Standard Operating Procedures to Implement in Your Cannabis Business

Nov 4, 2019 | Cannabis Business

Before starting a business, many founders draft a detailed and comprehensive business plan. A business plan is helpful when raising capital, and for giving the business its best possible start. An operations plan is equally as important. 

Part of the operations plan involves drafting step-by-step instructions about how to perform and execute business tasks. This list or set of instructions, is collectively known as the business’s Standard Operating Procedures, or SOP for short.

For a cannabis business, SOPs are extremely vital to have in place due to the strict regulatory environment that surrounds the cannabis industry. Your SOPs acts as a ‘how-to’ guide that proves to be immensely valuable in day-to-day operations, as well as in the long-term.

Here is a brief summary of what SOPs can help your business with: 

  • The approval of your cannabis business license
  • Ensuring that your business runs efficiently
  • Cutting down on bookkeeping mistakes
  • Staying compliant with state and local laws and requirements
  • Reducing the chance of theft or fraud

 

What’s Included in a Cannabis Business SOPs

Before discussing the categories to include in your SOP’s, it’s important to understand that the cannabis industry is not the only industry subject to strict standards. Industries such as banking and healthcare also operate in a tightly regulated space. They too must keep detailed SOPs for their own compliance and regulatory requirements.  

Here are the specific areas that many cannabis businesses include in their SOPs:

Security Risks of a Cannabis Business

Outlining how your business plans to mitigate security risks is critical, which is why it’s being discussed first. A cannabis business handles a lot of cash on a regular basis which presents a big security concern. Secondly, cannabis products are very valuable. These two factors expose the business to risks like fraud, theft, and loss.

Detailing out your security procedures in your SOPs, will help keep your cash, products, employees, and company safe. Some details to outline in this section of your SOP include:

  • The facility buildout 
  • Alarms and surveillance
  • Computer system security
  • Limited access areas
  • Armed guards and security fencing

Security for a cannabis business

It’s important that a cannabis business install security measures.

 

    

Quality Assurance & Testing 

Any product intended for medical use is subject to strict quality assurance and testing standards. Cannabis is no different. The requirements in California, for instance, state that all cannabis products must get tested at licensed cannabis testing facilities.      

The SOP for Quality Assurance (QA) and Testing will look different depending on the vertical your cannabis company is in. Here are some examples of what might be included:

  • Cultivation and manufacturing procedures
  • Sanitation measures that will prevent contamination of products
  • Environmental controls for storing and preserving inventory
  • Inspection of the labeling and packaging

Your SOP should detail the steps you’ll take to ensure each of the processes in this section gets accomplished.   

 

Track & Trace Cannabis Inventory Control

State and local regulatory bodies want cannabis companies to keep a tight handle on their inventory at all times. To achieve this, a cannabis business must include specific instructions in their SOPs for this process. 

This is why a solid internal inventory management system is important. It can help track how your inventory is received, handled, stored, and delivered. 

Cash Handling

Another important process to thoroughly document is that of cash management. How you handle your cash is a good predictor of your company’s financial future and success. Some questions to address in this section of your SOPs include:

  • Where will you keep your cash and how will you store it? 
  • Will you open a bank account, or keep the cash in a safe?
  • Which bank will you use, and who will have access to make deposits, payments, or transfers to and from the account?
  • What kind of safe will you buy, who will have access to the safe, and where will the safe be kept?
  • How will you transport cash to the bank, and how will you ensure it’s safe during transit?

These questions and others will help you write up instructions on how to handle your business’s cash.  

 

Record Storage 

Another area of interest for state and local authorities is record keeping. They expect cannabis businesses to be transparent. If the authorities request to see documentation, they’ll want original, untampered copies – and they’ll want them promptly.

So, when it comes to writing out your SOPs for this crucial process, consider including instructions that answer questions such as:

  • How will you keep your records–will everything be electronic, manual, or a combination of both?
  • Where will you store your manual records and documents?
  • Who will have access to them? Will you lock them up in a restricted area?
  • How long will you keep the files?

Writing up your SOPs can take a lot of time and effort. If you need help developing your SOPs, get in touch with the cannabis accountants and consultants at Northstar Financial Consulting Group. Contact us at (424) 274-3188 or info@nstarfinance.com.

 

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