Why Cannabis Operators Need Better Costing Systems

Sep 22, 2025

Unlocking Profitability: Why Cannabis Operators Need Better Costing Systems

Author:

Dana Baranovsky

Summary

Costing is one of the most overlooked levers in cannabis operations, but it’s also one of the most powerful. In this blog, we unpack why accurate, real-time costing matters, where most systems break down, and how forward-thinking operators are building toward better visibility without the complexity of a full ERP.

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When the React library was introduced into the community some years back, it was accepted and soon gained lots of popularity as the choice for building out user interfaces in a composable way. The major idea was that each UI interface can be split into multiple different small components and at the end of the day, these components can be combined or composed to form the whole larger UI as intended.


class App extends React.Component { 
render() { 
return ( 
      <ColorContext.Provider value="white"> 
      <SampleComponent /> 
      </ColorContext.Provider> 
    ); 
  } 
}

As a background to what we are trying to present, if we were building multiple UI components for example, we indeed have a component tree which includes the parent component, which becomes the source of truth for our data, and due to the interrelation dependence on the parent components and those underneath it known as the children or descendant descendant descendant descendant descendant component to share data, it comes a point where this becomes an issue.

As we stated earlier, for small to medium apps, sharing data across many different components could be easy, since all we need to do is pass this data or props across or down from the parent to every child that needs it. Now this is fine. What if we have a hugely nested or a large component tree and we intend to pass the data or prop down this tree?

React context, a core React API provides an easier interface for developers to share data or pass props down multiple levels deep in our React applications. From the React docs, with react context, we can easily pass data down to the very component that needs it at any level in the component tree, without having to explicitly pass this data down each component level in the tree. This is all there is to React context.

To drive this definition further for more clarity, say you have a particular theme color set at the parent component level of the app, and you only intend to pass it down to the thirtieth component down the tree, without having to pass it down every level until you get to that thirtieth level, but just pass it down to only the thirtiet

In cannabis, profitability is harder to achieve than most people realize. Margins are tight, regulations are intense, and market prices can change in a flash. Only 19% of small-to-mid-sized cannabis businesses are profitable, according to 2024 data shared at the 2024 AICPA Canna Conference

If you’re scaling SKUs, sites, or operations without understanding your true costs, you're increasing the risk with every step.

In our latest webinar, Elevated Signals COO Hardeep Shoker and Dave Woodbeck, a fractional CFO with Dope CFO, shared why strong costing practices are essential for cannabis businesses that want to scale with confidence.

Read below or watch here:

The Problem: Scaling Without Cost Clarity

As businesses grow, complexity creeps in: new strains, new SKUs, new workflows. But many cannabis companies are still using systems that weren’t built for manufacturing, let alone costing.

"You might have clean financial statements in QuickBooks,” said Hardeep Shoker, “but they don't show you what’s actually happening in production.

Without integrated, real-time costing:

Finance teams can't pinpoint where cash is leaking
Operators can’t track unit profitability
Leadership can’t plan with confidence

Why Costing Matters

Understanding your costs isn’t just about audits or compliance, it’s about making smarter, faster decisions.

“Costing tells you if your business model actually works,” said Dave Woodbeck. “Without it, you’re guessing.”

With the right costing system, you can:

Spot your most profitable SKUs
Tie labour, materials, and overhead to each batch
Identify what’s dragging margins down
Support investments and cut what’s not working
Give stakeholders a clear picture of your financial health

Where Cannabis Costing Falls Apart

Here are the most common roadblocks we see:

1. Systems That Don’t Talk to Each Other

“ERPs, spreadsheets, accounting tools, everyone’s working off different islands,” explains Hardeep. This makes traceability and visibility nearly impossible.

2. Too Much Manual Work

Manual entry creates errors and delays. Costs show up too late to act on them.

3. Lack of Leadership on Cost Strategy

“Hiring another accountant won’t solve this,” said Dave. “You need someone who will lock arms with operations and lead the charge.”

From Spreadsheets to Systems That Actually Work

Most cannabis companies start with spreadsheets, and that’s totally normal. But as you scale, those spreadsheets become unmanageable. More SKUs, more people, more sites…and suddenly, no one’s on the same page.

“It’s not about the size of your revenue,” said Hardeep. “It’s when your processes, and your communication, start to break down.”

This often prompts many companies to move toward traditional ERPs. But ERPs are built for industries with stable processes (pharma, automotive), not for cannabis, where products and workflows shift constantly.

“We’ve seen companies jump into an ERP too early and get stuck,” said Dave. “It creates more complexity when what you need is clarity.”

A better approach is to build structure gradually, starting with digital systems that connect production to finance and inventory to reporting.

Looking Ahead: The Future of Live Costing

Elevated Signals is investing in live costing—a real-time view of how production activity flows into your financials.

Here’s what we’re working toward:

Capturing every production event—purchases, transformations, sales—in a structured, traceable format
Mapping operational activity into clean financial data
Bridging the gap between production teams and finance systems

“Think of it like a bank statement for your inventory,” said Hardeep. “It brings clarity and traceability to everything you do.”

Live costing is designed to meet cannabis operators where they are, without the heavy lift of an ERP.

Building Cost Clarity: Where to Start

Every operation is different, but the path to better costing is surprisingly consistent.

1. Connect Operations to Finance

Why it matters: Teams need to work from the same numbers.

How to start: Map where your costs live—materials, labour, overhead—and unify that view.

2. Apply Costs Consistently

Why it matters: Inconsistent cost allocation leads to confusing results.

How to start: Define and apply costing rules batch by batch and SKU by SKU.

“If you're not applying costs consistently, you're not generating intelligence, you’re generating noise,” said Dave.

3. Build Real-Time Visibility

Why it matters: You need to catch issues while production is still active.

How to start: Track WIP (work-in-progress) to see how labour and materials accumulate before a batch finishes.

“That’s when costing becomes a planning tool, not just a reporting tool,” Dave added.

4. Start Simple, Then Scale

Why it matters: Overcomplicated tools can create more issues.

How to start: Begin with clean digital workflows and build from there. Elevated Signals can plug into existing systems and evolve with you.

Final Thoughts

Costing is often overlooked, but it’s one of the most valuable tools cannabis businesses can invest in.

Operators who get this right:

Make confident investment decisions
Avoid regulatory missteps
Build trust with investors
Gain a clear understanding of what’s truly profitable

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Elevated Signals, founded in Vancouver in 2016, offers a GMP‑validated SaaS that unifies real‑time inventory, quality and environmental data, replacing paper systems.

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// Built for the Bold