Compliance in cannabis is a constantly evolving process that doesn’t end once you obtain your proper licensing. Instead, it's the one piece of maintenance that your business relies on. Each state has different compliance requirements that pertain to wholesale purchasing procedures and consumer purchasing limits.
It can be tricky to stay on top of the fluctuating changes and policies, but being proactive about compliance is still your best bet when opening or maintaining a cannabis retail store. We’ve spent some time assessing 10 common compliance pitfalls, so you can make sure to avoid them at your dispensary.
1. The right location
If you are a new business owner, or a business looking to open up new stores, selecting a location that is not close to a school is key. Besides schools, it may be smart to look for a location that isn’t by another underage attraction. Plenty of compliance issues relate to regulating cannabis in a safe environment away from children. Your location has to be permitted for cannabis sale use based on city ordinances. Ensure that it is zoned to avoid inherent penalties or licensing restrictions.
2. Appropriate signage
In most states, cannabis signage cannot be distracting in any way. This often means no fluorescent signs, marketing in any way that may appeal to minors, and even the green cross most dispensaries have cannot stay lit overnight.
3. Security measures
Security rules often mandate that dispensaries monitor sales in the front of house and inventory work in the back of house via video cameras. Not only do they help in case of a break-in, but they can catch employees that are acting suspiciously. While internal theft is possible, look for tangible proof before accusing anyone of something that may simply have been mislabeled or miscounted. Look to the cameras for additional information if you need to, as they are there to ensure safety.
Ensure you have a designated area in the back of house for accepting intakes that is secure and out of sight of the customer. Receiving inventory on the floor could create crimes of opportunity if bulk items are left unattended.
Privacy is a huge concern for recreational consumers that don’t have the protection of a medical card. 7 Compliance Risks that Every Cannabis Dispensaries Can Avoid states the nuances involved in keeping customer information private. The article goes on to state that not only do customers’ purchases and payment information require privacy, so do the documents that track your sales:
“Your customers’ information isn’t the only thing you want to protect—keep in mind that you don’t want to lose any transaction history or inventory records either. If you lose any of this information or if there’s a violation of privacy, you could be facing civil and/or criminal penalties.”
Another common compliance issue can arise from mistakenly accepting a fake ID. Be careful to look for fakes that minors may try to use to get into the shop. Some POS systems have built-in ID Scanners that are helpful for verification purposes, but they add another privacy risk to the information held by your software system.
Ensure that your POS system also has an option to not save a customer record when scanning an individual’s ID. If that information saves automatically, it could become a compliance issue regarding customer privacy.
Dutchie’s POS systems, Greenbits and LeafLogix are SOC 2 (System and Organization Controls 2) certified, operating with multi-layer security that encrypts and protects customer data.
5. Cooperate with local regulators
Prepare a list of the regulations you need to follow and inform the correct authorities with any changes being made to your store ahead of time. Keeping that line of communication open and forthright is the best approach to avoiding fines from local cannabis regulators. Oftentimes, law enforcement or state compliance officers may surprise you with a check-in. If you are caught unable to provide something they require, communicate in the most understanding fashion that that item is ordered and on the way. A common instance is running out of child safety packing for items that don’t already come with a child lock, so ensure that your store always has a healthy backstock of childproof product bags.
6. Be consistent
Be consistent in your inventory auditing, but switch the employees you use to track products. This method will allow them to peer review one another’s work, and you can begin to note if inconsistencies are happening by the hands of one particular employee. Check out our other tips for making inventory management easier by reading Inventory Management Strategies for Cannabis Dispensaries Explained.
7. Train your staff to value compliance
Training is another part of being consistent. Start by ensuring you have photocopies of your staff’s Marijuana Handler Permits, or whatever employee licensing is required in your state. This can be helpful during a sting operation and to ensure your employees know the value in keeping these permits up-to-date. Hiring before you have verified your staff actually has these qualifications can come back to haunt you in the form of a hefty fine.
As Cannabis Compliance: The Essentials says:
“Prepare Standard Operating Procedures And Train Your Employees To Follow Them. Prepare SOPs for every part of your operation. If you don’t know where to start, begin with your local and state applications. Every plan or action item that was listed in your applications should have a corresponding SOP.”
Teach your staff to follow the chain of command and if something like a UID (Unique Identifier) doesn’t match the product tag, then that employee should know to alert the Compliance Team/Officer before continuing a sale. The item may have gotten mixed up from an old batch or incorrectly tagged. Make sure the staff is aware that these issues are much easier to fix before the customer walks out the door with that item.
8. Keep your compliance documentation organized
7 Best Practices for Effective Cannabis Compliance Programs states that there is no such thing as redundancy when it comes to tracking and duplicating important documents:
“Similar to inventory management and audits, you want to build redundancy into your Compliance Documentation Plan. Not only do you want to ensure that documents are secure and backed up with duplicates, but you must also ensure that more than one employee knows how and where to access each item if needed. It’s not uncommon to find situations where all business documents are managed by a Store or General Manager, but when that individual leaves the company, owners and remaining staff members are scrambling to figure out where everything is. At the very least, you want to ensure that at least two employees are trained on how everything is organized. We love digital document management for many reasons, but primarily, having everything organized in digital form makes documents easy to organize and manage, while ensuring that key individuals have access.”
The article goes on to highlight another benefit of organized documentation: it will give you a strong leg up when it comes to finding investors or when looking to sell your business. Those with deep pockets appreciate an organized business owner, and they can make their own projections based on the success of your current dispensary.
9. The importance of cash balancing sheets
Since most cannabis businesses currently run either mostly or entirely in cash, they are susceptible to a higher volume of mistakes that can lead to compliance issues.
When you print your EOD reports from the POS, you need to create a system to validate the cash deposits coming from each register physically. Like with typical retail, ensure two employees are verifying the amount in each drop. Bad cash handling practices can lead to bad inventory practices.
You can reconcile any issues that you catch coming from each till in the POS software that then transfers into your accounting software for tracking. Tracking this information provides a trail for figuring out cash discrepancies. The majority of cash handling mistakes come from manual errors which can lead to the appearance of inventory theft. This is when state regulators become concerned with your business and may require an audit.
10. Stay aware of rules
As The Top 4 Cannabis Compliance Complaints And How To Cope tells us, the rules that allow the cannabis industry to operate are ever-changing in the US, as federal laws add another layer to the state-specific regulations.
“When it comes to cannabis compliance in the U.S. there is no “one size fits all”. Both the state and the local municipality where your business is located will have individual regulatory frameworks including laws, standards, and licensing systems. On the federal level, you also have to consider legislation from the Health Insurance Portability and Accountability Act (HIPAA), the Federal Communications Commission (FCC), and the Occupational Safety and Health Administration (OSHA).”
When it comes to Canada, regulations are determined by the corresponding province. Make sure to stay apprised of your province’s rules for the legal sale of cannabis products.