Regular auditing is key to maintaining accurate inventory in Dutchie POS and state traceability systems. This article outlines best practices and tips for avoiding and investigating discrepancies.
Inventory audits are a process for evaluating unrecorded events through the comparison of on-hand inventory against the recorded value. Cash reconciliation is the corresponding process for cash. Comparing the data from both processes is often key to resolving issues in the best possible way.
Table of contents
Performing counts
Ideally, counts should be done at a time that allows for the entire count and reconciliation to be performed without any changes to the inventory levels. This is typically done during non-operational hours, such as early mornings before opening or after closing on low-traffic days like Mondays (though Dutchie POS does have features to allow you to perform an inventory audit during business hours without causing discrepancies). Counts can be structured in a number of ways, with some stores electing to do the entire count on a single day and others dividing their inventory counts across multiple days.
The introduction of a third inventory layer in the form of traceability additionally complicates counts for the cannabis industry.
While some markets may require reconciliations at the end of every month, others are held accountable every day. Therefore, performing counts every day, such as dividing inventory type by day, is the recommended approach.
Unlike traditional industries that reconcile on-hand inventory to recorded levels, a cannabis retailer must compare on-hand POS recorded levels and traceability recorded levels. A count is not fully reconciled until all 3 values match.
To assist with these more complicated counts, we recommend counts include at least the following steps in order.
- Review traceability audits: Backoffice > Traceability.
- Review and resolve discrepancies from the receipt and integration audit pages.
- Before beginning a count, it is important to ensure all events that impact inventory are recorded in both systems.
- Count the physical on-hand inventory for all products included in the count.
- Compare physical on-hand inventory quantities in Dutchie POS using either an inventory audit:
Or by looking up individual packages: - Review cash reconciliation from the same period the inventory count represents. An inventory count is representative of the period of time since the last count was performed.
- Identify unreported events and record them. Complete identifiable sales or exchanges.
- Resolve the remaining discrepancies with adjustments to bring all 3 inventory values in line. You can adjust quantities on individual packages or in bulk using an inventory audit.
For more information on performing accurate counts and minimizing disruptions, see Conduct an inventory audit in Dutchie POS. For information on how to structure your audits (blind vs. non-blind, simple vs. advanced), schedule them outside peak business hours, and ensure proper permissions are set, visit: Inventory audit types, workflows, and permissions in Dutchie POS
Count accuracy
The first step in any reconciliation is to obtain the accurate on-hand values via a count. Again, counts should be done regularly to not only find issues but also to provide a timeline for review in the next count. This means reconciling counts performed more often are more straightforward to resolve. A full review of inventory should be done weekly in order to maintain accuracy and ensure issues are caught and resolved quickly.
Count accuracy is also pivotal to inventory reconciliation. Inaccurate counts can lead to more adjustments than would otherwise be needed and can impact the number of adjustments on future counts.
A double-blind count system is often recommended, where two separate employees perform the same count and compare their values only after the count is complete. Some operations may elect to have a dedicated staff member perform the count. Inventory that was found to be different on the two counts should be recounted again until an accurate count can be determined.
To learn how to keep your on-hand inventory, POS records, and state traceability in sync, consult Conduct an inventory audit in Dutchie POS. This article walks you through creating, conducting, and completing audits while maintaining detailed logs and adjustment histories for compliance.
Preventing adjustments
Preventing adjustments is often a goal for stores conducting counts.
Using both the inventory and cash counts can be helpful when attempting to recreate sales rather than adjust inventory. Reviewing what inventory items were under, and comparing to cash overages from the same time period, stores can sometimes reconstruct events and log sales that were previously missed.
Note: Medical markets require a sale to be recorded to a specific patient. This makes recreating sales instead of adjusting inventory much more difficult and often impractical, sometimes adversely affecting the patient. Medical sales should only be recreated if the license can be positive of the transaction details that occurred.
Inventory values can sometimes be off without a corresponding cash imbalance. One common cause is unrecorded exchanges, which occur when a budtender fails to log a transaction in Dutchie POS or Metrc. These unreported transactions introduce discrepancies, requiring adjustments that do not always resolve the issue after syncing with Metrc.
To mitigate this risk:
- Regularly conduct receipt audits to identify unreported events.
- Check batch mode/receipt audit reports before conducting counts to catch pending or failed transactions that may later succeed.
For example, an unlogged exchange may have occurred if a store is short three units of a particular item but over by three units on a similarly priced product. Instead of adjusting inventory outright, some stores document the return of the overstocked item and record a new sale for the missing product to maintain an accurate audit trail. [ADD SCREENSHOTS]
Another risk occurs when an adjustment is made to correct a discrepancy caused by a pending sale that later succeeds. This often happens when a sale fails temporarily due to Metrc-side issues but later goes through successfully.
If the store adjusts inventory before verifying these transactions:
- An initial adjustment is made to correct the discrepancy.
- The sale was later processed successfully, creating a new discrepancy.
- A second adjustment is required to fix the unintended overcorrection.
To prevent unnecessary adjustments:
- Always verify pending transactions in batch mode/receipt audits before making adjustments.
- Be mindful if your state audits based on discrepancy totals instead of shrink, as excessive adjustments may trigger compliance concerns.
Some markets have specific procedures for the handling of returns that may require the returned inventory not to be sold or even returned to the originating vendor. In markets that have such rules, it is important to understand the impact and requirements of returned inventory. In some cases, performing the adjustment may be preferable. The best practice is to keep return inventory separate from live inventory. If returned products fail to update correctly in inventory, verify your settings and ensure adjustments are made to maintain accurate inventory records.
For additional guidance on preventing unnecessary adjustments, see:
- Inventory audit types, workflows, and permissions in Dutchie POS for audit workflows, permissions, and compliance strategies.
- Adjust inventory: inventory management action in Dutchie POS for detailed steps on making compliant adjustments, using valid reasons, and maintaining proper documentation.
Identifying common causes
Often, during the course of reconciliation, store runners can identify issues and causes common to their operation. Taking the time to identify these can provide options for adjustment going forward. New training and SOPs can be developed in order to minimize or eliminate the causes most common in a given operation.
Avoiding errors
Reviewing intake can also often lead to a reduction in errors. Mistakes made with initial values can be avoided by having multiple staff counting the same intake.
Downtime/outage procedures are often critical to avoiding inventory errors. Ensure your staff is aware of your store's specific downtime plan and that the plan is compliant with your state rules and allows for the accurate capture of all activity.
Budtender errors
Budtender errors are a common cause of discrepancy in many operations. This may include issues related to scanners not working, prioritizing speed over accuracy, inaccurate handoffs, etc. Spot-checking transactions routinely can help identify staff struggling with accuracy. Many operators believe the very act of inspecting regularly helps maintain accuracy among staff.
Employee samples
Similarly, handling internal inventory tasks, like distributing product samples to employees, requires careful documentation to remain compliant. If your state has rules about the limits that each employee can have on samples, then every single sample adjustment note should include the employee it was distributed to. When allocating employee samples:
- Use an adjustment rather than a sale to log the distribution.
- Include the employee name, sample amount, and a reason (e.g., “Employee Sample” or “Quality Control”) in the adjustment notes.
- Follow state-defined limits on sampling. If compliance concerns arise, consult local regulatory agencies.
Duplicate packages
System glitches can result in packages appearing twice. Duplicate packages need to be corrected before you start auditing, as this can lead to mismatched inventory. To resolve this:
- Confirm the duplicate package has not been adjusted, sold, or modified.
- If unmodified, delete the duplicate package record.
- If already used or modified, perform a manual adjustment to zero using Bypass state system, and include an explanatory note such as “entry error” or “duplicate package creation.”
Anytime there is a duplicate, talk to Support to help you identify which is the accurate record.
Further reading
For more information on addressing inventory-related discrepancies, visit:
- Troubleshoot Metrc inventory adjustment failure in Dutchie POS for guidance on resolving allocation errors and validating API keys.
- Conduct an inventory audit in Dutchie POS to handle mid-audit changes, prevent negative quantities, and reconcile discrepancies.