Do you think regulators should address ongoing A/R issues in cannabis, and how?
Kris Karl | 3isFor | Co-founder
Yes, regulators should address ongoing A/R issues, as inaction only protects bad actors. I’m wary of overregulation, but the lack of banking access and contract enforcement disproportionately harms small operators. Too many small business owners in the cannabis industry are chasing payments while struggling to stay afloat. We need fair systems that hold companies accountable while making it easier to manage finances and pay others.
Amna Shamin | CannabisEvents.Global | Director of Content Marketing
Other industries have legal processes to address A/R issues and so should cannabis. Late payments, invoice issues and the inability to deduct business expenses all negatively affect cannabis businesses cash flow, which can irreparably damage a business that has no easy access to credit. Federal regulators could deschedule cannabis but even the local regulators could set up processes for handling disputes related to payments locally. If there were potential repercussions, there would be fewer bad actors in the cannabis industry, which affects everyone from consumers to MSOs.
Mitchel Colbert | Full Spectrum Strategy | CEO
“The A/R issues in cannabis go beyond the licensed cannabis market and spill over into the ancillary space, such as High Times going under without paying all its writers. If we are talking about regulators addressing the ongoing A/R issues in cannabis, we need to talk about more than just cannabis regulators getting involved because they can only regulate licensed businesses, not the ancillary ones they partner with.”
Jesce Horton | Grand National |CEO
“I get the frustration, but more government intervention isn’t the answer. The real issue is small businesses being locked out of capital because of overregulation, such as the Controlled Substances Act. The focus should be on creating real pathways to funding, just like any other legitimate business in this country.”
Jeffrey Miller | HoneyProjects | CEO
“There is more than enough regulatory involvement in the cannabis business as it is. So it doesn’t seem like the magic bullet for the A/R crisis is more government involvement. The solution to this problem, like so many other cannabis industry issues, is in continuing to push for cannabis businesses to be treated like all other businesses, with recourse to the court system, bankruptcy protections, normal tax burdens and all the other rights and expectations that American (non-cannabis) businesses enjoy.”
John Shute | PufCreativ | CEO
“Yes, regulators should address the A/R problem by tying payment compliance to licensing. When businesses fall behind on billing, it causes a ripple effect that hurts operators, vendors, municipalities and consumers. Requiring timely payments as part of compliance would protect the ecosystem, encourage accountability and keep the industry healthier overall.”
Jeff Scrabeck | DIZPOT | Co-founder
“I believe our industry has more than enough regulations. This is a business problem, not unique to our industry, that will be solved by our industry. The cannabis community has already begun to self-regulate bad behavior through things like industry credit rating tools based on actual shared data. While cannabis is a big industry, it’s still a relatively small community where bad actors quickly become known. This welcomes an environment of self-regulation that does not require outside assistance.”
Stacy Litke | Green Check | VP Banking & Financial Services
“Absolutely. But not in a direct way. Rather, I believe that regulators have the ability to address the root cause which is the disconnect between federal and state laws, and the risk that comes with providing services to the industry due to that legal uncertainty. If cannabis became a legal, but well-regulated product with consistent regulation across the country, that would have a positive impact on the expenses of the industry from lower rates and higher availability for capital, a reduced tax burden, an increase in efficiency for operators in multiple states, the ability to accept mainstream payments and a reduction in the expense of cash transactions. Plus, with consistent federal regulation, the interstate market could open up, which would level out some of the supply and demand issues. All of that would make these businesses more profitable and allow them to pay their bills with more consistency.”
Rick Bashkoff | Lit Alerts |CEO
Yes, over the past few years, I’ve learned about several effective measures that state regulators have implemented in the alcohol industry. These include enforcing mandatory COD (cash on delivery) status for retailers with delinquent accounts until their debts are cleared, as well as publishing a list of delinquent retailers to inform wholesalers about those who consistently fail to pay on time. While I wish there were a self-policing solution to address this issue, I believe it has reached a systemic level that requires the support of state regulators.
Greg Tannor | Flower House | CEO
A/R is still a tough nut to crack in the cannabis industry, especially in states like New York, where many new retailers are starting out and taking on more than they can handle. It can take anywhere from five to six months for a store to reach its projected revenue goals. So, we need to be careful with retailers when it comes to A/R because it costs them a lot of money to get started. The amount of money a retailer has or will invest before opening their doors is huge. A/R will keep being a problem, and with the New York State regulators putting together a COD list, the purchasing power of a store can change at any time. Open communication is key when it comes to dealing with A/R issues.
Marianne Cursetjee | Alibi | CEO
In general, less government interference in business operations makes sense to me. Operators should be able to stand on their own and succeed or fail without regulators dictating the details of business policies and procedures. Suppliers (farms, processors, wholesalers) should follow normal credit processes which would include an agreement from account guarantors and be diligent with extending credit. I think regulators should have oversight upon license transfer and treat the license as an asset that can be collateralized.
However, since cannabis is different from normal businesses, the challenges are greater, and the black market is still a force, a bit of regulatory assistance could be helpful. I’m curious what the data shows, but my experience indicates that unpaid debt is a bigger problem in states where there are too many producers. In Oregon, if a farm isn’t paid by a retailer and chooses to stop selling to that shop, that shelf space is immediately filled by another farm and the cycle is repeated. I believe that oversupply is the biggest driver of the accounts receivable problem and since licenses are issued by regulators and commerce is restricted to single states, that regulators can and should be helpful to operators.