March 20, 2017

Employee Handbook

What is an Operations Manual?

An operations manual is a summary of a business’s daily operations, and often focuses on inventory control, financial documentation, security protocols, and quality control. Recently, cities and counties in California have asked applicants seeking licensure for medical cannabis businesses to submit operations manuals. Sometimes, business owners can find preparing an operations manual invasive or boring – but when done well, preparing an operations manual lets you demonstrate to a city or county that you will be a responsible, professional operator. This is precisely who the city is looking for when issuing licenses.

You should not confuse an operations manual with your biography, resume, or list of goals for the business. An operations manual is also not a business plan, or a pitch for investors. It should not cover your financial projections, mission statement, expected growth, or desired returns.

Why an Operations Manual Matters

You may be thinking that an operations manual sounds boring, or even obvious. You may even find the request invasive. Often people in the cannabis industry are uncomfortable writing down their procedures, even for relatively mundane tasks that all businesses engage in, such as inventory tracking (hardly a surprise, given that until fairly recently, cannabis cultivation, possession, transportation, and processing were crimes). But, please try to imagine you are not the person you are, with the experience in the cannabis industry that you have. Please try to imagine you are a regulator, who may have little to no familiarity with the cannabis industry. Please try to imagine you have to educate yourself about regulating a medical cannabis business and evaluate competing applicants. If you were that regulator, an operations manual would be interesting, new, and important. A well-written and clear operations manual would help you to be a better regulator and to understand that an applicant’s business would be safe, well-run, and a benefit to the community. Try to view an operations manual as an opportunity, not as a chore.

What Should Your Operations Manual Cover?

Instead, an operations manual should cover what your business will do every day – in detail. How will you track inventory, meaning cannabis. How will you document financial transactions. How will employees ensure their physical safety and the integrity of the inventory. How will you comply with local regulations and state law. What you will do if there is an emergency or if inventory goes missing. If you are a cultivator, you need to take special care to explain how you will ensure that plants are cultivated safely, what pesticides you use, and how you will contain odor. If you are a manufacturer, you need to discuss chemical storage and safety.

Above all, jurisdictions are interested in your procedures to track inventory and finances. You should discuss how you and your employees will track every gram of medical cannabis and every cent. You should discuss your computer tracking, procedures for packaging and storing inventory, and documentation for when cannabis is destroyed or must be discarded. You need to explain your bookkeeping plans and procedures for cash drops.

Another topic you must discuss is security. You need to explain that you will comply with local regulations on security, such as alarm systems, cameras, background checks, and lighting. But, do not forget that security includes procedures for admitting visitors to the facility and preparing inventory for transportation and safe storage.

You cannot merely submit general statements. For example, you cannot say, “We will track our inventory to make sure nothing goes missing.” Instead, you need to discuss what computer program or other procedure you will use. Will you use bar codes? What information will be entered into the computer system for each item? Who is responsible for checking and then rechecking that information? How will you resolve a discrepancy in tracking inventory? How will you dispose of spoiled or destroyed inventory?

At the same time, an operations manual is not the time to show how much smarter than everyone else you are, or how many $20.00 words you know. Please keep jargon to a minimum, and explain your procedures in plain English.

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.