Business
Opinion: 4 signs your cannabis customer is not going to pay you
If you have been paying attention to the California cannabis market recently, you have heard about the credit crisis many suppliers are dealing with.
Not only do marijuana-related operators in the state owe more than $250 million in unpaid taxes – a primary reason for small-business failure in corporate America – but they also are owed millions of dollars in accounts receivable (up to $600 million) from other cannabis-related businesses.
Because of this, a coalition of marijuana firms in California is trying to pass Assembly Bill 766, which would require cannabis licensees to pay for bills for good or services totaling $5,000 or more within 15 days of the final date listed on the invoice.
The passage and enforcement of this bill would be a major help to California cannabis companies and ensure that the current credit crisis doesn’t happen again.
But, first, the bill must pass and then be implemented, which could take years.
Timing is essential
What should marijuana-related businesses do today if they have customers that are seriously delinquent?
As I wrote previously, when you have a customer that is past due and not communicating with you, it’s time to engage a third-party collection partner to help get you paid.
Why? As you can see from the graph below from the Commercial Collection Agencies of America, every month that you hold on to nonpaying debt significantly reduces the probability of collection.
Here are four primary reasons why you should consider sending your delinquent customer to a third-party collection agency:
1. The customer is more than 60 days past due
The customer has been a solid citizen and always paid on time. You have transitioned them from paying you cash on delivery (COD) to limited credit terms.
But now, they are 60 days past due, and this is not the first time it has happened. They answer your calls and promise payments but don’t follow through.
So, what should you do?
Chances are good that you have a problem, and, depending on how much the debt is and how old it gets, turning them over to a third-party collection agency will apply a level of focus to collection efforts that will greatly increase the chances of your company getting paid.
2. The customer is not returning your calls
If your customer is past due and ducking you, you have a problem.
If they won’t talk with you after repeated attempts to reach them – by phone and by email – and their debt is 60 days past due and getting older, a collection agency might be your only solution.
A collection agency works to get your customers to pay their outstanding bills. That’s what they do for a living.
A collection agency’s job is also to help repair the relationship and get your customer to start paying and, maybe, even purchase again.
3. The customer has stopped buying
If a customer owes you money, is not returning your calls and emails and has stopped purchasing new products, you need to be on alert.
For whatever reason, if the customer no longer needs you, they don’t have a reason to be a prompt payer, as they now need those funds to purchase from other suppliers.
If they go 60 days past due, are not responding to your calls and have not tried to place any new orders, you are probably going to need outside help from a collection agency to collect your money.
4. You receive negative trade information on the customer from other suppliers
In this example, the account is not past due – yet.
However, you receive some negative trade information on the account from other suppliers who also are selling to them.
This needs to be checked carefully. When a company gets into financial trouble, it starts allocating available cash and prioritizing vendors.
Its primary vendors might not see a problem, but the secondary suppliers are going to start experiencing payment issues.
If your customer is not paying other suppliers, you might be next.
Getting paid
The collections industry is one of the oldest in America; it has been around to help creditors collect from their customers when they cannot.
The escalation effect works, but the focus that collection agencies place on the accounts also has a significant impact.
Collection agencies employ “career collectors” who understand how to negotiate with debtors to get them to pay what they owe.
What’s more, the fees that collection agencies charge (typically around 20%) is minimal compared to the potential losses cannabis companies can incur due to non-payment and eventual write-offs.
Source: https://mjbizdaily.com/4-signs-your-cannabis-customer-is-not-going-to-pay-you/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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