Silver Leaf CBC: An ERP Platform for Cannabis Companies

The system offers 6 modules on a Microsoft backbone.

By Liz Gold
CannaBizCPA.Pro

Alex Glueckler began his career as an accountant at CliftonLarsonAllen. After years in financial leadership positions with large cannabis companies, today he works with Silver Leaf CBC (Cannabis Business Central), an ERP software solution he helped bring to market for the cannabis industry.

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The platform came about when Silverware’s leadership group, Sara Silver and David Thikoll, approached Glueckler about creating a standardized yet adaptable system that could address the specific needs of cannabis companies as they evolve and grow.

They had been in touch over the years after working on a similar ERP solution for a private equity-backed cannabis firm Glueckler was working for at the time. Fast forward two-plus years and the timing was finally right – he had just helped another cannabis company merge and was looking for a new project.

Working with a number of beta clients in the cannabis space to build out the framework, Silverware set out on a journey to create a robust, multidimensional system that takes cannabis business owners beyond QuickBooks and seed-to-sale, to truly understand their costs and make effective business decisions. Silverware had already spent three decades implementing and configuring ERP systems for companies in several industries but chose to focus on Microsoft Dynamics 365 Business Central (then called Dynamics NAV) about 20 years ago because of its capabilities to help manufacturers and wholesale distributors.

Microsoft Dynamics 365 Business Central also had native lot tracking and traceability functionality that was critical for cannabis businesses.

“We knew Microsoft was able to track the controlled substance products natively with the way it was created because it does lot tracking, so we knew we could adhere to state regulations on where the product was, the level of inventory, and everything that a typical product tracking software would do,” Glueckler said. “We also knew that Microsoft has best-in-class accounting and financial management capabilities that helps companies stay compliant with their investors and any of the reporting entities and audits they would have to go through.”

As in any industry, an ERP system serves as a centralized data source. In this cannabis-specific system, there are six main modules, according to Silver Leaf’s website: Finance and Accounting, Manufacturing and Processing; Inventory and Procurement; Quality Control; Sales and Delivery; and Human Resources. In the Inventory and Procurement module, for example, users will be able to manage their cannabis strains, track their full lot and various batches, and also be notified when an item, product or raw material needs to be replenished.

Quality control is also an important functionality for cannabis businesses, so consistency is built into whatever product is being made as well as its process. For a finished good, according to Glueckler, the system attaches all of the testing that has been done for a particular product or batch and an operator can see the inheritance of test attributes by raw materials in their finished products. “So, if it’s been further refined and combined with other batches and lots, you can inherit those testing results,” he said, adding, “It can also create a quarantine process for them, if they need to recall something for quality purposes.”

Though Glueckler said Microsoft hasn’t made a public statement about working with cannabis companies in the United States, he said it supports Silverware’s efforts. For example, Microsoft is moving many of its products and services to the cloud through AppSource on its online hosting service, Azure. Glueckler said AppSource is a way for resellers and developers to create customizations or services for their products and his team wanted to see how the cannabis industry would fare. The result, he said, was favorable.

“We put a cannabis consulting service app on AppSource to test the waters and see about the approval process,” Glueckler said. “We didn’t want to tip our hat too much. Ultimately, it got approved and we were the first cannabis app approved on AppSource.”

Silver Leaf launched the first version of its product 18 months ago and intentionally decided to bypass a traditional launch.

“The truth is, we were a small company and we were fortunate enough to have had great beta clients,” he said. “We had enough clients already in the pipeline that filled our capacity. Our model has been one of marketing word of mouth and letting our clients speak for us. We’ve been fortunate enough to work with some of the larger clients in the industry and those larger clients have afforded us some great recommendations.”

Silver Leaf’s client sweet spot are those companies that have what the Silver Leaf team calls “ERP Readiness.” These companies know what an ERP system is, they have a team that understands and has experience in large system products and have the resources for the four- to six-month implementation process.

“I jokingly say, ‘You don’t hand the keys of a Ferrari to someone who doesn’t know how to drive it.’ We are not trying to get a million clients; we are trying to get the right clients. We view ourselves as a long-term strategic partner to companies focused on operational excellence and sustainable success.”

That said, Silver Leaf’s focus has been primarily on manufacturing, processing and distribution companies, though it is developing a cultivation module as well. That module would support companies that are vertically integrated – manufacturing, processing and distributing branded products.

Glueckler said one distinguishing factor in ERP implementation for cannabis businesses is that because cannabis is federally illegal, companies have to create a separate company in each state in which they want to operate.

“Usually when we implement a regular manufacturing company, we spend all this time implementing a company and then if they want to go into another state or have another company it’s just as simple as them copying the existing company’s structure and creating a new one,” he said. “Here, we have to implement an entirely new system because each state can be completely different. So these multistate entities become more complex and takes more project implementation.”

Ben Marchi-Young, NAV implementation director at Cura Cannabis Solutions in Portland, Oregon, has been using Silver Leaf since July 2018. Marchi-Young said the company has been implementing the system state by state.

“We turned two of our companies on less than six months from the date we started and then we turned on three different companies after that,” he said.

After implementing in five states, Marchi-Young said they were able to create a template company that takes the already developed processes and systems and allows them to be scalable.

Marchi-Young said what’s helpful about the system is the seed-to-sale traceability that allows tracking from inception to cannabis material to the consumer’s hand at a retail dispensary. He also likes that he can consolidate all his financials and get multiple views: He can see data from each individual state as well as get an aggregate view from the parent company.

“They have been able to turn very quickly, not only development within the system but also their ability to identify processes within the fast-moving cannabis industry,” he said. “They have done an extraordinary job at that.”

He also says Silver Leaf provides one of the best system implementation and support teams.

“It’s about the people behind the software that makes the difference. If the functionality is there and the people behind the software exude competence in not only platform but the commitment to their partner, that’s what I look for,” he said.

As for CPAs in the cannabis industry, Glueckler said they have a pretty interesting journey ahead of them, if they embrace going outside the traditional roles of tax and audit.

“I think they are cautious about entering into the space in terms of what they can and can’t do with regard to federal policy,” he said about CPAs and accountants. “I know a lot of them have great intentions but they might not have the knowledge of how to create a business that is upholding the best standards. The industry is full of entrepreneurial people, very young startups and having a lot of entrepreneurial people in a highly regulated environment, there is a knowledge gap. There are certain ways CPAs can get involved outside of tax and audit. Levels of consultancy and creating processes and procedures that are compliant, that are effectively helping their reporting, would be a really interesting way for them to get involved.”

Posted on May 31, 2019