Dispensaries typically conduct most of their transactions using cash because of the difficulty in finding payment processors.
In the United States, the problem stems from the fact that cannabis is still a Schedule I substance at the federal level. This means that most financial institutions and payment processors are hesitant to work with cannabis companies. They deem it too high of a risk due to legal compliance issues.
There are a growing number of payment processors that will work with cannabis-related companies, but many charge high fees. The result is that most cannabis companies have to deal primarily in cash, but that comes with its own difficulties.
The Challenges of Cash Payments
The fact that dispensaries can’t have traditional bank accounts and work with most payment processors leads to a long list of challenges.
From a legal perspective, there is the tax issue. Dispensaries have to pay business taxes, just like any other company would. But because they don’t have bank accounts, this involves transporting massive sums of cash, something far less secure than simply sending money electronically.
Even on a daily basis, the fact that dispensaries rely on cash can cause issues. There is the risk of theft, as thieves know dispensaries have a lot of cash on hand. Employees may also steal cash, especially if there aren’t good records. There is also the risk of human error with counting cash, something which isn’t as much of a concern with electronic payments. This makes record-keeping more challenging as well.
To overcome those challenges, dispensaries can incorporate some useful cash management strategies.
Look for Methods of Reducing Cash Use
While there are not many payment processors that will work with dispensaries, there are some. But not all of these are created equally. If you choose to work with a payment processor, make sure that they are compliant with all of the relevant laws and have a clean record. POSaBIT, for example, has been successfully running payments since 2016 without a single interruption.
The options for payment methods you can accept with these processors tend to be more limited than those for businesses outside of the cannabis industry, but they still offer multiple ways to reduce the cash you have to manage.
Cashless ATMs
One of the most popular solutions is a cashless ATM. This system lets a customer use the terminal to “withdraw” money, but instead of receiving cash, they get a receipt for the amount or something similar. Then, the POS system treats that receipt as if it were cash.
The only caveat is that most of these systems round up to $5. This means that dispensaries still need to keep change for customers on hand, so the need for cash isn’t completely eliminated. However, you can overcome that by choosing a system that offers tips. There are also some slightly more expensive options that follow the same method but charge exact amounts, without change required.
ACH
ACH transfers are another possible solution offered by the best payment processors. Customers only have to set these electronic payment systems up once, and then the dispensary doesn’t need to keep any cash on hand.
But even with solutions like these, dispensaries are still likely to have a lot of cash on hand. This is where the following cash management tips come into play.
Look for Local Credit Unions
While you are unlikely to find any sizable or national financial institutions willing to work with a dispensary, you might be able to find a local credit union or even a local small bank that will. This is most likely to be the case if you choose a credit union that only operates within your state. While options are still limited, there are hundreds of financial institutions across the country that accept cannabis-related companies.
If you can find one of these, then your cash management will get much easier. You will be able to deposit cash into a business account at the bank instead of having to find somewhere secure to store the cash. You may also get more options for processing payments from the bank, although that is not always the case.
Make It Easy for Customers to Pay With Cash
Not everyone realizes that you can’t necessarily use a credit card at a dispensary. To keep your customers happy and avoid losing sales from people who come in without cash, consider keeping an ATM in your dispensary.
It can also be smart to put up a sign or two explaining why cash is the most common payment method or why you can’t accept certain methods.
Create Strict Procedures for Cash Management
Before you ever start accepting payments, you need to create strict procedures for any time that someone handles cash.
At the most basic level, ensure that employees never leave cash out unattended or easily accessible.
Limit the Cash in Drawers
At any given moment, limit the amount of cash that can be in a drawer. Have clear procedures for supervisors to transfer some of the cash in the safe if the drawer approaches the limit or goes above it.
Use Lockable Money Bags
When someone in the dispensary moves cash between the register and safe or anywhere else, require them to use lockable money bags.
Limit Access to the Safe and Money Bags
Don’t give all of your employees access to the safe. Instead, limit it to just a few. Have other employees call one of these supervisors over if their register has too much cash or they need change.
Consider Safes With Slow Opening
Savvy dispensaries don’t just store their cash in a safe; they opt for one that doesn’t open immediately. You may not realize it, but some safes will take 15 or 20 minutes to open. This is a great deterrent for thieves, as they won’t want to wait along that long to get the cash—the risk of being caught is too high.
Of course, if you opt for this type of safe, you will have to plan ahead to ensure your registers have access to enough cash. After all, you can’t just go to the safe and get change in a few minutes. You may even want to keep a non-timed safe that holds a very small amount of extra cash to make change for the registers, then keep most of it in the slow-opening safe.
Get Safes With Two-factor Authentication
Whether or not you opt for safes that take 15 to 20 minutes to open, try to choose ones that feature two-factor authentication. This will add yet another layer of security.
Opt for Blind Drawer Reconciliation
It should be standard practice to count each register at the beginning and end of each day or shift. To improve cash management, make this a blind process. That means that the person counting the drawer should not know the amount that is expected to be there. This encourages more accurate counting.
Limit the Cash in the Store
Just like you want to limit the amount of cash that you leave in drawers, you also want to limit the cash that you keep in the dispensary itself. Unfortunately, this can become incredibly challenging for several reasons.
To start, you need to make sure you have enough cash on site for daily operations. On top of that, dispensaries can’t store their cash in a bank since banks won’t offer them accounts. This means you may have to get creative to find another secure, permanent location. That being said, there should be options in your area. Remember that you want to find a secure place for the cash that is close to the store. This limits the risk of theft while transporting the cash.
Cash Management and Security During Transportation
A key segment of your cash management strategy should involve implementing security measures to prevent theft while transporting cash. Remember, you don’t want to keep too much cash on site, so you will have to regularly transport cash.
Consider an Armored Car Service
The process of transporting the cash from your dispensary to your secure storage comes with a risk of theft. You can reduce the risk by hiring an armored car service. However, this may be out of the budget of smaller dispensaries.
Have More Than One Person Transport Cash
If an armored car service is too expensive for your store or you don’t use enough cash to justify it, then at least make sure that no one ever takes the cash to and from the dispensary alone. Ideally, they will go with a security guard.
Don’t Follow a Single Cash Transportation Routine
Whether you move cash to and from the dispensary yourself or hire an armored car service to do so, be sure to change up the routes. If you follow the same route every day at the same time, you leave yourself open to being targeted by thieves.
Consider Cash Tracking Technology
Depending on the amount of cash your dispensary deals with, it may be smart to use cash tracking technology. This is essentially a GPS device that you put with larger amounts of cash, such as in the money bags you use for transporting the cash. This system will let you know if cash leaves your store when it shouldn’t. It will also make it easier to find the cash if someone does manage to steal it.
There are also other advanced cash tracking technologies that not all dispensaries need. For example, dispensaries with extremely large cash volumes may want to invest in some of the security measures typically reserved for banks. One example would be an alarm system if someone removes cash from a drawer or safe without following security procedures.
Discourage Theft by Employees
Simply by creating strict cash management procedures like those mentioned above, you will be on your way to deterring employee theft. After all, employees will have limited access to the funds.
Monitor Everything
You can also discourage theft by making it clear that your dispensary monitors everything, including employees and customers. If employees think there is a high risk of getting caught, they are less likely to steal.
Choose a POS System That Can Limit Access
When choosing a point-of-sale system, be sure to select one that lets you limit your employees’ access to various information and features. At the very least, it should be able to track which employee handled various transactions.
Treat Employees Well
You should also do your best to give your employees no reason to try to steal. Start with generous employee discounts or incentives. Encourage customers to leave tips.
Include Physical Security to Prevent Theft
Any business that has large amounts of cash on hand needs to take physical security seriously due to the risk of threat. Be sure to incorporate the following best practices.
Hire the Right Security Guards to Control Access
Depending on the state you operate in, your dispensary may be legally required to have a security guard check customer IDs before they can come in. Whether or not that is required in your state, get a security guard. But don’t just choose the cheapest one to meet the legal minimum; find one that will actually provide security.
Simply put, you want experienced security guards who will protect your store from theft and meet legal requirements. That experience will make it easier for them to spot potential problems. It will also ensure that they can deal with unruly customers or potential thieves.
Invest in Good Security Systems
It is typically a state requirement for dispensaries to have a security camera in every room of their store. As with security guards, this is another area where you don’t want to just stick to the minimum legal requirement. Instead of going with the cheapest system, choose one that is high-quality. At the very least, choose a system you can access from off-site. This will reduce the chances of someone tampering with footage.
The Takeaway
Because most major banks aren’t willing to work with dispensaries, dispensaries are forced to complete most of their transactions in cash. Cash management should start by looking into other payment methods, such as cashless ATMs and a system from POSaBIT. They should also include having strict policies in place, such as blind drawer reconciliation, and physical protections to prevent theft.