February 2020
Where to begin with Cannabis Compliance
Loading...
Starting a business in a nascent industry is hard enough as it is, but cannabis entrepreneurs and funding instruments have even more to worry about.
Beyond the obvious challenges of building a brand, earning customer trust, and inking contracts with reliable distributors and vendors, there is an entire world of regulatory issues demanding constant attention. The only reason a cannabis industry exists at all is that voters approved regulatory oversight.
So this means that cannabis entrepreneurs have to familiarize themselves with all of the specifics of their state’s cannabis laws. Above all, achieving compliance means being able to fulfill the obligations that state governments place on newly legalized cannabis industry organizations.
There is nothing trivial about compliance. State regulators have every right to revoke business licenses to organizations that don’t follow their rules.
The cannabis industry is even more fragmented because every state has its own unique set of rules to play by. Since there is no federal-level framework for legal cannabis sales, the specifics of each state’s regulatory framework can vary widely.
This is the ideal situation for a third-party vendor to step into the picture. Every highly regulated industry has reputable vendors that help businesses establish secure, compliant workflows using best-in-class tools.
Start your journey through cannabis compliance with the following in-depth resources:
The first step to achieving regulatory compliance is understanding exactly what it is. Every business in a regulated industry – like finance, healthcare, and cannabis – has to follow rules to continue doing business legally. The cannabis industry has a unique legal framework that differs from state to state.
Cannabis dispensary owners should know what to expect from their state’s regulatory authorities. They should also know and what kind of actions regulators can take against non-compliant businesses. These actions can include fines, audits, and even the unilateral revocation of the dispensary’s cannabis license.
Since cannabis remains illegal at the federal level, federally-backed banks can lose their licenses for providing financial services to cannabis dispensaries. In practical terms, this has turned every state’s cannabis industry into an all-cash environment.
As a result, managing a cannabis dispensary is fundamentally different than managing any other kind of retail business. Dispensary owners have to implement strict security and surveillance protocols to protect this critical asset. Dispensary owners must implement solutions for reducing cash exposure both inside the dispensary and while traveling to pay taxes and municipal fees.
State regulators are interested in the movement of cannabis through their state’s distribution network. Similarly, they want to be able to identify cannabis that moves across state lines or ends up in the hands of minors. This requires having a great degree of visibility into cannabis dispensaries’ inventories.
Dispensaries with solid inventory management solutions will have a far easier time attaining and demonstrating regulatory compliance than disorganized, ad-hoc affairs. The ability to quickly identify and report lost or stolen products is a business-critical feature for any cannabis inventory system.
One of the most important infrastructure decisions a cannabis dispensary can make is choosing what kind of point-of-sale (POS) solution to use. Without a POS, employees will need to manually enter every sale into the state’s compliance system, which will take time and draw attention away from higher impact, value-generating activities.
For dispensaries in territories where delivery is legal, choosing a compliance-oriented POS solution is key. Otherwise, entering seed-to-sale tracking data for every transaction while keeping track of inventory becomes an unmanageable task.
Cannabis dispensaries cannot market their products the way most retailers do. Every state has different regulations concerning what is and is not allowed when it comes to cannabis marketing. One of the areas where state laws consistently agree is on loyalty and reward programs for returning customers.
This represents a key advantage to cannabis dispensary owners who want to embed themselves into a community. By maximizing customer lifetime value, dispensaries can ensure long-term success even in the face of restricted marketing regulation.
Every state’s seed-to-sale tracking application works based on customer data. Dispensaries have to report sales transactions to regulators in order to demonstrate they are following the letter of the law concerning cannabis sales and logistics.
Enterprising cannabis entrepreneurs will quickly realize that this transactional data is of immense value. Since you are already collecting and reporting data on every transaction you conduct, there is no reason not to analyze that data to identify sales trends and build better customer relationships.
Inventory remains the biggest obstacle for most dispensary owners to overcome. Tracking every single cannabis plant as it travels through that states industry is no short order, and dispensaries that don’t take initiative with inventory optimization can easily fall behind. Moreover, it can have consequences for you later.
Instead of waiting to be surprised by a regulatory audit, and then scrambling to furnish the appropriate data, take time to conduct your own reconciliations and mock audits. These will help ensure that when the time comes, you and your staff will be ready to deliver.
California has already begun suspending the licenses of non-compliance dispensaries. If any dispensary owners entertained the idea that they could call the state’s bluff when it came to compliance, they certainly aren’t anymore.
State regulators are facing mounting pressure to close down illegal dispensaries that fail to observe regulatory law. These stories are going to become increasingly commonplace as the cannabis industry matures – make sure it doesn’t happen to you.
Cannabis might be illegal at the federal level, but that doesn’t mean that associations cannot develop national standards for its sale and use. The development of national standards helps to ensure that cannabis cultivators, processors, and dispensaries all operate according to the same framework.
Therefore, we provide a more reliable market for consumers and a simpler environment for regulators and dispensary owners. Implementing standards now can help make your life much easier as the cannabis industry evolves and matures.
You can’t succeed in the world of cannabis compliance without a clear understanding of the illicit market it is situated against. Vaping offers an excellent example – vaping products were seen as perfectly harmless until people started reporting dangerous health complications, and now the entire industry has to present a united front towards safeguarding consumers’ health.
Regulatory laws for the cannabis industry are not set in stone, and the better dispensary owners understand the potential for overlap between the black market and the legitimate, regulated industry, the more stable the industry’s growth will be.
Identifying the best strategy for compliance requires taking the time to understand state regulatory frameworks and predict where compliance is headed in the near future. As a result, Chameleon Collective has built a team and has the resources for marketing, strategy, retail operations and compliance for the Cannabis industry with an understanding that each state may differ in their requirements to do business. In short, make sure to schedule a call with one of our leaders to review your cannabis goals. We want to hear from you!
Mike Coner
Business Development & Go-to Market Strategy