The cannabis industry is continuing to grow with each coming year. As of the start of 2019, there are ten states (and the District of Columbia) that consider marijuana to be fully legal, with more offering medicinal options. As such, growers and cultivators are finding ways to produce a product as efficiently as possible, maintain state regulations, and turn a profit.
Whether you’re a cultivator, packager, or retailer, you’ll want to track every gram of the product and all related costs from seed to sale. Seed to sale software helps cultivators, manufacturers, processors, and even retailers become as legitimate of an operation as any other pharmaceutical manufacturer and distributor.
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Seed-to-sale software (also known as cannabis software or marijuana software) seeks to manage your entire cannabis cultivation operation. From simple compliance monitoring and dispensary POS (point-of-sale) functionality to predictive analytics, seed to sale software ensures you operate every facet of your licensed cannabis business the way it should.
Given strict regulations in the cannabis industry, players in the market found it difficult to find companies to process the plant (either companies that trimmed a plant to sellable product, or broke down the plant into a good such as CBD or a THC-based product such as an edible), vendors for seeds or needed equipment, or even clients to sell their product to. Because of that, marijuana cultivators will have vertical integration, where they manage every aspect of the supply chain, so all aspects of seed to sale (manufacturing, distribution, and retail) are covered. Seed to sale software will do that; help you out from planting the seed to selling the finished product.
Of course, seed to sale software can manage the entirety of your supply chain process as well as assisting you in one area of seed to sale, such as the manufacturing. Companies looking to integrate the seed to sale process with back-office accounting and inventory control may want to consider a fully integrated cannabis ERP software.
|Cultivation Tracking||Monitor and automate your grow performance. Monitor any waste that is generated and account for potential errors in weight with moisture loss. Find inefficiencies in your operation by better tracking time and labor costs. Log notes about strains to keep a close eye on genealogy and potency.|
|Compliance Management||State regulators want to monitor every step in the supply chain including where it was planted, harvested, processed, and sold. Strict traceability is a must. Compliance functionalities in seed to sale software will go over plant and product procedures to ensure compliance. They will also automatically report any compliance data to the state while ensuring reports are created in a compliance-friendly manner.|
|Processing and Manufacturing||Optimize future product yield by keeping a close watch on your nutritional cycle via watering, lighting, and adding pesticides. Analyze the volume of your harvest to help predict and optimize future yields.|
|Inventory Management||Convert multiple products into final goods. Keep track of both raw materials and finished goods. Ensure your inventory can be audited and ensure proper weight and dosage has been recorded. If inventory levels run low, ensure purchase orders can be sent at the right time to avoid shortages.|
|Supply Chain Management||Track transportation manifests that keeps strict note of the cargo for any regulatory review.|
|Dispensary POS||Process sales through in-person transactions, online ordering, and more. Store customer profiles with patient ID’s and any referrals. Monitor the frequency of visits and purchase history. Provides discount and loyalty programs. Establish purchase order limits to comply with state law.|
Start-ups and small businesses: At its core, seed to sale systems have a primary focus to ensure compliance. While some software solutions may work great when you are small, and industry-neutral software options may be able to handle your manufacturing, distribution, inventory, etc., businesses starting out will want to look at finding a software vendor that has experience implementing their solution for a cannabis-based company. Otherwise, you will find yourself falling behind the competition and eager to go back on the market for software.
Mid-sized operations: As your client base grows and your employee count starts to rise, you’ll need to consider having a solution that is scalable. Companies of this size need to determine where they land in the seed to sale process: Are they primarily a cultivator? Do they handle processing and manufacturing? Are they a dispensary dealing with point-of-sale issues? Even if your company is a combination, focusing on your more successful areas and ensuring the primary cannabis ERP solution you use can handle your
Large enterprises: Larger operations will handle vertical operations and manage a true seed to sale process from cannabis cultivation, to processing, to distribution, and to sale. As such, they’ll require the use of a cannabis ERP solution that can provide them with the full suite of supply chain management, manufacturing management, and accounting.
States that have full legalization of marijuana such as California and Colorado use compliance tracking software solutions specific to the seed to sale industry, such as Metrc. Metrc ensures compliance with specific states’ regulations that govern the growth, distribution, processing, and overall sale tracking of cannabis products.
Objectives of Metrc
Metrc itself operates as a regulatory cannabis inventory accounting software used by the Marijuana Enforcement Division, which is an arm of the Colorado Department of Revenue to manage the enforcement of marijuana laws. It’s expanded to be a solution available for anyone in need of monitoring cannabis production from seed to sale.
Metrc is utilized by 11 states for their marijuana compliance tracking. Other software solutions such as BioTrackTHC, MJ Freeway (and their sister product Leaf Data Systems), and King Agrisoft have jumped into the picture as well. Businesses who use the same software as their state’s enforcement division can be assured that their business can be covered by any audits that may be conducted by their state’s enforcement division.
Medical cannabis has been legalized in Canada since the early 2000s under the ACMPR, which stands for the Access to Cannabis for Medicinal Purposes Regulations. These rules govern the use and authorization of medical marijuana across Canada.
The recent passage of the Cannabis Act in Canada should result in a spike of companies flooding the market to sell recreational marijuana, which means more companies will require compliance capabilities.
Software options such as Ample Organics allow you to track and report directly within the program to stay in line with any reporting requirements set forth by the Cannabis Act and ACMPR.
QuickBooks will suffice to handle most small business accounting. However, growing businesses in the marijuana industry will realize that QuickBooks is not a long-term fit for the unique challenges in accounting for a scheduled drug. It also may not track your operations as efficiently as you like.
Some seed to sale software may provide you with the needed manufacturing and supply chain functionalities, but lack the accounting needed to become a “fully integrated option”. These type of seed to sale software options may suggest the use of entry-level packages such as QuickBooks Pro or Sage 50c.
The most important question you’ll want to ask about the software you’re considering is, “Will my financials be covered?” If so, you’re looking at an ERP. If not, the software vendor can typically recommend the accounting solution that will work best with (or alongside) their software.
Rapidly growing industry. The legal marijuana industry can include anything from hemp products, THC baked goods, CBD oils, or the flower plant itself. The industry has grown to $10.4 billion in the US in 2018 and employs more than 250,000 people.
Vertical Integration. This level of involvement occurs when the supply chain of a company is owned by that company. In the cannabis industry, the combination of complex regulatory issues prompts cannabis businesses to establish vertical value chains. This means cultivators may also look into opening up dispensaries or adult-use venues, so their product can go from farm, to cultivation, to processing, and to sale.
Specialty accounting professionals. As the cannabis industry continues to grow, accountants are learning how to properly work in this line of business and ensure companies are receiving whatever tax breaks possible. Entire firms are being created with the sole purpose of handling marijuana-based businesses.
Almost half (47.4%) of hemp cultivators see “finding processors” as their biggest challenge. Prior to the 2018 Farm Bill being signed, cultivators of hemp and other marijuana products found the biggest business challenges that had a direct impact on their operations were finding processors, a lack of banking services, and finding seeds or clones. However, with the passage of the Farm Bill, investment capital and low-interest loans have been made available to cultivators. It also lets growers ship their crop across state lines to a location that may have a larger pool of licensed processors.
There’s a real potential for higher taxes. Given marijuana’s illegal status under federal law, the IRS says that no deduction or credit will be allowed for businesses who incur expenses in relation to trafficking in controlled substances prohibited by federal law. The normal tax breaks and incentives businesses receive will be disallowed, which means most cannabis-related business will pay more taxes then if they had been able to deduct the expenses they incurred in the normal course of business.
A quality seed-to-sale software will already know this and encourage cultivators to deduct expenses as cost of goods sold (COGS). This includes what you may be paying for material, labor costs, maintenance, depreciation, administrative costs, and more.