Despite its rapid growth, the legal cannabis industry still lacks the federal sign-off to use the United States banking system in the same way that any other business can.
Because the federal government has yet to take significant action to embrace the growing recreational markets, national banks have thus far refused to store money that was earned through the cultivation or sale of cannabis products. Marijuana is still considered a “Schedule 1” drug by the DEA, putting it on legal par with drugs like heroin.
The lack of access to cannabis banking services and credit card payment processing has resulted in a lot of risky and sometimes outright dangerous situations for marijuana businesses that must collect, store, and transport large amounts of cash.
Take this example described in The Economist. In Oregon, companies are required to pay taxes for their earnings on a monthly basis. This presents a bit of a problem when the entire cannabis industry is operating on a cash-only basis out of necessity. Every cannabis retail operation in the state must transport tax payments in cash once-per-month to a secure site in Salem, Oregon. The state only has one site, too. Every company must travel to Salem, regardless of how far away their location is from the storage facility. That’s a lot of risk assumed as many businesses must transport hundreds of thousands of dollars once per month.
It’s easy to see how this could create a very precarious situation. Sure, some stores will hire an armored car to help them deliver the money to Salem. Those that can afford it, anyway. There are a good number of dispensaries that are simply bringing in boxes of untraceable cash in the back of their personal vehicles, making them a target and putting themselves and others in potential danger.
Collecting, securing, and transporting that much money on a regular basis is transparently risky. However, these aren’t the only risks that come with the cash-only model. Retail stores are particularly vulnerable to internal theft as well. Accounting errors are more likely.
Until a solution is signed into law, such as the SAFE Banking Act or STATES Act, companies in the legal cannabis market must find safe and effective ways to store, track, and transport cash.
In this post, you’ll learn 17 tips that can help you deal with large sums of cash and keep your marijuana dispensary safe in the process.
Create a loss prevention strategy
While external theft presents a huge risk to legal cannabis companies, internal theft is often more impactful across the industry. Large quantities of cash sitting around your store create a certain temptation. That is just a reality of the industry.
For some internal theft is a serious problem. But it doesn’t have to be. By accepting that internal theft will be an ever-present concern for your company and taking steps to mitigate the risk, you can put yourself in a position to limit theft, improve the culture of your company, and promote accountability.
Tip #1 - Establish a culture of compliance
Dispensary owners that make compliance a priority in the way that they hire, train, and design processes will simply have less internal theft problems to deal with. Employees are more likely to attempt to steal from companies that are loose with their controls. When cash floats around unattended, untracked, and without a culture that lets the employees know that management (and other employees) are keeping a close eye on them — theft is almost certain to occur.
Establish a culture of compliance, transparency, and honesty among your teams. Design standard operating procedures that make it clear that the actions your employees take are being monitored. Make expectations apparent by clearly defining day to day procedures for handling cash very specifically. Limit the amount of cash in a drawer at any one time and designate a few trusted employees to handle the movement of cash within your store from your drawers to a back of house safe. Require the use of lockable money bags when moving cash within the dispensary, and make sure that employees are never leaving cash out in the open.
Additionally, create an environment where your employees feel valued and rewarded beyond their paycheck for following rules and doing their job well. In doing so, you’ll set the stage for a culture of accountability. Be generous with employee discounts to dissuade product theft, and offer additional incentives for your budtenders and management staff if goals are met around reducing shrinkage. Include a tip jar and signage encouraging customers to give a suggested percentage of their total spend if they have been happy with their budtender’s service. All of this can help make your front of house staff feel appreciated, and that they are more of a stakeholder in the day to day operations.
Tip #2 - Limit employee permissions
Internal theft is an ever-present problem in companies that have few (or no) controls in the systems that they use to track their money. You’ll see higher rates of discrepancies and theft rates in companies that do all of their cash accounting by hand. Use a point-of-sale and inventory management system, like Flowhub, that gives you complete control over employee permissions. Limit what can be done in the system so that potential thieves can’t manipulate your data to cover their tracks.
Tip #3 - Use blind drawer reconciliation
Installing a blind drawer reconciliation process for each register at the end of the business day (or whenever an associate leaves for the day) is critical for holding employees accountable. Blind reconciliation means that when your sales associates close a register, they are prompted to count all of the cash and debit card slips, then report the total within your point-of-sale system without knowing how much should be there until after all of the information is added.
The system will then let the employee know if their totals are correct or not based on the numbers from your sales reported in your point-of-sale software. This process makes it easier for managers to spot discrepancies and keeps employees in line knowing that they will have to account for cash at the end of their workday.
Tip #4 - Create clear SOPs for managing discrepancies
When there is an internal discrepancy with a register, make sure that you have a standard set of operating procedures for dealing with that. Many stores use a tiered system for small discrepancies where a source can’t be identified. The first time the employee might just receive a warning. The more that it happens over time, the employee may receive write-ups, removal of permissions, and eventual firing for continued discrepancies. Make sure to also create standard operating procedures for your management staff to dig into your point-of-sale data and reporting and audit for shrinkage on a frequent basis, so you can better detect patterns when they arise.
Tip #5 - Employee activity tracking
One of the easiest ways to mitigate internal theft risks is to ensure that the point-of-sale system that you are using has in-depth employee tracking features. Being able to see every action that an employee takes is critical for not only establishing a culture of compliance but for auditing discrepancies. Flowhub is built to give your management staff full visibility into your employees’ activity history with tools such as dynamic drawers, which tie each employee to a specific drawer, and each transaction to an employee via a pin. Additionally, Flowhub has back of house tracking features such as a Drawers Activity Report which helps you track when your drawers were opened or closed, when cash drops or payouts were made, who was assigned to what drawer, beginning cash balances and the current amount of cash in a drawer.
Educate your customers about cash-only practices
In legal states, customers learn about the industry’s cash-only practices over time. The first time they come in they might try to pay with a card and are gently directed toward an ATM located in the corner of the room. Any associate that works in a recreational cannabis store will tell you about how often this happens.
The stores themselves must educate their customers. Some customers won’t understand why they have to pay in cash. The key is setting expectations. Remind them on your website, in-store, and on social media that your store is cash-only. If it's their first time a recreational store, it might turn them away completely. There are a few simple steps that any cannabis retailer can take to educate their customers on their cash-only practices:
Tip #6 - Make educational materials available
Many of your customers won’t understand why you are a cash-only business. Having some simple pamphlets on hand that can explain how legal cannabis companies are not currently allowed in the federal banking system can help to save your associate's time having the same conversations over again while providing some valuable information to your customers. Simple signage stating that your dispensary only accepts cash in waiting areas can also raise awareness.
Tip #7 - Provide ATM access
All recreational stores should have an ATM available in their store so that customers that walk into the store have the ability to take out cash if needed. Because cash-only stores are the industry-wide standard, many customers have come to expect that every store will have an ATM available to use.
Employ effective security
Security is a critical component of keeping yourself safe in a cash-only business. In fact, most states require that legal recreational stores have security guards posted at the door checking IDs and keeping away anyone that might have nefarious intentions.
Tip #8 - Hire experienced security guards
All recreational cannabis stores need to have security on-site to protect their cash, monitor inventory, and ensure a safe experience for all of their customers. But make sure that you don’t view hiring a security guard as a mere formality. While it might seem like a good idea to get the find security at a cheap rate just to ensure you meet your state’s security compliance issues, it’s important to understand the full breadth of benefits that experienced security guards bring to the table. They’ll not only help you man your door, but they’ll also know the signs of suspicious activity and help you to maintain order throughout the store as well.
Tip #9 - Invest in the best security surveillance tech
Security cameras in every room of your store are usually a regulated requirement in order to open and operate a dispensary. However, not all security systems are created equal. It is recommended that the security system you install in your dispensary is built with the feature of being able available to access off-site, to minimize the risk of being tampered with and to check in on operations when management is temporarily away.
Tip #10 - Entrance & exit access control
Most legal states mandate that recreational stores (and medical dispensaries) have a security guard placed at the entrance and exit area of the store. Their job is typically to check IDs to make sure anyone entering is of age, keep out potential trouble makers, and serve as a deterrent to anyone that is considering causing a disruption. Having them there to guard the entrance and exits, controlling who enters and leaves, ensures that no one unwanted comes in and no one leaves without paying.
Tip #11 - Cash tracking technology
Cash tracking systems help you to know where your cash reserves are at all times. They’ll include a GPS device that is attached to large sums of cash. That GPS device not only tells you where the cash is but can alert you immediately if the cash is removed from your place of business or storage facility. More advanced cash management solutions like the ones used in banks can trigger alarm systems when cash is removed from specific drawers or through unexpected motion.
Where to store your cash?
When you have large amounts of cash you need to find a place to reliably store it. While storing it within your dispensary might make sense for a single business day, keeping it there makes your store a target for robbery.
As you look at cash storage options, consider these tips:
Tip #12 - Temporary on-site cash storage
There is no way around storing cash at your retail store, at least until you are able to take it to a more permanent location. When you store cash at your store, use a time-triggered safe. Safes that take 15-20 minutes to open can dissuade some offenders from even attempting to rob the store. Additionally, it ensures that employees with access have some time to re-think any plans that they had to steal the cash. Signage stating that cash is not kept on site may discourage anyone casing your dispensary for a potential robbery.
Tip #13 - Evaluate state banks & local cannabis-friendly credit unions
Big national banks are not willing to jump into the cannabis industry until they have protection from Congress. However, banks and credit unions that don’t do business across state lines may be willing to work with cannabis businesses. The U.S. Treasury Department states that there are more than 400 financial institutions across the U.S. that are willing to work with legal cannabis businesses. In just 2014 there were zero. So there is progress being made.
Speak with other cannabis business owners in your area to see if they are using a local bank or credit union. Calling around and speaking with a rep from the bank can also be an effective way to create a list of potential options. Among those that are willing to work with cannabis companies, each may have their own processes and requirements. The New York Times recently published an article that details how small local credit unions have started to bridge this gap in some markets.
Tip #14 - Use secure storage facilities
If you find that you will be responsible for storing your own cash, you’ll want to find a reliable, secure storage facility in your local area. The storage facility should be close enough so that you can drop off large sums of cash on a daily, or bi-daily basis. You never want to have large sums of cash accumulating inside of your store if you can help it.
How to transport cash
Regardless of where you decide to store your cash, it comes with concerns about how you’ll transport it. Moving a full days worth of cash to a secure location puts the person that is transporting it in danger. It can make them a target and puts a significant portion of your store’s earnings in jeopardy.
Here are a few tips that you can follow to help you mitigate risk and ensure that your cash is transported safely.
Tip #15 - Armored cars
Larger stores might want to just bite the bullet and invest in regular armored truck pickups to ensure that their cash reserves stay safe. While this option can get pricey, it is truly the safest option for your employees and brand. Armored cars can pick up and deliver large sums of cash to the location of your choosing, providing you with peace of mind and ensuring that your employees are never exposed to undue risk.
Tip #16 - Change your routines often
If you or a member of your team will be required to deliver your cash to the storage site, it is important that you take some precautions to protect yourself. First, you should change your routes regularly. If someone were planning to rob you for the cash on your way to the storage facility, they would probably want to get an idea of what your routines are. By changing them on a weekly basis or even mixing things up throughout the week, you make it harder for someone to plan their attack.
Tip #17 - Security guard accompaniment
If possible, try to avoid sending out your employees or making your cash deliveries on your own. Having a security guard there to accompany whoever is making the deliveries to the secure storage facility can help to provide peace of mind, mitigate risks, and ensure that your cash is safely transported.
A problem for all
At this time, all cannabis companies who make their money from the legal cultivation or sale of legal cannabis have to deal with the lack of banking options from national banks. While small credit unions have stepped in to fill the void, there are still many considerations that come with storing the cash in house, training and monitoring employees, and securely transport the cash to a secure location.