Your cannabis business depends on seed-to-sale tracking to stay compliant, which means that you need a well-designed inventory management system.
In addition to ensuring regulatory compliance, creating an efficient inventory management system helps you avoid the biggest pitfalls of running a cannabis business while ensuring long-term profitability.
Understanding the Importance of Inventory Management Systems
Cannabis is a Schedule I substance and therefore is subject to rigorous compliance. To that end, your inventory management system must work for your business, particularly if you’re a dispensary or a lab.
Having an efficient inventory management system helps you reduce costs, automate processes, and prevent deficiencies. What’s more, you can usually increase your revenue by streamlining your inventory.
How to Create and Maintain Your Inventory Management System
It’s one thing to understand the importance of an efficient inventory management system. However, creating and maintaining it means understanding best practices for creating a cannabis inventory system that works to strenghten your business..
Best Practice #1: First In, First Out
In any business that handles and sells perishable goods, first-in, first-out inventory is one of the most useful inventory management methods. By using this process you avoid selling stale or expired products and keep your business compliant with your state’s regulatory authorities.
Best Practice #2: Use A Cannabis-Specific Point of Sale System
Without quality point of sale (POS) system designed for your cannabis business’s needs, it’s tough to ensure compliance. Of note, not all POS systems are created equally. Most generic POS systems lack the degree of functionality dispensaries and many other cannabusinesses need to:
- Maintain compliance — With an industry-specific POS, you can more easily track compliance issues and your receipts, while ensuring compliance with local and federal regulations.
- Deliver an exceptional customer service experience — The embedded functions that come with a cannabis-specific POS system are designed to streamline every aspect of the purchase process and track past purchases for order continuity.
- Create meaning sales reporting — Improve insight into which products are performing well and those that are underperforming.
- Traceability — A cannabis-specific POS system makes batch tracing easy in the event of a recall.
Best Practice #3: Audit Your Inventory On A Schedule
Checking your inventory regularly is a great way to get an idea of which products are moving and which products are sitting on your shelves for far too long.
In an ideal world, you would do this daily, but that can be hard to manage when you’re busy maintaining other aspects of your business.
This also might be a great place to add that we recommend having an employee strictly for audit purposes. This person should be responsible for maintaining inventory and your inventory space. By having one person in charge of inventory, you’re reducing the risk of fraud or theft due to too many hands in the cookie jar.
Best Practice #4: Monitor your KPIs to Streamline Inventory Management
Key performance indicators (KPIs) is the best way to track your progress towards your goals, so you can:
- Make informed purchasing decisions
- Streamline your cash flow
- Enhance profitability
Some KPIs that can help create an efficient inventory management system include:
- Gross margin by product — The amount of money the business keeps on the sale of each product. Understanding the profitability of each product is key to increasing your bottom line.
- Inventory shrinkage — A measure of inventory that cannot be accounted for due to loss, theft, or inaccurate recording.
- Other inventory levels — A measure of how much stock you have on hand, how long products have been sitting, and which products sell quickly.
- Inventory turnover rate — The number of times you sell and replace certain products during a specific period to track high-demand products and buying habits, as well as products you may not want to carry in the future.
- Days to sell inventory — The age of your inventory and how many days it takes for your products on hand to sell. If it’s a large number, there are inefficiencies in your inventory movement. If the number is low, make sure popular products aren’t at risk of going out of stock.
Understanding How A Strong Inventory Management Software Can Improve Your Entire Business
Maintaining your inventory by hand can be a time-consuming process. The human data entry factor alone can lead to inventory mishaps, compliance issues, and worst of all, fines to your business.
Accounting for Green helps cannabis businesses simplify inventory processes with inventory management software. By automating processes, we set you up for better SOPs that ensure that you book products correctly and account form them so your business stays in compliance and continues to grow.
Because an efficient inventory management system involves detailed traceability, you can ensure that you’re producing the highest quality products.
By choosing the right inventory management software for your business, we help you comply with local and federal regulations, and earn public trust. Quality inventory management software can help avoid selling products with recalled ingredients because you can trace your products from seed to sale.
We’d love to help you set up an efficient inventory management system and help you get your finances in order so you can grow your business and get the most green. Contact us today to set up a consultation.