whole. We also want to do everything we can to be at the forefront of federal legalization of cannabis.
We believe in the cannabis industry and are making plans to expand our investment banking division and build out a fund to be able to invest in the companies we work with to continue to share in our clients’ success.
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