Demand for cannabis and cannabis products is high, but maintaining a cannabis business, especially in manufacturing, is challenging. The industry is flooding with compliance legislatures at the Federal and State levels that keep changing as the industry expands.
It doesn’t help that the United States has varying cannabis regulations across states. Municipalities and neighboring states can have different rules and compliance demands, making navigation through the seed-to-sale process tricky.
So, how do you avoid compliance issues with your cannabis manufacturing business?
Prioritize Record Keeping
Meticulous records are a consistent requirement in every state. Make recordkeeping your primary compliance consideration. Maintain all the records from seed to sale. Your product records will help you trace your products from their raw material stage to their final product stage, which is essential if your consumers raise a safety concern.
Additionally, adhere to the OSHA recordkeeping requirements for reporting and recording any illnesses and injuries experienced by your manufacturers. This will also extend to your financial records when dealing with issues like workers’ compensation for any manufacturer injured on the job.
Keep all your sales records intact as well, especially the ones that concern cash transactions, a common practice among cannabis dispensaries. Transaction record keeping will help you track incidences of theft and prepare you for any unexpected business audits.
Don’t forget to ensure the safety of all your licenses and legal documents like your Articles of Incorporation, Employer Identification Number, and operating agreements. These will keep you compliant with your bank and local, state, and federal government.
Revisit State and Federal Regulations Continuously
Keeping an eye on your state and federal regulations is vital for your cannabis manufacturing business. Remember, this is one of the compliance factors that can cost you your entire business operations.
Do not take sources that keep you informed of your state and federal cannabis regulations for granted. Check local and legal newspapers, industry reports, and websites that update cannabis policy and look for manufacturing rules in the cannabis industry.
Also, start to network and form relationships with local regulators. They are first in line with information about cannabis compliance regulations and policies, meaning they can help you better understand what you need to do to conduct your manufacturing businesses properly.
Implement Good Manufacturing Practices
Any products controlled by quality standards need to follow given processes, procedures, and documentation. Your cannabis manufacturing business must follow these practices since cannabis products fall in this category.
That means implementing standards that ensure your cannabis products are safe, high-quality, and address issues like environmental pollution and hygiene. Make these processes your standard operating procedures, and then train your employees to follow them to the letter. The systems also include storage practices for your products.
Show compliance with these operating practices by keeping a record of your processes from seed to sale. Include your training manual to ensure you practice total transparency when handling your manufacturing business.
Here’s 6 more cannabis accounting and compliance tips for manufacturers
Leverage Software For Your Manufacturing Business
The right software will help your cannabis manufacturing business remain compliant in different ways:
- Maintaining sales and accounting records and reporting
- Tracking and managing your employee’s work schedules
- Tracking and assessing your business operations
As a cannabis manufacturer, you can produce various products like capsules, edibles, and vaping cartridges. You need both nonvolatile and volatile chemicals to extract and infuse cannabis within the standard processes in cannabis manufacturing.
For instance, volatile solvents extract and isolate the active ingredients in cannabis. However, some of these processes have high exposure to hazardous chemicals and waste, which can cause illness and injury to your workers and the environment.
There is a risk of life-threatening explosion if the processes are not appropriately monitored. This is why OSHA’s Hazard Communication Standard requires cannabis manufacturers to have a written plan for hazard control. Cannabis manufacturers must outline their compliance with maintaining safety data sheets, labeling hazardous containers, and training employees on handling hazardous materials and processes.
Leveraging software will help you and your employees assess your manufacturing processes, identify possible hazards and exposure points, and provide the mitigating approaches to use to stay safe and compliant.
Learn how to choose the right cannabis manufacturing software
Practice Makes Perfect
Maintaining compliance within your manufacturing business becomes more manageable with a bit of practice. But first, you need to understand your industry well and the transparency required to remain compliant. Then understand the legal laws and regulations that you must follow as a cannabis manufacturing business, including the standard operating procedures to use in your operations. This might be the most challenging part for you, but a local regulator relationship will keep you updated and informed at all times.
Finally, leverage the advantages of technology today to keep records of every activity in your business. And to ensure you are entirely compliant, conduct an audit for your business regularly to make sure you are always on top of legal and tax regulations.
FAQs
What is compliance in the cannabis industry?
These are the rules and regulations stipulated by the federal and state governments that businesses in the cannabis industry must follow. The tax rules in the cannabis industry are significantly different from other sectors, and they carry more severe legal implications for cannabis businesses.
Why is compliance vital for cannabis manufacturing businesses?
Compliance is the key to survival in the cannabis industry. If your manufacturing business fails to comply with the federal and state regulations and restrictions, your business license is revoked, meaning you lose your business operations. Also, compliance is attractive to investors and acquisition partners for your business.
How can manufacturing businesses avoid compliance issues in the cannabis industry?
Stay updated on the state and federal rules and regulations concerning cannabis manufacturing, keep an updated and transparent record of your business operations, practices, and transactions, and use technology to automate these processes and store your documents safely.
