When you apply for an adult-use cannabis business license, the application is likely going to ask you to detail your standard operating procedures (SOPs). These are a critical factor in helping your license application get approved – as well as key to making sure your cannabis business runs smoothly.
Here’s what you need to know about standard operating procedures in the cannabis industry.
What are standard operating procedures?
Standard operating procedures are a comprehensive and detailed list of tasks, procedures, and policies that are written and compiled to guide employees in executing and performing their assigned tasks. It’s basically a how-to for everything in your business. Outlining your SOPs can help ensure compliance with both internal and external policies and regulations.
Where it concerns cannabis businesses, SOPs provide detailed, step-by-step instructions about how daily tasks are supposed to be performed and monitored. These procedures help your business comply with local and state laws and regulations. Because the cannabis industry is a tightly regulated industry, standard operating procedures will integrate mandated policies, procedures and protocols into daily life in a way that will enable employees to perform effectively. SOPs can cut down on bookkeeping mistakes, help prevent fraud, and keep your business running smoothly so you can focus on the customer.
What goes into a standard operating procedure for cannabis companies?
Consider including standard operating procedures in your application that cover the following areas:
- Quality assurance
- Packaging and labeling
- Cash handling
- Track and trace
- Storage: product and records
- Inventory control
You may find some overlap when it comes to outlining the operations of these aspects of your business. Likewise, some of these areas may not apply to your specific role in the cannabis industry. These are illustrative examples to show you just how detailed your operations plan should be when it comes to meeting the application requirements.
Proving your business is properly secure isn’t just important for the application. Cannabis companies deal with a) tons of cash and b) very valuable product. Some cannabis companies report dealing with between $250,000 - $350,000 in cash each month. The potential for diversion, theft, loss, and related illegal activity is a pressing concern to the governing bodies that be. It should also be a concern for you and your employees.
Almost every commercial cannabis application will have a section in their application dedicated to security. This includes how the business will build out its facility to ensure optimal security and safety for its employees, its products and the neighboring community. Include strict protocols for the type of security mechanisms and equipment that your company will use to meet and/or exceed local and state requirements. Consider the following options:
- Type of alarms, security surveillance equipment, lighting and perimeter
- Record-keeping security to prevent fraud
- Security personnel or armed guards
- Ingress and egress security
- Employee identification
- Limited access areas
Quality Assurance and Testing
California is one state with rigorous requirements to ensure that cannabis goods and products are of the highest integrity. One of the goals of eradicating the cannabis black market is to prevent any unregulated, poor quality product to cause medical issues that could put the public at risk.
The legal cannabis market demands that your goods and products be tested by licensed cannabis testing facilities. You must also implement rigid protocols to maintain the integrity and quality of cannabis goods and products internally—prior to, or after, third party cannabis testing.
Your SOP for QA and testing should consider the following, depending on your role in the cannabis industry:
- Environmental controls for storage, cultivation, manufacturing
- Sanitation measures to ensure cleanliness, prevent degradation and contamination
- Inspecting inbound and outbound shipments of goods and products
- Inspecting labeling and packaging
Packaging and Labeling
California has strict requirements on packaging and labeling of cannabis goods and products to ensure that patients and consumers alike are well-informed. Packaging is also regarded as a top priority in order to ensure that minors, especially children, will not be able to gain access to cannabis goods and products. In brief, your SOP in regards to packaging needs to meet these high level requirements in California:
- All packaging for edibles must be opaque.
- You must package your finished cannabis products prior to transferring them to a distributor.
- The packaging must protect the product from contamination and ensure the product is child-resistant.
Ensuring that your SOPs have this aspect earmarked is important to safeguard the youth as well as meet local and state requirements. Further details about child-resistant packaging:
- Products cannot be packaged to look like non-cannabis food.
- The product should have tamper-evident packaging if applicable. The customer should easily be able to see that a package has been damaged, opened or tampered with.
- If a package is intended for multiple uses, then it must be easily resealable.
- You must use the universal symbol for manufactured cannabis products. It must be black. Although you can alter the size, the color cannot be altered.
Make sure your SOP is clear on your packaging requirements. You should also include some provision stating how often will goods and products be labeled and packaged and who will pack and label them. When will the labels and packages be checked for accuracy? Who will provide the labels and packages?
Track and Trace + Inventory Control
Track and Trace is a state-mandated technological protocol that, in theory, would be able to pinpoint and identify where cannabis goods and products are at any time. This is the crutch that the industry depends on to maintain control over every process from seed to sale.
However, statewide track and trace systems have yet to actually be implemented. Cannabis businesses, therefore, must rely heavily upon internal inventory management and outline strict procedures for handling and storage of cannabis goods and products. Where cannabis goods and products are stored, how they are put into and removed from storage, how they are received or delivered, are all important processes that must be identified in your SOP.
Storage: Records and Products
Transparency is key in this industry; state and local regulators demand it. This requires an SOP for keeping comprehensive records stored in a secure place with limited access. Every cannabis business must be able to produce original and unaltered records to local and state authorities when requested.
Your SOP should answer the following questions:
- Where will the records be stored?
- Who will have access to them?
- How long will they be kept on file?
- What kind of information will be kept?
As for product storage, where and how products are stored is tantamount to preserving its quality, as well as preventing diversion, theft, or loss. How often are they accessed? Who has access to them? These are all questions whose answers must be clearly delineated in your company’s SOPs.
Last but not least, prevent fraud with a clear SOP that deals with your cash handling operations. Like any other business that deals with cash, it is not uncommon that cash is diverted, stolen, lost or used for illegal activities. Hence the stress on cash handling practices that must have strict handling procedures. Where will the cash be kept, how will it be counted, who will count it? Will the business get bank account and where? How will the cash be transported from facility to bank? Where will the safe be located? What type of safe will be used?
For questions on cannabis standard operating procedures or anything else related to running a compliant cannabis company, get in touch with our experts.