When we speak to cannabis growers, distributors, and processors, we often refer to young companies. These small businesses are often limited in using cannabis Accounting Software. Many cannabis operations companies purchase an entry-level accounting package believing it will meet all their needs.
Managers and business leaders are realizing that small-scale thinking does not work. This can cause production bottlenecks and inefficiencies, pricing errors, high prices, and loss of profitability. Most cannabis businesses will see a significant benefit from implementing an ERP system for cannabis sales. What is a cannabis accounting system, and how does it work?
It's not hard to see that ERP plays an important role in every business intelligence, regardless of size or sector. The primary purpose of an ERP is to provide a firm foundation for running an entire business. It is the foundation for digital transformation and allows organizations to drive strategic change.
This article will discuss the "what" and the "why" of cannabis-specific ERP systems, the criteria for selecting a platform, and give a brief overview of the implementation process.
What Exactly is Cannabis ERP, And Why Do You Require It?
Cannabis ERP stands for cannabis enterprise resource planning. ERP systems were initially used to centralize manufacturing processes. However, they have since been extended to include back-office processes.
A cannabis ERP might be a good option for large-scale cannabis companies looking to improve information flow and data exchange between departments. Cannabis ERP systems can save time and money and improve communication between departments. A well-designed ERP system for cannabis businesses will provide valuable insights to help you make better business decisions.
If employees only use spreadsheets or email, sharing information between cultivation, extraction, and retail departments can be difficult. These manual processes aren't scalable, don't provide transparency, and can cause financial reporting headaches for accounting and management. This problem is solved by an ERP system centralizing many back-office processes under one roof.
Cannabis ERPs are a central business management system that allows companies to meet their core requirements. They manage all aspects of the business, including finance, accounting, inventory, and finance.
If you think, "hey, that sounds just like an ERP," then you are right. The basic structure of cannabis ERPs and regular ERPs is the same. However, ERPs can be both generic and hyper-specific. While cannabis ERPs can perform most of the same functions in other industries as those found in other industries, they can also address the unique challenges and requirements of this industry.
Many marijuana businesses use a separate seed-to-sale system to comply with federal and state regulations. Depending on their business model, they might use separate accounting systems and additional solutions for inventory management and POS.
High regulation in the cannabis industry means businesses must maintain data integrity, control, and visibility at all costs. All of these are difficult to accomplish when working with outdated, fragmented systems, making it difficult to collect reliable data and put it into use.
This can lead to serious business problems. Bad data can result in regulatory non-compliance or recalls and poor decision-making. Complex and fragmented systems are also difficult to replace or improve. This means that you won't be able to adapt to market changes and customer needs.
Cannabis companies can manage their business processes, keep compliance, track resources, and leverage data to achieve certain business outcomes by working from one source of truth.
Who Uses Cannabis ERP Software?
ERP software has been a great choice for companies in the distribution and manufacturing industries. Flexible features are available with the Business Central platform. Silverware Inc. realized it could create this flexible solution to support the cannabis industry and make it manageable for a small IT team.
The cannabis ERP software solutions can also be used by companies with an internal ERP manager who can collaborate with a partner or business owner to maximize the sale software's potential. An ERP for cannabis provides a high-level overview and prioritizes functions such as track and trace, tax automation, and compliance aids.
Cannabis ERP can centralize and organize a company's processes, reducing other systems' complexity. Basic accounting programs like QuickBooks or a seed-to-sale tracking system are not designed to scale operations. Access to data is crucial in this rapidly growing industry. It also requires adapting to changing regulations and using them to scale operations.
Features & Functions of Cannabis ERP
End-users can create customized dashboards that provide all the information they need to make strategic business decisions. Strong cannabis ERP helps legal cannabis supply chain businesses:
- Learn the true production costs
- Microsoft Power BI allows you to display data
- Streamline audits and demonstrate compliance
- Ensure quality control
- Keep track of lab results and other processes
- Plan and forecast
- Assure chain of custody
- Integrate tracking systems like Metrc, BioTrackTHC, and Leaf Data Systems to track and trace
An essential part of daily business operations is cannabis ERP. Warehouse managers, growers, drivers, and other employees are all key members of an operation whose jobs can significantly impact profits. An ERP provides these employees a central platform to gather and record information, create data records, and update operational changes. Owners can access and analyze this real-time data to make any necessary changes to their operation.
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How Can Cannabis ERP Be Used Effectively?
Cannabis ERP is a software tool that integrates all operations to help a cannabis company grow. It has the following features:
- Compliance Reporting: Integrate state tracking systems and reconcile data
- Analytics and Accounting: Offers financial reports, audit trails, and tax compliance information per state. Also, item cost analysis.
- Team Management and Workflow: Automates processes, identifies bottlenecks and areas for improvement
- Sales & Delivery: Invoices, Scheduling, and Order Placement are made easier by
- Track and Trace: Tracks the cultivation costs while tracking plants by tag
The Key Benefits of a Cannabis ERP
Enterprise Resource Planning is the first step in helping your company maintain and secure a competitive edge. Here are some of the greatest benefits of choosing the right all-in-one solution.
- Data-Driven Decision-Making: Cannabis companies can see all their business activities in one place by working from a unified ERP. Intuitive reporting tools and baked-in intelligence allow users to make faster decisions and drive improvements.
- Supply Chain Transparency: Cannabis ERPs allow teams to track finished products and manufacturing processes and forecast crop yield. They also help monitor and improve products, processes, and future performance.
- Increased Profits and Cost-Savings: ERP systems integrate and streamline all business operations, which leads to greater efficiency and higher productivity. Leaders can find and eliminate waste areas and make profit-making decisions. Improved collaboration benefits both employees and external collaborators. AI insights and automation promise quicker turnarounds, fewer mistakes, and consistent products and services—both ends of the cannabis ERP equation benefit.
- Streamline Manual Tasks and Workflows: By simplifying and optimizing tasks ranging from data input to compliance and quality testing, ERPs enable firms to reduce manual processes, prevent bottlenecks, and mitigate risks.
- More Stringent Security Controls and Security: The most modern cloud ERP solutions offer the best security and compliance protections. AWS, IBM, Microsoft, and IBM work with companies operating under complicated regulatory conditions. Although the cannabis rules are different, ERPs that excel were designed with complexity in mind and high-stakes regulations.
How to Select the Best Cannabis ERP Solution for Your Company
The same process applies to choosing the right cannabis ERP system for your company as with any other ERP evaluation. This is a very condensed list. However, it gives you an idea of how the selection process might look.
Get a Holistic View Of Your Business
The first step in selecting an ERP is to get a zoomed-out view of your entire business. It is important to move beyond single-purpose ERPs like a seed–to–sales systems and begin mapping all business functions and processes. This is where you can better understand each business function and identify gaps and opportunities for improvement.
Define Your Business Requirements
After you have mapped your business processes, systems, and personnel, it's time to identify your business requirements.
What solutions are needed to maintain end-to-end operations in the current state? And what solutions can you use to fill in gaps and drive improvements to get you where you need to be?
A cannabis ERP should generally include the following:
- Finance and Accounting: Financial data are essential to any ERP system. It is the foundation for everything, from forecasting and budgeting to sales and marketing, procurement, and many other functions.
- Product Tracking & Cultivation: To ensure compliance with federal and state regulations, cannabis companies need an ERP system with a seed-to-sale component. These capabilities are not available in standard ERPs, so it's important to search for ISV solutions and add-ons or build your own.
- Automated Compliance & Control: Modern ERP systems rely heavily upon AI, ML, and automation to protect and enforce regulations, branding, and internal governance. You'll need an ERP system that adapts to changing regulations and tax requirements in the context of cannabis business owners.
- Distribution & Logistics: Make sure you have a system that tracks all raw materials, finished goods, and incoming orders. It's a good idea to ship products to wholesale customers or end customers to ensure your ERP Solution has IoT integration and fleet management capabilities.
- Sales & Retail: Will your website be used to sell products? Consider partnering with delivery companies and selling wholesalers. These strategies may not be in your immediate plans, but you will want the ability to continue to pursue them in the future. Consider a POS system to process and track transactions in person if your dispensary is open.
It is important to remember that these requirements are just a starting point. It is also important to consider the unique services and workflows that exist only within your company.
Read More: A Comprehensive Guide to Cannabis ERP and its Implementation
SMB vs. Enterprise
Consider whether your business is an SMB or a large enterprise. This will affect the choice of an ERP system. Here you can choose from a variety of Finance & Operations apps.
Most conversations about cannabis companies tend to lump them in the SMB category. This makes sense as it is difficult to do business beyond the US borders and internationally due to the complex system of laws and regulations. It's possible but not impossible.
To make the final decision, you must consider factors such as your business model, growth projections, and complexity. If you want more information about "enterprise qualifications criteria," we have a longer post.
Putting Cannabis ERP in Place
A cannabis ERP will provide everything you need to respond to changing conditions and make profitable decisions by giving you greater control over your supply chain management, end-to-end visibility, and intelligent automation if you can successfully implement it.
We'll share a few items you need in your ERP implementation strategy. Remember that implementation can be a complex process with many nuances and stages.
Establish Measurable Objectives and Key Performance Indicators (KPIs)
The cannabis industry, like many other industries, is constantly changing. Cannabis businesses must adapt to changing market conditions and increasing customer demand, but unlike other industries, they must be flexible. It is also about staying current with changes in tax codes, licensing requirements, etc.
A flexible ERP system is essential to ensure your survival in changing regulations, rising demand, uncertain futures, and shifting regulations. It will allow you to manage your business and align your goals, needs, and budget.
It is important to deliberate on what you want from your investment and how you will measure it.
Companies often overlook this step. However, it is important to understand the desired outcomes in the pre-and intra-implementation periods. It's also important to identify the KPIs that you will use to monitor progress toward those goals. This baseline can be used as a starting point and should provide a guideline for KPIs at each stage.
Make Sure Everyone is On The Same Page
Like any organizational change, getting buy-in from the top is crucial. You will have fragmented initiatives and resentment if no leader is at the top. This will make it difficult to implement ERP projects before they even begin.
The investment in a new ERP for cannabis will majorly impact everyone within the company. It would be a grave mistake to let employees go, whether they are middle managers, front-line workers, directors, or VPs leading whole departments.
People resist change often, especially if they've been doing the same thing for many years. It is important that everyone involved in the implementation, even if they are not the first selection, participates.
This could be a benefit for cannabis businesses. People aren't all that old, so they have unlikely had enough time for routines or habits to calcify. However, implementing a new ERP could be a change away from informal record-keeping or ad-hoc processes that could limit your business' growth potential or put your business at serious risk. You want to help the team realize that an ERP is essential for the success of your business.
Create A Game Plan
Do not take planning as a given.
Cannabis companies must ensure that their system is built for the moment but also flexible enough to change as the market, customers, and overall strategy change.
Before you can implement, it is important to understand the current state of your business processes.
Perhaps you are asking yourself the following question:
- Can you get the reports that you need to prove compliance? Make purchasing decisions? How do products perform? Etc.
- Do you have the ability to show compliance with local, state, or federal laws?
- Do you plan to expand into new markets or segments?
- Do you want to raise capital for expansion?
- Create an internal team.
A team of project champions can help ensure a smooth transition and broad adoption. The team is an internal resource that will continue to be successful after implementation.
Each organization is unique, but the roles of your ERP team may include the following:
- Project Leader: A senior manager who provides high-level guidance and filter support once the system is in place. This person could be an overall project manager. They will set meetings, track progress toward milestones, monitor system controls, and address all issues.
- IT Manager: Internal IT support is crucial for any successful implementation. From an operations perspective, the project will run smoothly if all information is merged and all system requirements are met. This could include ensuring the hardware and software are connected properly and monitoring company activity to provide guidance.
- Team Leaders & Players: Users will require information and training. Leads can also be trained as trainers. However, you don't have to adhere to the hierarchy in the org chart. Individual team players are likely to gain buy-in and train others in context. Find power users and recruit them to help you accomplish your mission.
It's Not Possible To Do It Without a Partner
It is important to remember that the best partner will help you get the most out of your ERP investment. While doing your research is a good start, it's not the best way to navigate the selection process.
This holds for all businesses that are undergoing major ERP changes. Partner support is even more important because of the complex nature of the cannabis industry.
For example, Dynamics Business Central ERP software is not necessarily made for cannabis. However, it can be customized to meet your requirements through ISV solutions and the right integrations.
The bottom line, cannabis ERPs are essential for thriving in this highly competitive business environment. Businesses can eliminate bottlenecks, automate manual processes, address issues such as unreliable data and inability to scale up, deal with operational limitations, functional gaps, or inability, and comply with constantly changing laws and regulations.
However, an ERP investment is a significant decision and a substantial commitment. You should choose an ERP Application that will improve your efficiency, give you the data you need for intelligent decisions, and protect your business from the many risks associated with this industry.