Cannabis companies need to organize their inventory to record and track for tax purposes. Without recording proper inventory in line with regulatory standards, fees can occur from regulatory authorities.
Establishing an organized cannabis inventory management system can put businesses on the right path to avoiding those fees.
If you’re a cannabis facility or a dispensary looking to organize your inventory accurately, we’re offering an effective way to manage and organize it.
We took the work from you by providing a way to manage your inventory without worrying about accruing fees.
This article further explains cannabis inventory management and how to manage your inventory to enhance operations.
Importance Of Effective Inventory Management In The Cannabis Industry
Cannabis inventory management allows you to keep order, store, manage, and keep track of your products in a way that improves your business operations. Without a good management system, you risk receiving fines, license revocation, wrongful tracking, criminal trouble, and inaccurate reporting.
When you have an effective system for your cannabis inventory, it leads to maintaining proper quality control, adhering to compliance regulations, enhancing supply chain efficiency, controlling inventory costs, and minimizing risk mitigation.
These advantages are a necessity to have in your inventory, especially if you own and operate a dispensary.
How To Manage And Organize Your Inventory
Managing your inventory through a clear organizational system won’t be easy the first time you conduct the activity.
However, the more you practice these management and organizational strategies, the easier it will be to use every day.
Start Conducting Inventory Management Protocols
1. Inventory Tracking Software
Getting an inventory tracking system in place can allow you to track, organize, and regulate products. It smooths your business operations and leaves you time to conduct higher-priority activities in your business.
2. Track And Trace Systems
Track and trace systems allow you to monitor cannabis products from seed to sale. The products contain serial numbers and barcodes to track where the product goes in the supply chain, all while maintaining compliance.
3. Standard Operating Procedures (SOPs)
SOPs can help organize your inventory well since they contain a thorough procedure for all work tasks and responsibilities. Enforcing SOPs for receiving, storing, packaging, labeling, and distributing cannabis products can improve your business operations.
4. Security Measures
You need to have security measures in place to avoid theft and unauthorized access to cannabis products. These security measures are surveillance cameras, access controls, alarm systems, secure storage facilities, and personnel training on security protocols.
5. Quality Control Procedures
To ensure standards are met, you need to measure the quality and quantity of the production being set out. When everything is up to quality standards, your inventory management can run much more smoothly and minimize potential challenges.
6. Inventory Reconciliation
It’s essential to conduct regular inventory reconciliation to ensure physical inventory levels match the recorded inventory in the system. This helps identify discrepancies involving missing or misplaced inventory and allows for prompt resolution to maintain accuracy in inventory records.
7. Inventory Costing
Inventory costing methods of FIFO, LIFO, weighted average cost, and specific identification are selected based on the business’s needs. It also depends on the regulatory requirements and accounting practices of the business to identify the best one.
The most highly incorporated method is FIFO (First in, First out) by most cannabis companies since it’s the easiest to utilize and most profitable. The choice of these methods influences how inventory is valued and impacts financial statements.
8. Staff Training And Education
Training staff on inventory management helps keep everything organized and streamline the inventory process.
These are some protocols you can utilize in your cannabis company whether you’re a retail or a dispensary owner.
9. Document Everything
It’s essential to document everything to ensure accurate inventory recording. The more you have everything in order on paper, the better everything will become down the road. Taxes will become easier for your accountant to do since you’ve mapped out all inventory data.
Optimizing Inventory For Cannabis Businesses
Many cannabis businesses reap the benefits of optimizing their inventory which leaves them with better operations.
Those with a younger cannabis business can experience the same advantages in optimizing inventory processes.
1. Make Purchasing Procedures More Efficient To Guarantee A Steady Flow Of Supplies
Establishing an efficient process for obtaining goods and services can minimize risks for your business. It can also attract a steady flow of goods or supplies into the business.
When making purchasing procedures efficient for inventory, you need to optimize the lifecycle of getting product goods from identifying needs, selecting suppliers of products, negotiating contracts, purchasing goods, and managing relationships.
As a cannabis business, optimizing the entire cycle can provide a smooth product flow into the business.
What procedures should you undertake?
Every business is different and will have unique procedures for purchasing for smoother supply flow but building strong supplier relationships and discovering strategic sourcing are a few factors to consider.
2. Hire An Inventory Manager
Hiring an inventory manager can conduct procedures, strategies, and tasks you set forth to ensure inventory runs smoothly.
You have more time on your hands to conduct priority items in the business rather than focusing on inventory management.
3. Reduce Carrying Costs
Another way to optimize your inventory process is by minimizing excess product flow to reduce carrying costs. Carrying costs are expenses that hold product inventory. These are storage, insurance, handling, and depreciation costs.
Reducing carrying costs can allow cannabis businesses to have more capital to put into other areas of the business.
More inventory can lead to products needing to be updated which can increase carrying costs, losses in revenue, and take up space in the operation.
4. Free Up Space
More space in your retail store can enhance the workflow and streamline inventory management.
Efficient inventory management reduces the need for excessive storage space, allowing businesses to utilize their storage facilities more effectively. This can lead to cost savings by minimizing the need for additional storage space or optimizing existing storage capacity.
Finding A Cannabis Inventory Software System For Your Business
Incorporating an inventory software system allows your cannabis business to succeed in effective inventory management.
The software automates some inventory management processes for cannabis companies that work with it.
Using software systems can increase your production, track inventory products, and record inventory from seed to sale. You can accurately record products coming in and out which helps in maintaining compliance and calculating inventory accounting.
Maintaining Regulatory Compliance For Inventory Management
Sustaining regulatory compliance in inventory management is essential to avoid criminal issues, fines, and recalling your cannabis business license.
With an effective inventory management process, you can record proper inventory transactions including receipts, sales, transfers, and disposals. When you have a system of organizing and recording inventory then you’re more likely to pass regulatory inspections and reporting requirements.
By maintaining a proactive approach to regulatory compliance, cannabis businesses can minimize the risk and foster trust with regulatory authorities and consumers.
How Accountants Drive Inventory Management Success For Cannabis Businesses
Accountants help you gather all the data in inventory management from every transactional sale, transfer, and purchase of inventory supplies.
Cannabis accountants specialize in working with businesses in the cannabis industry.
They record all the inventory information without missing any detail to ensure your business maintains compliance with your state’s regulations.
They also analyze inventory costs of acquisition, production, and storage expenses to optimize inventory areas. Conducting these tasks allows accountants to minimize expenses in need and come up with cash management strategies.
Accountants work with inventory valuation, financial reporting, and budgeting, and incorporate tax planning methods to enhance business operations.
Several accountants work in different states and if you’re looking to find one in Maryland, look no further than Maryland cannabis accountants.
There are many strategies and tasks accountants can help cannabis companies with that lead to business financial success.
We at Green Space Accounting incorporate all these methods to ensure companies have a fulfilling inventory management system.
