The legal cannabis industry still lacks federal sign-off to use the US banking system.
Marijuana is still considered a “Schedule 1” drug by the DEA, putting it on legal par with drugs like heroin.
Because the federal government has yet to formally embrace the growing recreational markets, national banks have thus far refused to store money earned through the cultivation or sale of cannabis products.
This means we don't have access to banking like other businesses do.
It also means there's more of a need to manage cash effectively and securely.
The risk of cash management for cannabis businesses
The lack of access to cannabis banking services and credit card payment processing has resulted in risky and sometimes outright dangerous situations for marijuana businesses.
The legal cannabis industry is worth an estimated $18B in 2020. And projections are $37B by 2024. If nothing changes to allow cannabis businesses access to the banking industry, we’re talking about a lot of cold hard cash to safely and securely collect, store, and transport.
Here’s a look at the real risks here: Companies are required to pay taxes for their earnings, in some states on a monthly or quarterly basis. This presents a problem when the entire cannabis industry is operating on a primarily cash basis out of necessity.
Every cannabis retail operation in the state must transport their tax payments in cash to a secure site.
Some states have many sites, others require everyone to go to one secure location, sometimes hours away from their store.
It’s easy to see how this creates a precarious situation. Those who can afford it may hire an armored car to help them deliver the money, but most dispensaries will simply bring 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 risky.
However, these aren’t the only risks that come with the cash-preferred model. Retail stores are particularly vulnerable to internal theft and accounting errors as well.
Can Dispensaries Use Banks?
In this post, you’ll learn 18 tips to manage large sums of cash and keep your marijuana dispensary safe in the process.
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.
Accept that internal theft is an ever-present concern and take steps to mitigate the risk. Here are a few specific tips to strategically address loss prevention:
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 fewer internal theft problems.
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.
Here's a few ways to establish a culture of compliance, transparency, and honesty among your teams.
- Design dispensary 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 from your drawers to a back of house safe.
- Require the use of lockable money bags when moving cash within the dispensary.
- Make sure that employees are never leaving cash out in the open.
Additionally, create an environment where your employees feel valued and rewarded for following rules and doing their job well, which 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.
You can also include a tip jar to encourage customers to give if they've been happy with their budtender’s service.
All of this can help make your front of house staff feel appreciated, and that they are a stakeholder in the day-to-day operations and success of the business.
Tip #2 - Limit employee permissions
Internal theft is a 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 in companies that do all their cash accounting by hand.
Limit what each employee can do in the system so that potential thieves can’t manipulate your data to cover their tracks.
Tip #3 - Use blind drawer reconciliation
Using 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 bank 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 the totals they counted are correct or not based on the sales data 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 and use SOPs for managing cash
Every process that involves cash in your dispensary should have a documented standard operating procedure. This includes opening/closing drawers, doing drops/payouts, depositing cash, storing and transporting cash, and handling discrepancies.
When there is an internal discrepancy with a register, your standard operating procedures outline how to deal with that. Sometimes errors in cash management are theft and sometimes they're negligence. Both scenarios must be handled appropriately and action should be taken to reduce the likelihood of either.
Many stores use a tiered system for small discrepancies when the source can’t be identified. The first time the employee might just receive a warning. The more that it happens over time, and depending on the amount of the discrepancy, the employee may receive write-ups, removal of permissions, and eventual firing.
Make sure that your management staff is regularly digging into your point-of-sale data and dispensary inventory auditing for shrinkage on a frequent basis, so you can better detect patterns.
Tip #5 - Track employee activity
One of the easiest ways to mitigate internal theft is to ensure that your cannabis POS system has in-depth employee tracking features. Being able to see every action that an employee takes, from processing sales to editing product names to checking in a customer, is critical for not only establishing a culture of compliance but for auditing discrepancies.
If you know every action that every employee took in your system, you can more easily find and address issues directly.
If your point-of-sale system does not have employee activity tracking, you’ll have to manually keep track of which employees are operating each drawer and clearly document and reconcile discrepancies. However, it will be hard to reconcile discrepancies and identify patterns without a system that tracks activity.
Create efficient in-store cash workflows
In legal states, customers learn about the industry’s cash policies over time. The first time they come in, they might try to pay with a card and are gently directed toward an ATM. Any associate that works in a cannabis store will tell you how often this happens.
Stores themselves must educate customers. Some customers won’t understand why they have to pay in cash, others will just be unaware, and others may have just forgotten.
The key is setting expectations and as the industry matures, providing options for customers to pay through methods other than just cash. The following tips cover education and alternatives to cash:
2020 Guide to Cannabis Payment Processing
Tip #6 - Provide educational materials
Many of your customers won’t understand why you require cash. Having simple pamphlets or signage in your waiting room that explains the current status of cannabis and federal banking can help save your sales associates time while providing valuable education to customers.
Also be sure to include your payment options on your website, on your front door, in the waiting room, inside the dispensary, and on social media, so customers are aware before they make it to the payment stage of their purchase.
Tip #7 - Offer ATM access
Since cash is the primary way of paying, most dispensaries have an in-store ATM and customers have come to expect that every store will have an ATM available to use.
If you choose not to have an ATM, you may have to turn customers away. This option is only preferred in locations where ATMs are nearby, such as in the main lobby of your building.
If customers have to leave to go get cash, it’s unlikely they'll want to return.
Tip #8 - Accept point of banking payments
While not directly a cash management tip, offering non-cash payment options will reduce the amount of cash you have to manage. Cannabis payment software and point of banking options are fairly new to cannabis businesses, but are quickly gaining traction, especially since COVID prompted many businesses and consumers to prioritize touchless, cashless operations.
Near-term, many cannabis businesses will accept both cash and non-cash payments. This means that cash management best practices and tight operations will still be necessary, but this will start to reduce cash risk (and also satisfy customers).
Another growing option is self-service kiosks, where customers select products, check out, and pay from a machine. This option won’t make your cash handling practices different, but you will need to create SOPs around who empties the cash out of the machine, how it’s stored, and the process for counting the expected vs. actual cash inside the machine.
Employ effective security measures in your store
Security is a critical component of keeping yourself and your business safe in a primarily cash industry. In fact, many states require that legal dispensaries have security guards posted at the door checking IDs and keeping away anyone that might have nefarious intentions.
Here are a few tips to help you hire and manage your security efforts:
Tip #9 - Hire experienced security guards
All cannabis stores need to have security to protect their cash, monitor inventory, and ensure a safe experience for 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 find security at a cheap rate just to 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 manage the front door, but they’ll also know the signs of suspicious activity and help you to maintain order throughout the store.
Tip #10 - Invest in the best security surveillance tech
Security cameras in every room of your store are usually a state requirement. However, not all security systems are created equal.
The security system installed in your dispensary should be built with off-site accessibility, to minimize the risk of being tampered with and to check on operations when you're away.
Tip #11 - Control entrance and exit access
Many legal states mandate that 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 a dedicated person to guard the entrance and exits ensures that no one unwanted comes in and no one leaves without paying.
Tip #12 - Invest in cash tracking technology
Cash tracking systems help you know where your cash reserves are at all times. They include a GPS device that’s 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.
Not every store needs this level of security, but it is an investment that can bring peace of mind and help safeguard your livelihood.
Store your cash securely
When you have large amounts of cash, you need a place to reliably store it. While keeping cash in your dispensary might make sense for a single business day, storing it there longer-term makes your dispensary a target for robbery.
As you look at secure cash storage options, consider these tips:
Tip #13 - Keep on-site cash storage to a minimum
There is no way around storing some amounts of cash at your dispensary, at least until you’re able to take it to a more permanent location.
All cash temporarily stored on-site should be in a time-triggered safe. Safes that take 15-20 minutes to open can dissuade offenders from attempting to rob the store. Additionally, it ensures that employees with access have some time to re-think any plans for theft.
Signage stating that cash is not kept on-site may discourage anyone who is casing your dispensary for a potential robbery.
Create and enforce cannabis cash management SOPs to outline where cash is stored, who can access it, how it's moved from drawer to safe, etc.
Tip #14 - Evaluate local cannabis-friendly banks and 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 700 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 to other cannabis business owners in your area to help identify which local banks or credit unions are cannabis-friendly. Calling around and speaking with a rep from the bank can also help you create a list of potential options.
Among those that are willing to work with cannabis companies, each may have their own processes and requirements. US News and World Report published an article painting a picture of banks in Colorado keeping their relationship with cannabis businesses under wraps.
Tip #15 - Use secure facilities for longer-term storage
If you either don’t want, or don’t have access to, traditional banking for your cannabis business, you will be responsible for storing your own cash.
The most important thing is to find a reliable, secure storage facility in your 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.
If this is the best option for your dispensary, be sure to do your due diligence to understand the facility's security measures.
Transport your cash safely
Regardless of whether you store your cash at a bank or a secure storage facility, the concern is how you’ll transport it.
Moving a full day’s worth of cash to a secure location puts the person who 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 to help you mitigate risk and ensure that your cash is transported safely.
Tip #16 - Invest in an armored car service
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.
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 #17 - Change your routines often
If you, or a member of your team, are required to deliver cash to the storage site, it’s important that you take some precautions to protect yourself.
First, change your routes regularly. If someone were planning to rob you 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 #18 - Bring a security guard with for transport
If possible, try to avoid sending your employees or making cash deliveries alone. Having a security guard accompaniment to the secure storage facility can help provide peace of mind, mitigate risk, and ensure that your cash is safely transported.
Having an additional person along for cash transport also reduces the risk of internal theft.
Be sure to create and enforce clear SOPs around the transportation process, including when it happens, who goes, how the trip is logged, verification of cash drop, etc.
Get started with SOPs
Now that we’ve talked through tips for safe and secure cash management in your dispensary, it’s your turn to take action.
First, decide how you are going to prevent loss in your store, consider accepting non-cash payments to reduce your cash risk, invest in quality security, make decisions around cash storage (ideally at a local bank or credit union), and plan for how your cash gets transported to the bank. Then, document and enforce your new procedures.
To help you get started, we’ve created an editable cash management SOP template. All you have to do is update your protocols, save, print, and make sure every employee knows their role in reducing theft, mitigating risk, and keeping the business successful and safe.
Dispensary Cash Management Standard Operating Procedures
This post was originally published in June 2019 and has been updated to reflect the current state of cash management in cannabis.