For startups and established businesses, compliance issues can be time-consuming and confusing. But they don't have to be daunting.

Despite the massive growth in the cannabis space over the last decade, the industry is often more heavily scrutinized than other industries. But unfortunately, many cannabis businesses — especially those on a smaller scale — aren’t adequately prepared to deal with compliance issues, putting them at risk of facing heavy fines, losing their licenses, and even going out of business. 

With so many unstandardized rules and regulations that vary by state (from cultivation and distribution to advertising and consumption), and with the COVID-19 pandemic intensifying the already difficult issues facing the industry, businesses are left with a razor-thin margin for mistakes. 

From startups to industry veterans, the four biggest compliance complaints I hear from customers are listed below.

1. A lot of time, a little return

Compliance can be extremely time-consuming and yield little to no tangible business value — aside from keeping your company’s licensure in good standing. This can be an issue for any business, but especially small mom-and-pop startups that don’t have deep pockets. Time spent on compliance takes away from time spent on things that help you meet your bottom line.

2. Too many rules

When it comes to cannabis compliance in the U.S. there is no “one size fits all”. Both the state and the local municipality where your business is located will have individual regulatory frameworks including laws, standards, and licensing systems. On the federal level, you also have to consider legislation from the Health Insurance Portability and Accountability Act (HIPAA), the Federal Communications Commission (FCC), and the Occupational Safety and Health Administration (OSHA). 

3. The regulations are complicated.

The layers of cannabis compliance and regulations at the federal, state, and municipal levels are complex and, oftentimes, confusing. Beyond the sheer number, these regulations are also constantly changing. This can lead to even more challenges. As a cannabis business, you’re expected to know and follow hundreds, if not thousands, of rules, regulations, and laws when it comes to the industry.

4. The reporting tools are unstable.

After investing time, effort, and energy into building a team and a collective understanding of the cannabis industry's complex laws, you’ll be rewarded with the clunky and unstable state-mandated reporting tools that will often grind your progress to a screeching halt.  

Help is on the way

While there’s no quick fix or easy way around compliance and regulation in this volatile industry, there are steps you can and should take to mitigate your chances of making a mistake and putting your business at risk.

Educating yourself and understanding the “why” behind the many laws and regulations in the industry helps to paint a clearer picture of what you legally can and cannot do. We know that regulations change often, but businesses should empower themselves in any way they can to stay current. How?

• Read regulatory newsletters and blogs.
• Stay abreast of industry trends. 
• Regularly monitor relevant agency websites
• Take part in available training and webinars. 

Business owners and employees should keep up on the regulations for each layer of compliance in their state or municipality to ensure that nothing slips through the cracks.

Another important early step is to build and maintain open communication with state and local regulators in your area. Find out which local law enforcement agencies and officers oversee cannabis-related enforcement and connect with them. These agencies can either be your worst enemy or your best friend, depending on the relationship. Use these agencies to talk about what you can do as an operator to stay compliant and what resources are available to help you. Being cooperative only serves to benefit your relationship with those in charge of compliance and help to keep you on track.

Every state and some municipalities require licensed cannabis businesses to keep up with various types of documentation. Not doing so can result in major fines. Beyond having this documentation available, businesses also need to ensure that everything is up-to-date at all times with the necessary information required for each document.

Meticulous record-keeping will not only keep your business well organized; it will also save you time, money, and effort in the event that you need to quickly show regulators that you’re maintaining compliance. Businesses should invest in secure and efficient record storage systems for the copious amount of documentation with which they’ll be dealing, including licensing applications, inventory control, employee information, and financials. 

While it may not make sense for a new startup, a more established company may also want to consider investing in a cannabis software solution. The cannabis technology and software industry have come a long way in recent years and it can be a viable option for businesses looking to take the grunt work of compliance and regulations off of their plates. Third-party compliance software and solutions can provide the adaptability and scalability needed to accommodate a new and constantly evolving industry.  

Cannabis is a huge opportunity for entrepreneurs, especially with 2021 looking to be a banner year for state legalizations. While it can be a complex industry to grasp, cannabis businesses will need to dedicate time, effort, and a lot of energy into keeping up with compliance standards. This is crucial for an industry still under a microscope.