Shoring up Your Cannabis Business With Audits

Late fall into the early winter can be a slow time for many businesses, including cannabis businesses. That can be worrisome for business-owners, but slow times need to be seen as opportunities. It is difficult to make significant changes to day to day operations when the business is running at breakneck speed, just trying to keep up with its orders. One way to make the most of the window when time pressures are less forceful is to audit your operations and business practices. An audit allows you to hone in on your business’s strengths and weaknesses to identify areas of improvement. It also gives your business an opportunity to reinforce its best practices and institute changes in areas that are weak. For any business in a regulated space, including marijuana businesses, regular audits are a must.

There are many different types of audits, though if possible it is probably a good idea to do a lot of them at the same time, so that new business practices can be reviewed in the context of the different types of audit fields. The main types of audits are accounting audits, which focus on a company’s management, tracking, and deployment of its financial resources; legal audits which focus on compliance with state and federal regulations, labor laws, corporate law, intellectual property law, and assorted other areas; and quality control audits, which focus on making sure that the processes in place for the business work to create high quality consistent products.

At its heart, the goal of an audit is to suss out what the business’s operating procedures are and to judge whether or not they are sufficient. In some cases, that will mean reading over the company’s written policies and procedures, grading them, and then determining whether those policies and procedures are actually put into practice. More often, companies lack sufficient written standard procedures, so it is up to the auditor to figure out what the company does in certain circumstances. Examples: A financial auditor will look at how profit distributions are accounted for and whether the company’s owners are illicitly using company resources. A legal auditor will determine whether the company is using illegal or unenforceable employment contracts when hiring new employees. A quality control auditor will determine whether different employees with the same job are trained in the best practices for that position.

At the end of the audit process, companies want more than just a piece of paper saying what they scored well in and what they scored poorly in. Companies want and need information that gives them a roadmap on how to improve their practices. This is where defined standard operating procedures come into play. Standard operating procedures mean different things in different industries. In this example, we simply mean having a standard process that all necessary parties know for given inputs. Employees start the day by doing A. If we receive a check for an order, we do B. When making a corporate decision, we determine C. It is great if these procedures are written down, but not every business detail and every potential decision needs to be predetermined. Small businesses are often viable in part because of their flexibility. On the other hand, growing beyond mom and pop size virtually always requires some standardization. Regular audits, and developments of standard procedures to solve problems raised by audits, are invaluable tools to position cannabis businesses for growth.