The Top 4 Pitfalls to Avoid as Your Cannabis Business Grows

As start-up cannabis businesses experience success, they often discover their software tools can’t keep up with the accelerated pace. Production may fall behind customer demand, either turning into lost opportunities to generate more revenue, or more revenues with decreasing margins.

We collaborate with cannabis business owners and management teams every day. This gives us a unique perspective on what works well and what doesn’t as they try to capitalize on their successes. In this blog, we discuss the top four pitfalls to avoid so you can learn from our experiences to efficiently scale your cannabis operations and ensure you generate sufficient profits as your revenues increase.

Pitfall #1 – Inefficient Processes

Processes can become inefficient very quickly as a growing business relies on multiple systems and tools—such as spreadsheets for tracking inventory and state compliance, QuickBooks for finances, Dutchie for point-of-sale systems, and Canix for production tracking. With so many disconnected systems, data transfers require manual inputs, which can lead to errors and lengthen the time for workflows to be completed.

There’s also a lack of real-time visibility into inventory and other performance metrics since there’s no single source of truth. Managers are never sure if they’re looking at all the info that’s out there and if it’s accurate and up-to-date.

Pitfall #2 – Manual Quality Control

One of the manual processes that evolves from the use of spreadsheets is quality control. There are no automatic system checks to prevent the release of untested and failed products, or something that’s still in quarantine may slip through to retail channels. There’s also no real-time visibility into the quality control results of the current inventory tracking. This makes it difficult, for example, to sort inventory by tags to determine which products have the highest THC content.

It’s also challenging to trace lab results from bulk materials to finished goods and vice-versa to know where negative testing results came from and find the root cause of a quality issue. This puts a cannabis business in a bind when a recall occurs. They might need to manually dig through spreadsheets to identify all finished goods that came from a raw distillate batch.

Pitfall #3 – Insufficient Regulatory Compliance

Cannabis businesses that operate in multiple states are forced to contend with varying state regulations. There’s also the need to file 280E forms with federal returns that present complex challenges given that some products do not contain cannabis.

With spreadsheets, QuickBooks, and other disparate software systems, it’s cumbersome to track the chain of custody for each product—where each product is and where each product has gone—as required by Metrc and other state track-and-trace compliance programs. The fact that cannabis businesses must track higher volumes of cash than most businesses adds even more complexity to compliance and tax reporting.

Pitfall #4 – Lack of Financial Visibility

Cannabis businesses tend to have complex organizational structures, operating multiple entities in multiple states, and managing different activities across the product lifecycle (cultivation, production, distribution, retail sales). Without an enterprise ERP system, data integrity is at risk.

There’s also a lack of real-time visibility into the entire operation. It’s time consuming to produce a true, at-a-glance view to assess the status of the business, such as the current value of the inventory. By the time the management team gains access to the data, it’s too late to make decisions on how to react.

Automating Workflows and Real-Time Data Access

The key to avoiding these four pitfalls is to deploy a comprehensive ERP system tailored for the cannabis industry. Many operators have found the answer by turning to SilverLeaf running on Microsoft Dynamics 365 Business Central in the cloud. Together, these solutions provide the robust ERP capabilities that every business needs along with workflows and reports built specifically for cannabis businesses.

SilverLeaf automates production and financial workflows while also enabling you to consolidate your disparate software into one system that centralizes data and provides real-time access to the entire business. No more waiting for reports to be produced manually—inventory availability, product costs, revenues, and profitability are all available within a couple of clicks.

There are also no worries about vital information living only inside the heads of a few key people. Knowledge is shared so the business can operate more efficiently and scale its operations quickly to take advantage of new revenue opportunities while continuing to operate profitably.

To learn more about avoiding the pitfalls that prevent cannabis businesses from growing efficiently, check our on-demand webinar, presented by our ERP experts.