Cannabis farmers, cultivators, trimmers, processors, extractors, packagers, laboratories, and especially dispensaries face unique challenges in tracking their inventory. Seed-to-sale inventory tracking is indispensable for meeting tax regulations and for maintaining the profitability of every cannabis business. Cannabis businesses have special requirements for inventory management that most off-the-shelf inventory management packages aren't equipped to handle.
Inventory management is one of the most important things lenders look at when they decide whether to fund a cannabis business. Just meeting the regulatory requirements of your state, like the California Cannabis Track and Trace (CCTT) system, and using their required platform may not meet the requirements of your lenders. They will also want to know how you track your inventory of inputs for your business, which can be anything from fungicides for your grow room to wrappers for your cannabis edibles, and how you account for buildings and equipment.
Inventory management isn't just essential for meeting state regulations and keeping your investors happy. It can also have a huge impact on your bottom line. Here are the basics of good inventory management for keeping your business profitable and running smoothly.
It may sound really elementary, but cannabis inventory management won't work if you don't know how much product you have. Every time you receive new product, weigh each individual batch. Use this information to keep track of how much of every product and every strain is in your inventory.
Ideally, your scales should be integrated into your point of sale (POS) software. Autofilling product weight, and limiting access to your inventory system, helps you detect inventory shrinkage and employee theft,
Even if you aren't a retailer and you have complete faith in your employees, it is still a good idea to keep track of your inventory by weight at every stage of your production cycle. Knowing the ratio of finished product to inputs helps you minimize waste. With this information, you can show that you are using the most effective and profitable methods of making your products, or you can make an evidence-based estimate of the benefits of new equipment.
Weighing out eighths and quarters takes time from your customer-facing sales staff and your customers. It creates opportunities for inventory shrinkage and product contamination, not to mention outright theft. If you spend a few hours each week separating your stock into pre-weighed offerings, your salespeople can spend less time weighing and more time selling your products.
Keep in mind that your state probably has cannabis labeling requirements. In California, this is done before products are sold to a distributor, but in other states the regulations may be imposed at the retail level. Your labels may be required to display cannabis manufacturing symbols, and your packaging may have to be child-proof, tamper-resistant, and recyclable.
At a minimum, cannabis operations need two employees, one who handles cash, and another who keeps track of inventory. Processing customer payments, checking product out of inventory, paying invoices, and keeping track of petty cash need to be performed by separate individuals, preferably by employees who do not know or see each other. The person managing your inventory should never be the person taking cash from customers.
The more often you do spot checks, the more confidence you can have in the integrity of your inventory control. Regular audits of your inventory, on a weekly basis, also tell you which products are moving and how you can price them for maximum profitability.
Using inventory management software like Xero or Clover provides your cannabis business a few benefits. Automating your accounting encourages you to follow the generally accepted accounting principles (GAAP) and using inventory management for real-time sales analytics helps you run a tight ship.
With the right inventory management software, you will immediately recognize missing inventory when you do your weekly audit. You will be able to predict peak demand and order in time to meet it. You will have the lead time you need to make sure that your customers always leave with the products they want.
Canna Business Financing can help you secure funding for any inventory needs. Reach out to our team today to get started, we can get you pre-approved within 48 hours.
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