Guide to Cash Management in the Cannabis Industry | Evention LLC

Navigating cash management in the cannabis industry is no small feat. Due to the federal legal status of marijuana and cannabis products, dispensaries face unique operational challenges — such as limited banking access and difficulty securing services from essential vendors — rendering them highly dependent on cash transactions. However, with the right strategies and tools, these challenges can be effectively managed.

Keep reading for a closer look at best practices, technological solutions, and compliance measures that can help your dispensary maintain secure and efficient cash handling practices.

Key Challenges in Cannabis Cash Management

When compared to other retailers, cannabis dispensaries face a unique set of cash management challenges — the majority of which can be traced back to the complicated legal status of their primary product. While cannabis and marijuana may be legal in some states, the federal government still classifies these as illegal substances, creating significant cash management obstacles that dispensaries must overcome.

These include:

• Limited Access to Banking Services: Because cannabis is still prohibited on a federal level, most federally chartered banks are unwilling to work with dispensaries. The lack of banking partnerships forces these businesses to rely heavily on cash transactions.
• Difficulty Securing Financing: Many lenders view the cannabis industry as a risk, making it difficult for businesses to access funding. Without the ability to secure favorable interest rates or loans in general, dispensaries struggle to grow or manage cash flow effectively.
• Hesitancy from Vendors: Financial institutions aren’t alone in their hesitancy to work with cannabis-based businesses. Vendors also tend to view the industry with hesitancy to the legal and regulatory uncertainty. This limits dispensaries’ options for essential services such as payment processing, payroll, and insurance.
• Elevated Risk of Cash-Related Issues: Because dispensaries are so heavily reliant on cash transactions, they are more vulnerable to misappropriation of funds, fraud, and theft — presenting significant safety and security challenges.
• Lack of a Digital or Paper Trail: This lack of transparency can lead to difficulties in tracking and managing funds, complicating both internal accounting processes as well as meeting stringent regulatory compliance requirements.

Cash Handling Best Practices in the Cannabis Industry

One way for dispensaries to overcome these challenges — and to put their best foot forward when it comes to ensuring security, accuracy, and compliance — is to adopt a set of best practices for handling cash more effectively. The following six strategies are a strong starting point.

1. Enact Official Policies and Procedures

Clear and consistent policies that outline how cash is to be received, counted, stored, and transported, provide the foundation for effective cash management. To make sure that all employees follow these procedures, it’s crucial to document them. A thorough and detailed record of cash handling procedures helps to ensure that all employees follow the same processes, reducing the risk of errors and discrepancies.  

2. Implement a Regular Reconciliation Schedule

To identify discrepancies early and prevent potential issues from escalating, regular cash reconciliation is key. Establish a schedule for reconciling cash at the end of each shift, comparing the cash on hand with transaction records. This practice not only helps to catch errors but also deters theft and mismanagement by holding staff accountable for the cash they handle.

3. Leverage Cash Management Tools

Investing in cash management tools can significantly streamline cash handling and tracking. Cash counters, smart safes, and point-of-sale (POS) systems with integrated cash management features can automate tasks and reduce the opportunity for human error. These technologies often provide detailed reporting capabilities, which is invaluable for tracking cash flow and maintaining accurate records.

4. Conduct Regular Drawer Audits

Performing frequent, random drawer audits is an effective way to ensure that your cash handling procedures are being followed correctly. During an audit, compare the actual cash in the drawer to the recorded amounts, keeping an eye out for any discrepancies. If any are uncovered, perform an investigation and document the findings.

5. Create a Plan for Safe Storage of Excess Cash

Given the large amounts of cash that dispensaries tend to handle,it’s important to have a fail-proof storage plan. Use secure, tamper-resistant safes (ideally with time-locking capabilities to limit access after hours) to store any excess cash kept on hand and establish protocols for transporting cash to the bank or another secure secondary location.

6. Provide Training on How To Recognize Counterfeit Bills

Counterfeit bills present a real threat to any cash-centric business, and dispensary staff members provide the first line of defense against the financial losses counterfeit currency can cause. To prepare teams, provide regular training sessions on how to recognize legitimate bills, including watermarks, security threads, and color-shifting ink.

Ensuring Compliance With Cash Management Regulations

For cannabis dispensaries, maintaining compliance with industry guidelines is always a top priority. Due to the highly regulated nature of the industry, establishments must adhere to strict laws in order to avoid fines, penalties, and even license loss. This is why it’s crucial to closely follow all applicable laws when handling cash at your dispensary. 

Make sure your dispensary stays above board by:

• Providing employee training: Regular sessions should cover the latest legal requirements, best practices for cash handling, and the importance of adhering to established policies. 
• Routinely reviewing and revising cash handling policies: Laws and regulations in the cannabis industry are continually evolving, so it’s crucial to stay up-to-date on new developments and update your policies accordingly.
• Keeping detailed records of all cash transactions: Dispensaries should document every cash exchange, including sales, deposits, withdrawals, and transfers. These records should be organized and stored securely, making them easily accessible for audits and tax purposes.

Technology Solutions for Cannabis Cash Management

By leveraging the right combination of software, tools, and equipment, dispensaries can streamline operations, reduce errors, and enhance security. Here are some of the top technology solutions that can make a significant difference in your cash management efforts.

Cash Reconciliation Software

This is a game changer for dispensaries that deal with large volumes of cash. Systems such as Total Recon from Evention integrate with your POS system to automate the cash reconciliation process, ensuring that any cash on hand matches your records. Not only does our solution reduce the risk of human error, it also speeds up the reconciliation process and provides visibility down to the transaction level, making it easier to identify and address discrepancies.

Cash Management Equipment

Some of the most effective tools include:

• Cash recyclers: Machines that automatically count, sort, and store cash. They also dispense cash as needed, “recycling” it for customer use.
• Smart safes: Secure storage devices that count and record cash deposits, monitoring cash levels in real-time to improve cash flow management
• Count by weight machines: Devices that quickly count large sums of cash by weighing the bills, offering a faster and more accurate alternative to manual counting

Counterfeit Money Detection Tools

When operating in a cash-heavy industry, encountering counterfeit bills is to be expected. This is why it’s crucial to have reliable counterfeit detection tools at your disposal. Some of the most common and effective options include:

• UV lights: Capable of illuminating security features such as watermarks and security threads that aren’t visible to the naked eye
• Counterfeit detection pens: Pens that contain ink that reacts with the paper used in legitimate currency. When used on a counterfeit bill, the ink will change color.
• Verification machines: Automated tools that scan and authenticate bills by checking multiple security features simultaneously

Cannabis Cash Management Success Stories

The case of Planet 13, a large cannabis dispensary, highlights the critical role of effective cash management. Facing challenges such as manual, error-prone cash handling and the risks associated with storing large amounts of cash, Planet 13 adopted advanced cash management solutions, including Fortis™ Series cash recyclers and Evention Reconciliation software. These tools streamlined cash reconciliation, enhanced security, and improved overall efficiency, enabling the business to better manage its cash flow and focus on customer service.

For more details, check out the full case study.

Cash Reconciliation for Your Dispensary

In the cannabis industry, developing sound cash management practices ensures the security and success of your business. While implementing best practices and staying compliant with regulations go a long way toward overcoming the challenges that come with handling large volumes of cash, the most effective way is through reconciliation automation. 

Evention Total Recon is the only payment reconciliation solution that offers complete payment reconciliation, including both cash and credit card, in one connected system. Schedule a demo to see what our solution can do for your dispensary. 

Or, if you’re looking for ways to update or enhance your cash or credit card reconciliation process, our eBook, Your Complete Guide to a Better Cash & Credit Card Reconciliation Process, has everything you need to know. Download your free copy today.