David Hua

David Hua CEO and Cofounder of cannabis POS startup Meadow.jpg

David Hua CEO and Co-Founder of Meadow

Cannabis Compliance

It's no secret that the entire California cannabis supply chain has had issues with Metrc since it's rollout in January of 2020.  

If Metrc instability is creating delays in your dispensary sales and inaccuracies in your transactions, you want to be sure you're able to quickly identify and fix the discrepancies to stay within California's required 3% inventory variance.  

We know that [CDTFA is starting to use Metrc variance as a means of audit across the California supply chain](https://getmeadow.com//blog/insight-into-2021-cdtfa-tax-audits-and-tax-issues-in-the-california-cannabis "CDTFA Tax Audits"), which means having a system that keeps you fully compliant is more important than ever.

Here are three Metrc red flags that cannabis retailers can use to identify a compliance problem, as shared with us recently by software consultant Brian Maravandi from [AlfaLINQ](https://www.alfalinq.com/ "AlfaLINQ"). Brian and his team at Alfalinq are part of our trusted network of compliance advisors that we’ve worked with to help dispensaries and teams rectify and correct Metrc inventory discrepancies when teams are switching over to Meadow's compliant solution.

### Red Flag #1: Negative Inventory

Filter all your packages that have a quantity smaller than 0. You should not oversell packages; if you see more than a couple negative packages, 
you have a problem. 

### Red Flag #2: Having way more products in Metrc than the inventory you actually have on shelves.

Does your Metrc account list 6000 packages? Or 12,000? 
Does that sound like way more than you actually have in stock?
Then you probably have an issue.

### Red Flag #3: Inconsistent Reporting to Metrc

You need to be reporting data to Metrc every single day. Run a sales report in Metrc; if you haven't been sending daily reports,
you are out of compliance.

<figure>
<iframe width="560" height="315" src="https://www.youtube.com/embed/5rsq4uIIj_g" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
  <figcaption>Los Angeles-based software consultant Brian Maravandi and his team at Alfalinq are part of Meadow's trusted network of compliance advisors that help cannabis retail teams rectify and correct Metrc inventory discrepancies as teams are switching over their software to Meadow.  If you're a California dispensary team and you discover negative inventory in your active Metrc account, we can help get you clean up your Metrc account and put in new SOPs to maintain compliance reporting and optimize your tax reporting.</figcaption>
</figure>
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__Think you may have a compliance issue? We're here to help.__

Even when Metrc goes down, Meadow keeps your inventory, sales and tax data accurate. There's a reason why more California dispensaries and delivery operators are upgrading to Meadow.

Meadow's unique integration with Metrc means:

__Meadow Uptime:__

When Metrc is down, the Meadow API will automatically keep trying to connect, and will pull packages and transfers automatically so you don't have to wait and keep clicking or checking.

__Never Upload a CSV: __ 

Meadow syncs your sales data automatically at the end of the day with no manual labor required.

__Flexible SKU management:__

One SKU can have multiple packages that map to it, without creating Metrc messes.

__No Negative Inventory:__
While other systems let you oversell, Meadow's built-in guardrails keeps you compliant with clean inventory.

__Active Account Monitoring:__
With daily Metrc monitoring, our team ensures packages are uploaded correctly and any false negatives are rectified.

__>> Read more posts about California [cannabis compliance](http://getmeadow.com/blog/tags/cannabis-compliance "cannabis compliance")
__

Metrc Cannabis Retail Compliance

Read more to discover if your dispensary has a potential Metrc issue to fix

3 Metrc Red Flags for California Cannabis Retailers to Watch Out For

Aria Biswas

Aria Biswas is head of marketing and cannabis events at Meadow, a cannabis retail software system for dispensaries.

Cannabis CPA Patrick Finnegan and cannabis Tax Attorney Regina Unegovsky shared that in 2021 the CDTFA is starting to use Metrc variance as a means of audit, which means having a cannabis retail system that keeps you fully compliant is more important than ever.

How Cannabis Dispensaries Can Avoid & Prepare for a Cannabis Audit

2021 marks three years since the launch of California’s legal cannabis market in January 2018; this milestone is triggering a wave of audits by the California Department of Tax and Fee Administration (CDTFA), as originally reported in an article published in Marijuana Business Daily by John Schroyer titled “[California marijuana firms face more state tax audits, millions of dollars in unpaid taxes](https://mjbizdaily-com.cdn.ampproject.org/c/s/mjbizdaily.com/california-cannabis-firms-face-more-state-tax-audits-unpaid-taxes/amp/ "California marijuana firms face more state tax audits, millions of dollars in unpaid taxes").”

The article states that “cannabis tax experts warn the industry should expect state regulators to ramp up tax enforcement, noting that several audits of marijuana businesses are already underway.”

We asked two of the tax experts quoted in the article, CPA Patrick Finnegan and Tax Attorney Regina Unegovsky, to shed more light on what’s going on with taxes, tax enforcement, and what to do in case of an audit. 

<figure>
  <video-player url="https://www.youtube.com/watch?v=FLYiXoARcGU"></video-player>
  <figcaption>In this excerpt from our webinar, cannabis CPA Patrick Finnegan shares about tax audits and the inaccuracies he's seeing in the way dispensaries are calculating their sales, local and excise taxes. </figcaption>
</figure>

The three year make California’s legal cannabis market, which equals the state’s statute of limitations for how far back auditors from the California Department of Tax and Fee Administration (CDTFA) can go to examine business tax returns. 

In this discussion, we learned that the CDTFA is increasingly reviewing Metrc accounts and using inventory variance as a means of audit up and down the California supply chain, which means having a system that keeps you fully compliant is more important than ever. While other systems let you oversell, Meadow's built-in guardrails keep you compliant with clean inventory in all of your sales channels (in-store, delivery & online). 

<figure>
  <video-player url="https://www.youtube.com/watch?v=Xc_uMDx40xg"></video-player>
  <figcaption>Watch the full webinar conversation with cannabis CPA Patrick Finnegan, cannabis Tax Attorney Regina Unegovsky, and Wally Wong at Meadow.
</figcaption>
</figure>


Get insight into how to prepare for tax audits in California cannabis

Insight Into 2021 CDTFA Tax Audits & Tax Issues in the California Cannabis Supply Chain

Conduct cycle counts at minimum every 30 days for the most accurate dispensary inventory management

Cycle counts are the best way to do dispensary inventory management

Do you know how much product loss you experience in a given week, month, year? 

California dispensaries are required to do full inventory counts at
a minimum of every 30 days to make sure your physical inventory matches with your POS inventory and Metrc inventory. You're required by law to know your monthly inventory discrepancy percentage and keep it under 3 percent.

<callout><a href="#inventory-management-guidebook">Get the Guidebook Now: Smarter Inventory Management for Dispensaries</a></callout>

While the minimum requirement is counting your inventory once every 30 days, we suggest conducting "Cycle Counts" much more frequently to keep your inventory organized both physically and digitally.

![Cannabis dispensary inventory management requires diligent cycle counts](//images.ctfassets.net/6kwu1u6s8j23/7AjyMk2iFmJolYgOAmV59R/8ec62513fd16a1b102b348f2c681a7a1/Blog_Banner_Image__9_.png)

A Cycle Count is when a retail shop physically counts all of the inventory in their possession to compare what your inventory system THINKS you have with what's actually there. In a perfect world, those numbers always match exactly, but in reality that's rarely the case due to inventory shrinkage. The only way to find discrepancies between your assumed inventory numbers and actual inventory numbers is to do a full count of all physical products.

Cycle Counts is a feature that’s already included with Meadow, and we’ve seen it dramatically **reduce theft and loss, ensure the right product mix on shelves, and smooth the transition to Metrc.**  Here are some of the key features of our Cycle Counts tool:

- **Barcode scanning synced to an iPad or laptop** for super fast and accurate counts.
- **Count while you're open** using our 'Conflicts' tab, which identifies any changes in inventory (i.e. if someone sells a unit while you are counting inventory, you can easily adjust for the sale).
- **Easy delegation** with allowances for multiple employees to do counts simultaneously.
- **Immediate loss/theft detection** that notifies you of any discrepancy with your expected inventory.
- **Metrc optimization** with drop-downs for counting within Metrc packages.
- **Other smart features, including**: notes to record if a product was lost, found, damaged, moved, etc; manager review and approval settings; and summary reports with missing products and conflicts.

Another reason we always recommend using the Cycle Counts tool is because there are huge implications when it comes to avoiding an audit by the BCC (or worse!). Under Track and Trace, any inventory discrepancy over 3% will have to be reported to the BCC, setting you up for greater scrutiny and increasing your chance of an audit. If the discrepancy is not reported, you could risk losing your license. So let’s put the safeguards in place to avoid these scenarios!  

__>><a href="#inventory-management-guidebook">Get the free guidebook on the right way to do dispensary cycle counts now</a>__

Get the free guidebook on the right way to do dispensary cycle counts now

Posts tagged “Cannabis Compliance”

3 Metrc Red Flags for California Cannabis Retailers to Watch Out For

Insight Into 2021 CDTFA Tax Audits & Tax Issues in the California Cannabis Supply Chain

Cycle Counts for Smarter Dispensary Inventory Management

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Posts tagged “Cannabis Compliance”

3 Metrc Red Flags for California Cannabis Retailers to Watch Out For

Insight Into 2021 CDTFA Tax Audits & Tax Issues in the California Cannabis Supply Chain

Cycle Counts for Smarter Dispensary Inventory Management

Product

Company

Social

Support