Maybe you have outgrown your current accounting system or spend too much time on workarounds due to inherent limitations. Whatever the cause, there are endless reasons to change accounting software. In particular, when it comes to cannabis, the tough regulatory requirements and a cash dominant environment make a robust accounting software integrally important. However, switching accounting systems takes time, attentiveness, and proper change management procedures. As a result, finding time to implement a sophisticated system may seem almost impossible. However, doing so could also alleviate substantial inefficiencies resulting from unsuitable software. So, when is the right time to bite the bullet and pull the trigger?

Consider Your Business Cycle

Most businesses follow certain cyclical patterns. In cannabis, we see our dispensary clients get big bumps in revenue around St. Patricks’ Day, 4/20, and the 4th of July, for example. Some of our clients are in the process of expanding from a single state presence to an MSO (multi-state operator). In both cases, those instances provide us with both guidelines and opportunities to plan a software replacement and rollout. In the first example, I would strongly advise my clients to look at their historically heavy sales dates on a calendar. Then, look for the longest stretch of time that predicts the lowest estimated sales volume. This allows as much capacity as possible to focus on the implementation and training periods. I am sure you can imagine the potential for chaos and disarray if budtenders are working in a brand-new POS system for the first time on 4/20.

In the second example, a client on an accounting system they are not happy with should not further ingratiate themselves with that software through a rollout to additional states. In this instance, I would strongly advise my client to vet, implement, and train their employees on a new accounting system before their expansion is underway. This allows existing employees to get up to speed while keeping new employees from having to learn two separate systems. Additionally, change management can be challenging in remote locations. Trying to roll out a new software from afar can result in challenges that could have otherwise been avoided if executed at the right time.

Consider external factors

Changes in the regulatory environment may mandate software migration. For instance, Arizona (formerly a medical-only state) passed Proposition 207 in November 2020, making recreational marijuana legal. Any of my clients considering a system migration are getting a huge push from my Rebel Rock team to get the process started as soon as possible. It is generally expected that the patient count could increase by 3-6X when the new law becomes effective in April 2021. Operating on poor or ineffective software when this explosion in consumers occurs could result in multiple missed opportunities and a lack of visibility into key performance indicators (KPIs). Conversely, having robust systems in place when you see the landscape changing can result in major efficiencies, translating to a competitive edge. The cannabis industry is very fast-moving, and it is integrally important to keep an eye on what is going on externally so your company can respond appropriately.

Consider tax filings and audits

Depending on your company structure, you may file taxes on March 15th or April 15th. If you opt for an extension, those dates shift later in the year. During annual tax preparation, it would be a particularly cruel exercise to request your accountants manage through a change in software during the same time. There is also a potential for data loss during such a transition, which can negatively impact tax support. Whenever possible, always avoid system changes around tax filing deadlines.

Depending on your company ownership or perhaps debt covenants, you may also need to undergo annual financial statement audits. This is yet another time period that should be avoided, like the plague, when considering software migration. Audits require substantial interaction between auditor and accounting employees, as well as loads of supporting documentation. Trying to implement and train your accounting team on new software during an audit will likely result in very stressed and disgruntled employees and the potential for negative audit findings as a result of data loss through system transition.

When selecting the right time to migrate software, the best approach is to think critically about your business. When are you busiest? What is happening in the world around you? What do you still need to comply with to ensure your business is uninterrupted? Make sure you have taken the time to fully understand what will be required of you as the business owner and your employees when considering system migration. At the end of the day, identifying the “right time” boils down to you and your leadership team’s thoughtful future planning. At Rebel Rock, we frequently help our clients with the planning and mapping out key achievement dates and software implementations. In practice, those who really commit to their implementation plan, readily accept that change management comes with pain, and communicate expectations to their team, are the ones who see the largest return on investment in the end.