How to Use Flowcharts to Improve Cannabis Businesses Operations

Flowcharts can be instrumental in cost-cutting, audits, mergers and acquisitions due diligence, and more.

An operational flowchart can help you identify areas where you may be able to curb spending.
An operational flowchart can help you identify areas where you may be able to curb spending.
Adobe Stock | infografx

When you think of accounting, typically spreadsheets, not operations, come to mind.

However, utilizing flowcharts to examine day-to-day business practices and how they impact the bottom line could help you save significant operational expenditures (OpEx) and improve your revenue cycles.

That’s because an operational flowchart can help you identify areas in which you may be able to curb spending so that you can use those savings to help maintain or grow your business.

And in an industry like cannabis where costs are high, taxes are onerous, competition is fierce, and margins are thin–getting a better handle on expenses can be the difference between survival and closure.

What Is a Flowchart?

First, let’s take a moment to define what flowcharting is and why businesses use it.

A flowchart is a diagram of business processes to accomplish a specific and repeated goal in sequential order.

Details within each step of a flowchart include things like:

●      Actions to be taken

●      Information that is needed

●      Decisions that are required

●      Who is responsible for making those decisions

Visually, flowcharts are clear in showing how each process “flows” into another, usually depicted by arrows and coded symbols. In almost all cases, a flowchart is intuitive. It doesn’t need detailed directions in order to follow it.

Flowcharts are not only great for planning large, multi-step projects, but also for day-to-day processes. They help train individuals to perform the necessary tasks and take the pressure of needing to memorize those processes. Flowcharts also make it easier for others to fill in and perform those processes if need be.

Within a cannabis company, here are some of the jobs, or processes, that could be displayed in a flowchart:

●      An edible manufacturing process

●      A daily watering procedure within the cultivation facility

●      A retail inventory reordering process

●      How payments over $X amount are processed and approved

One of the greatest benefits of flowcharts is their ability to point out potential inefficiencies, or ways to cut costs so that your business can save money over the long-term. Plus, they can help you get a better picture of how revenue is flowing into the business.

How Accountant-Led Flowcharting Works

The process starts with having an accountant interview your team members. Not just the CEO, or even COO, but those who are actually performing the tasks within a given process.

At many companies, employees haven’t been asked about their processes and day-to-day responsibilities. To begin the flowchart process, it’s important that an accountant sit down with every employee and say, “I want to understand how you’re working,” and have them walk through their day.

Processes can then be documented on a flowchart map along with a revenue and expenditure cycle. This is where an accountant can work with the team to identify if the company is having production or inventory issues that can be fixed to bring costs down.

Often in cannabis businesses, unnecessary costs begin with inventory. And for most entities, unnecessary costs can be found in the largest expenses—cost of goods sold (COGS) and payroll.

That’s because producing is expensive, and so is carrying product for long periods of time.

By walking through these processes with an accountant, they can suggest ways to curb those expenses without sacrificing the quality of your products and customer service.

Added Benefits of Flowcharting

Not only does a flowchart help you identify potential cost-cutting measures and improve your cash flow, but detailing your operations through flowcharts also helps with compliance.

Once the states get caught up and have a better handle of regulating the industry, inventory audits from state agencies are going to be more prevalent. Say an auditor shows up and says, “Hey, I’d like to see your inventory process. What’s going on here?” If you have a flowchart, you can hand the inspector a detailed inventory cycle, and say, “Take this, look around, I’ll be with you in 15 minutes if you have any questions.”

Auditing can cost businesses hours in lost productivity explaining processes to an auditor, and flowcharts help boil it down to just a few moments. Plus, documenting processes can help build credibility with auditors and state compliance teams.

Another advantage to flowcharting is reduced time in advancing toward the next step in a merger or acquisition between businesses.

Buyers love to see flowcharts because it streamlines due diligence. It leaves fewer questions to be asked. So now, the question of whether to purchase the business becomes “why?” instead of “how?”

All in all, flowcharting is “short-term pain” for “long-term gain.” People typically don’t want to take the time to map out their processes in the form of a flowchart; however, once they do, their business becomes stronger and better understood by all relevant stakeholders.

Flowcharting Symbols and What They Mean

In the flowcharting world, there are standard icons or symbols that define certain types of steps. These common symbols are noted in the image below:

Flowchart Symbols Web

Image: Adobe Stock | Piscine26

Using a common set of symbols helps people who come from flowcharting backgrounds pick up on processes more quickly. Additionally, gaining a solid understanding of the flowcharting symbols “key” eliminates the need for written explanation of the steps and allows the chart to become a more visual representation of how the job is performed.

Your process may or may not be complex enough to need all these symbols, however. Here are some symbols that are used most commonly in flowcharts:

Terminal Symbol - This rounded rectangle symbol notes the beginning or end of a process flow.
Terminal Symbol

Flowline Symbol - An arrow that shows the progression to the next step in the process.

Flowline Symbol

Process Symbol - This standard rectangle symbol, used most often in flowcharting, notes a step performed within the process.

Process Symbol

Decision Symbol - Shaped like a diamond, this symbol notes when a choice needs to be made before moving to the next step. Typically, that means the job can take one direction or another.

Decision Symbol

Here is how these symbols might look in action:

Cjbs Flowchart SymbolsCjbs Flowchart Symbols

Flowchart courtesy of CJBS.

The flowchart begins in the top left corner. First, you move to Process 1, then Process 2. After Process 2 is completed, there’s a Decision to be made. If that choice is “no,” you move toward Process 3, and the job is finished. However, if you say “yes,” then you move toward Process 4. That leads you to another Decision. If “yes,” you move onto Process 5 and end there, or if it’s no, you skip Process 5 and complete the job.

Of course, if the job takes more steps to complete, or needs more documents or data points, etc., your flowchart can get much longer and more complicated. The beauty of the flowchart is that no matter how complicated it gets, it’s still easy to follow in that sequential order. If your management team is contemplating changing a process, utilizing a flowchart can save you countless hours. Imagine that there is a new Process A that will come before Process 2. Having a flowchart established will allow your team to see where this process goes in the overall cycle, and what other processes are affected by the change.

Final Note on Flowcharting

Flowcharts are incredibly valuable tools for your business; however, they’re only helpful if your people have access to them. Make sure your flowcharts are located in a place that is accessible to those who need to view them. At the same time, this information can be highly confidential and proprietary for your competitive advantage, so you want to make sure those documents are stored securely and don’t leave the confines of your business.

Whether you’re a small or large business, flowcharting will help you get your team aligned on what needs to be done, and how it needs to be done–in addition to helping you refine your processes and curb your spending over time. When starting the flowcharting process, make sure your accountant is in the loop so that they can identify points of overall improvement.

Ryan Guedel, CPA, is a partner of Chicago-based accounting firm CJBS and a leader of the CJBS Cannabis Practice.

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