Seed to Sale Inventory Management Software Considerations
Cannabis businesses have countless options to choose from when selecting a seed to sale inventory management software. In states utilizing METRC, businesses can choose from just as many approved integrated software providers. With all of these options available, how do you choose what is best for your business?
Generally, there are six business models cannabis operators may choose. These include cultivation, processing, retail, transportation, safety compliance and micro business. A micro business is available in states like Michigan. These offer opportunities for small businesses to cultivate, process and sell their own marijuana products at one location.
It is always important to evaluate how a software fits with your specific trade specialties and business personality. The ‘look and feel’ of a software may not always equate to business usefulness however. For example, your master grower may desire certain attributes such as plant genome tracking features. A bud tender may prefer a software that is quick and easy to navigate. The business owner may look to value and price as the most important features.
From our perspective as accountants and CPAs, we tend to look at things from a numbers and reporting perspective. We also focus on the usefulness of a software to the business as a whole. The right software will not only help your business be efficient, but also offer opportunities for powerful analytics and reporting. A business should seek to implement a software that provides value for all aspects of its activities and goals.
Considerations from an accounting perspective in selecting a seed to sale inventory management software:
Reporting Capabilities for Seed to Sale Inventory Management
Sales and inventory on hand totals are a great start, but if a software is lacking on report variety, it will be more trouble than what it is worth. An appropriate software should at a minimum provide the following detail reports:
- Inventory purchased during a period by item and category, including date purchased, quantity and cost value
- Inventory on hand by item and category, including cost value, retail value and quantity
- Shrinkage and destroyed products, including value and quantity
- Sales by item and category, including discounts, cost, price and gross profit
- Cumulative cost of inventory on hand, such as plants in progress or edibles with multiple ingredients
Downloadable reports into excel or csv file format are a must. Downloads to pdf only are cumbersome and will require the data to manually be entered into spreadsheet format. Spreadsheet format is useful for other financial calculations, uploading into accounting software, and preparing tax forms.
Check out further information on reporting requirements and successful integrated inventory and sales management software here.
Supply Chain Management Functions
Seed to sale inventory management software should have built in supply chain management functions. Basic functions may include the ability to set reorder points, such as for a retail business. Supply chain functions for a cultivator and processor require more detail, with plant cycle and raw material management components necessary. Supply chain management tools help a business analyze its overall supply needs in relation to the outside market demand.
Entering an emerging cannabis market such as Michigan’s, even the most resourceful commercial operators have not been able to predict the market demand. Supply shortages in one area and over production in another earn no gold stars in business. This is especially true for products that have a limited shelf life before needing to be discounted or disposed. Growers and processors need the capability to track products selling faster at wholesale versus others that are in less demand. Similarly, provisioning centers should have tools to analyze customer preferences and work with suppliers to ensure adequate quantity is available. Too often provisioning centers may have supply shortages of a favorite strain, with another on their shelves hardly selling.
Entities that are vertically integrated should implement a software intelligent enough to manage supply between segments at an optimal level. Processing too much oil or growing too little of one strain can lead to effects spanning months or longer in related sales activity. When plant counts are limited at any level, these limits but be well analyzed and planned for optimization. The right seed to sale inventory management software should have the reporting capability to allow management to make these insightful decisions.
Internal Controls and Tax Reporting Features of Seed to Sale Inventory Management
Aside from incorporating inventory controls into your overall inventory management process, a seed to sale software should have capabilities to strengthen this process. Customized user access, transaction audit log, and a secure network are necessary for a strong internal control environment. Other issues such as HIPPA compliance also play a role in controls over patient data.
Accurate tax tracking and reporting by product are also necessary in an inventory and sales management software. Retail excise and sales taxes must be properly accounted for as applicable for each item passing through the system. In states with wholesaler taxes, cultivators and processors also need this type of tax tracking within the inventory management software.
Well designed seed to sale inventory management software will have multiple features to ensure integrity and accuracy in inventory movement. Regular system audits and reviews should be performed by management or an independent 3rd party, such as a CPA.
How our firm can help
At LC Solutions Michigan PLLC we provide our clients with outstanding accounting support, professionalism, and industry specific knowledge tailored to their business operations. Our team of CPAs, bookkeepers and accounting professionals can help your cannabis business thrive in its accounting best practices. We understand our clients’ needs and the special purpose inventory management, reporting, supply forecasting, and bookkeeping they require.
Choosing the best seed to sale inventory management software for your business can be a challenge. Let us help guide you in the right direction, whether it is in scheduling demos with trusted software providers, ensuring appropriate reporting capabilities are in place, or assisting with a smooth implementation process. Having reliable resources in place to track, plan, and analyze inventory and sales data will allow the business opportunities to remain forward-thinking and ahead.
To learn more about LC Solutions Michigan PLLC and how we can help your business, please contact us here. For regular tips, insights, and industry accounting know-how, check out our Facebook page here.
Copyright LC Solutions Michigan PLLC
May 27, 2019