Other
Publications
MG Magazine
May 2017
What you need to know to create a smart trade policy.
We attended the MJBIZ show in Las Vegas last fall and were fortunate to speak with many companies that operate in virtually every aspect of the emerging cannabis market. The one thing they all hoped for, and felt confident that would happen, is that the banking system will become available to the industry sooner rather than later.
When that happens, business in the cannabis market is going to change dramatically. Access to the banking system means access to trade credit. When trade credit becomes available to growers, manufacturers, wholesalers, distributors and retailers serving the cannabis market, things are going to change. At every level, the industry is going to have to learn how to provide and deal with managing trade credit and its inherent risk.
MG Magazine
August 2017
Granting credit has not yet become standard in the cannabis market, but as discussed in my article “Trade Credit in Cannabis,” published in the May issue of mg, I believe it will be in the future. Therefore, it is important that a company create a credit policy to define how it will manage its credit and collection processes and evaluate credit risk. Once that is accomplished, the next, and most important, step is to develop a credit application.
Cannabis Business Executive
August 2017
In our article, published by CBE in July (“Five Signs Your Cannabis Customer Needs to be Placed With A Collection Agency”), we mentioned that many companies servicing the cannabis market are now extending what we call “friendship credit” – in other words, allowing customers whom they know well, and have been dealing with on a cash basis, for a period of time, to pay them “next week”. Many times, due to the nature of your relationship and past dealings with a customer, you think you have very little risk associated with letting them pay you next week.
But what happens if they don’t?
Cannabis Business Executive
June 2017
While trade credit is not currently the norm in the cannabis market, it will be in the near future. Once there is credit, collections is not far behind.
MG Magazine
November 2017
Why will growth happen? Consider your current customer with $2,000 in cash on hand. They are now only a $2,000 customer, nothing more. But, if they can get bank credit—say, a $5,000 credit line—they become a $7,000 customer. Multiply that figure by the number of customers you serve, and your business will expand accordingly. At that point, the question becomes whether you sell companies the additional merchandise on credit terms or continue to require them to pay cash at time of delivery.
Customers no longer will want to pay cash on delivery, because they are creditworthy; a bank says so. After the bank approves credit, customers will want credit from you, too, so they can pay you “sometime down the road.” To get their business, you will need to extend credit, which means you will have to carry “paper” in the form of accounts receivable.
How much credit should you extend? What kind of terms should you offer: seven days, fourteen days, thirty days, or something else? You will need to make a credit decision you may not be fully equipped to make. Furthermore, as your business expands, your company will need to make credit decisions daily. Plus, you now will have accounts receivable, and with that will come delinquencies, defaults, and collections. If you want take advantage of growth, but also want to minimize your risk and reduce potential losses, you need a professional to manage the credit process. You need a credit and collections manager.
National Cannabis Industry Association
April 2018
Introduction
According to Forbes, “the legal cannabis market was worth an estimated $7.2 billion in 2016 and is projected to grow at a compound annual rate of 17%. Medical marijuana sales are projected to grow from $4.7 billion in 2016 to $13.3 billion in 2020. Adult recreational sales are estimated to jump from $2.6 billion in 2016 to $11.2 billion by 2020.” These estimates, we believe, assume that the banking system will begin treating cannabis businesses like almost every other business and make bank credit available. When this happens, as we are already seeing in the California market, cannabis related business will no longer be primarily operating on a cash basis. You will be extending trade credit on about 90% of your sales and once you reach a certain level of annual revenue, you will need to develop a Credit & Collection Department that will help you manage the second largest asset on your balance sheet - your accounts receivable.
Your emerging business has the potential to grow significantly, but only if you can implement the operational infrastructure and financial controls that are necessary to support your growth. If you, operationally, can’t keep up with your growth you won’t be able to provide the necessary level of customer service and your business may very well fail. Additionally, if you, do not manage the financial aspects of your business by applying best practices that help you manage and control credit risk,
your business is also in danger of failing. Your emerging cannabis business needs to start planning now to meet its future demand and the first step is implementing an Accounts Receivable / Credit & Collection Department. This department will manage the entire order to cash process and ensure that credit risk is evaluated properly and that cash flow is optimized.
Cannabis Business Executive
June 2018
COLLECTION AGENCY OR AN ATTORNEY?
As your business in the cannabis market has grown many of your customers who you started doing business with on a Cash on Demand (COD) basis have now started to ask to “pay you next week” or what is commonly called “credit terms” and you have obliged. Now, with close to 30% of your customers on what we call “friendship credit”, customers whom you know well, and have been dealing with on a COD and you are now allowing them to pay you on credit terms with no formal credit check or analysis as you think you have very little risk associated with letting them pay you in the future.
But what if they do not pay you when you expect them to, then what do you do?
If you are not currently experiencing, you will. If you are extending credit terms, eventually you will have a customer who will not pay you when you expect them to. If this happens and your customer has gone 60+ days with no payment, no new orders have come in, the communication has stopped and your internal efforts have failed to collect, who do you turn to?
Certifications
Commercial Law League of America
January 1995 - present
Commercial Collection Agencies of America
Volunteer
Finance & Insurance Committee Member
National Cannaibs Industry Association
August 2017 - August 2018
