Unpacking your compliance toolbox

Every day, cannabis business owners and operators deal with many complexities created by heavy regulation. The best practices from other heavily regulated industries, such as the banking or oil and gas sectors, can inform us in the cannabis industry. Making sure owners and operators have the right tools in their compliance toolbox is a great first step.


Compliance toolbox essentials: training

Compliance often begins and ends with a company’s employees. These trusted individuals are the front line of defense and the weakest link in compliance. Ensuring they understand the rules and regulations is key to daily operations. Creating an employee training program to get new members of the team up to speed can stop compliance issues before they start.

– Orientation: Orientation and onboarding act as an integral component in the compliance toolbox. An effective onboarding and succinct orientation create employee confidence. This also serves to limit turnover, one of the biggest hidden costs in the industry.

Many employees come into the industry without knowing the details of how cannabis has been perceived in the past, or how the industry has evolved to the present day. Making sure employees have the knowledge to speak as experts to customers, peers and other contacts creates confidence in your brand and in individuals joining your organization.

Ensuring employees understand the stigma created by “Reefer Madness” provides insight into the history of the industry, its professionalism and the current state of cannabis culture. Explaining the road to legalization and regulation in your state provides employees with a meaningful context for conversations with customers, business associates and regulators around the importance of compliance. This also give employees a clear compass for on-the-job decision-making and compliance management.

– Employee training handbooks: Establishing a culture of compliance in training is another essential component in the compliance toolbox. Employees are motivated by knowing the cultural expectations, shared values and mission of their new workspace in context with the overall movement and industry.

Emphasizing compliance and creating a culture of compliance go hand-in-hand. Ensuring compliance strategies are built into a business’ infrastructure from day one makes compliance natural and important. When employees understand the mission and dream the company brings into reality, turnover decreases — they know they are part of something bigger and are personally responsible for it. If employees have a reference, such as an employee training handbook, they can take notes and ensure processes are followed to accomplish the shared dream of the team.

In addition, well-planned and executed employee handbooks give business owners and operators a chance to explain why employees need to know and follow regulations and procedures. This can be a great platform to be real with employees about the consequences, both to themselves and to the business. If employees know what happens when they don’t follow the rules and regulations, they’ll be more likely to buy into a culture of compliance. They are more likely to hold each other accountable and speak up when incidences of non-compliance happen on the front lines.

Helping new employees understand how their job responsibilities determine the success or failure of the business keeps them engaged and on task to their daily expectations being done the right way, for the right reasons.

– Multimodal training strategies: Employees may have different areas of strengths, so training often requires a multimodal approach. Some team members may learn kinesthetically, through doing. Others may learn verbally or through interaction with others. Yet others may be visual learners. Creating a training program that incorporates a combination of learning styles will ensure each employee has a chance to capture and retain knowledge through different mediums.

Documenting these multi-modality training programs ensures the business has accountability over employees, with regulators, and for disciplinary actions if needed. Each process for each job type and its roles and responsibilities should be signed off on by the employee and their supervisor once they can prove competency in performing the task, using the right equipment and with the accuracy necessary to ensure compliant operations.

These signoffs in the employee training manual should be copied into each employee file to serve as validation of internal efforts, in addition to any certifications in compliance, pesticide application, food safety, OSHA, HIPAA or other required training the employee learns.

Compliance toolbox essentials: Standard operating procedures

Standard operating procedures (SOPs) define business procedures and are the basis by which employee training manuals are created and updated. They codify standards and provide quality structures so your employees can make the right decisions on the job and, in doing so, ensure the brand value of a cannabis business as well as the protection of its license.

SOPs establish an organizational foundation for your operation and act as the roadmap for all the procedures your employees need to follow. Therefore, keeping SOPs updated with the most recent regulatory and rules changes ensures accuracy. Too often, companies become complacent and SOPs gather dust, becoming inaccurate and out of date.

Giving your employees an updated and accurate reference guide empowers them to practice compliant procedures as a team, in real time. This means they can check themselves even when managers and compliance officers are not available to answer questions on a specific procedure and empower them to do the right thing — instead of making timely and costly compliance mistakes.

– Tips and tricks: When documenting procedures, reference/highlight requirements by the rules and regulations specifically within each procedure. This allows easy edits when rules change and procedures need to be modified to comply.

Many states require SOPs for license applications. Many states also require updated SOPs to be onsite and easy for employees to access and reference. Managing these living documents for your business requires careful crafting.

When drafting or revising SOPs, it’s important to include the following: organizational charts; job position roles and responsibilities; descriptions and flow charts to document daily activities; security protocols; quality assurance standards and procedures; packaging and labeling requirements and procedures; cash handling procedures; track-and-trace protocols; delivery protocols (where applicable); online ordering protocols; transportation procedures and requirements; inventory storage and handling; inventory management controls; testing and reporting protocols; books and records requirements and procedures; and equipment maintenance procedures and schedules.

By no means is this a comprehensive list, but these suggestions provide a starting point. It’s important to remember that no two facilities and organizations are the same. As such, businesses should avoid using one-size-fits-all templates of SOPs and should always customize and continually improve SOPs on a regular basis. These become the intellectual property of a company and hold important value in the event of a buyout, merger or acquisition.

– Generating engagement: Cannabis business employees operate more efficiently when SOPs and training manuals reflect the necessary and required steps for daily tasks. When creating or revising SOPs, meeting with the employees who complete these tasks daily ensures processes captured accurately reflect actual tasks.

To ensure adherence, we suggest copying finalized procedures, laminating them and posting them in areas of operation specific to each SOP to remind staff.

In addition, comparing the actual procedures to the procedures required by law and the actual activities performed by staff acts as a check for compliance, as well as a guide for further training opportunities. SOP revisions create essential communication between management and workers to ensure daily processes are accurately reflected and in compliance with the law.

Compliance toolbox essentials: Books and records

When it comes to compliance, ensuring accurate and clear books and records exist stands paramount. Furthermore, proper documentation ensures that even if an issue of non-compliance occurs, businesses have the paperwork to document the incident and quickly resolve the issue. Such documentation can act as a mitigating factor should any violations or investigations occur.

Here are some general guidelines for book and recordkeeping:

– Keep records of employee signoffs, training, orientation, etc.

– Ensure employees sign all necessary human resources paperwork required by your state.

– Be sure your point-of-sale software is regularly reconciled with your seed-to-sale inventory tracking system.

– Ensure transportation manifests are complete, documented and stored immaculately.

– Choose accounting software that can capture everything you need for taxes and have tax reports readily available for inspection.

– Keep track of electronic funds transfers and credit/debit card purchases with receipts as well as statements issued by the bank.

– Maintain visitor logs with time in/out stamps, date of birth capture and visitor signatures.

Because different states have specific requirements, be sure to know the state-specific requirements for your business records.

– Inventory records: Most state regulators use a seed-to-sale tracking system to monitor inventory activity. They also use this system to build a profile around each licensee and their operational consistency. This means new strains, propagation batch sizes, mortality rates, waste rates, growth stage intervals and yields are all monitored. Enforcement agencies often look for inconsistencies in the data to spot potential non-compliance.

No one wants to have too many chefs in the inventory kitchen, inputting data into POS or traceability systems. Effective inventory control, both physically and virtually, ensures accuracy. Inaccuracies lead to inspections and investigations. Tight controls around the inventory and personnel with access to these systems becomes paramount to avoiding non-compliance.

Regularly auditing and reconciling inventory prevents diversion in or out of the regulated system, helps catch mistakes and holds employees accountable to inventory management procedures. All too often, simple, reoccurring mistakes lead to a snowball effect of inaccurate inventory. Unfortunately, situations like that get out of control very quickly and can cause detrimental and expensive impacts on the business.


Compliance Toolbox Essentials: Third-party verification

In most heavily regulated industries, having another company come into the business and verify compliance is essential to operations.

When business owners invite an independent, neutral company to come into their operation and look at their compliance, they’re essentially building an externally verified case history for their business. That means business owners have evidence in the event they need to defend their license or investigate non-compliance.

Having a third party conduct a 360-degree analysis provides important feedback, which helps identify areas of focus. In addition, third-party verification validates the strength, accuracy and adherence to the operational compliance infrastructure of the organization.

This evidence can provide proof that a compliance issue has not occurred in the past. Additionally, this evidence often allows operators to discover important areas for improvement. Further, third-party documentation of remediation efforts reduces the impact of known violations and lessens violation severity with regulators.


Unpacking the Toolbox

When cannabis business owners ensure their compliance toolbox contains all the right tools, successful operations ensue. Ensuring employee training occurs regularly and documenting this training often becomes essential to business operations. Accurate, well-managed and well-implemented SOPs create clarity for operations. Creating clear and well-managed systems for handling books, records and inventory is also an essential tool for managing compliance effectively. And third-party validation of compliance allows cannabis business owners and operators to build a case history of compliance, as well as identify compliance issues and protect business assets from fines and suspensions.

Companies committed to compliant operations can take their businesses to the next level. Other regulated industries learned to operate with this level of compliance a long time ago by necessity, and cannabis will too.


Mark Slaugh is the CEO and founder of iComply, LLC. He established iComply to help cannabis businesses navigate the complexities of regulated marijuana. He provides the leadership and forward-thinking that continues to set standards across the global industry.

Lindsay Deen is a “Jill of all trades,” critical in operational, administrative, human resources and IT support for iComply. Having created and implemented the development of the administrative department at iComply, she’s integral to streamlining departmental functions. She is also a published author at the literary magazine US Represented. To learn more about iComply, visit www.icomplycannabis.com.


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