The Power of Navigating Credit Challenges in Cannabis – A talk with Jared Angell from Distru
We’re thrilled to introduce the #UOWEME Podcast series, an exclusive project from The Cannabiz Credit Association (CCA) designed to bring industry leaders together to discuss the critical financial and credit challenges facing the cannabis industry. Each episode aims to foster a deeper understanding of the cash flow and credit obstacles in this sector and to offer actionable insights that can propel the cannabis industry toward stability and growth. Through honest conversations with experts, #UOWEME shines a light on pressing issues and provides a forum to explore real-world solutions. By equipping our members with this knowledge, we’re empowering them to thrive in an evolving market. Episode 1 kicks off the series with a deep dive into cannabis credit management, accounts receivable, and the often-overlooked challenges of offering credit in this high-risk industry.
In this episode, CCA Principal Brett Gelfand interviews Jared Angell, Director of Business Development at Distru, about the complex dynamics of cannabis credit and collections. Together, Brett and Jared examine the challenges faced by operators, retailers, and distributors who are working hard to survive in an industry that presents constant regulatory and financial hurdles. With years of experience under his belt, Jared offers unique insights into the credit landscape, sharing both hard-learned lessons and effective strategies that companies can employ to protect their cash flow.
The Tough Terrain of Cannabis Credit
Jared, who has a background in finance and now leads business development at Distru, a prominent ERP provider for the cannabis industry, opens up about his journey from CFO to his current role. His path through cannabis finance reveals the industry’s reliance on credit and AR (accounts receivable) and how this reliance can become a risk for businesses unprepared for late payments or unexpected losses.
In many traditional industries, extending credit terms is routine; however, in the cannabis industry, this practice is fraught with challenges. Brett and Jared discuss how even well-established cannabis operators sometimes lack the resources and frameworks to handle the inherent risks of credit. The absence of reliable credit systems has left many cannabis companies vulnerable to delayed payments, which impacts their cash flow and often jeopardizes their operations. This isn’t simply an inconvenience; it’s a reality that can ultimately determine whether a cannabis company succeeds or fails.
Lessons from the Trenches: Early Encounters with Credit Issues
For Jared, his experience with credit management dates back to his time as a CFO, where he first encountered the strains of unpaid accounts receivable. It was a time when survival often required bending traditional rules to make sales happen, even if it meant risking delays in payment. He recalls how he would offer net terms simply to make sure the product moved, a practice he admits was less than ideal but sometimes necessary to keep the doors open. The “Wild West” nature of those early days is something Jared acknowledges many operators can relate to, particularly those who are new to the market and eager to establish a foothold.
In the conversation, Brett underscores the importance of developing a credit policy tailored to cannabis companies, one that balances the need to drive sales with the necessity of protecting cash flow. While cannabis companies, especially in their early days, may be willing to overlook creditworthiness to secure sales, Brett and Jared agree that having clear credit policies is essential for long-term stability.
Navigating the Realities of Price Compression and Market Challenges
The conversation also touches on price compression—a trend where increased competition and oversupply drive down the price of cannabis products. Jared notes how price compression adds to the difficulties of managing AR in this industry. When prices fall but operational costs remain steady, companies may face more frequent cash flow shortages. This results in a “race to the bottom” where the pressure to stay competitive forces operators to sacrifice margins just to stay in the game.
According to Jared, the decision to switch from high-end packaging to cost-effective alternatives was one of the key turning points for him in understanding market demand. As companies across the industry grapple with the impact of price compression, Brett and Jared discuss the importance of choosing customers carefully and avoiding a pure focus on quick sales. High-revenue orders are appealing, but they’re worthless if the customer can’t or won’t pay within agreed terms. Instead, Brett and Jared advocate for prioritizing long-term, reliable clients over high-risk, high-revenue opportunities that might compromise cash flow.
Effective AR Management: Essential Tools and Techniques
A recurring theme in the episode is the importance of strong AR management systems to support credit and minimize losses. Jared and Brett discuss some of the tools that Distru has developed to help cannabis companies stay on top of their AR. From threshold-based payment alerts to detailed AR aging reports, the tools are designed to keep clients aware of their financial standings at all times. One particularly useful feature is a custom “at-risk” flag that lets companies mark accounts that are showing signs of delinquency.
Jared highlights the advantages of Distru’s ERP integrations, which allow clients to centralize their credit and AR processes, reducing the likelihood of overlooked accounts and minimizing delayed payments. These tools also enable cannabis operators to set clear credit limits and receive notifications when customers approach their credit limit, helping to prevent AR issues before they arise. As Brett and Jared discuss, having these capabilities in place is crucial in a high-stakes environment like cannabis, where one missed payment can have significant ripple effects on a company’s financial health.
Building Strong Customer Relationships for AR Success
The role of customer relationships in successful AR management is another key topic Brett and Jared address. In a market as relationship-driven as cannabis, nurturing strong client connections isn’t just good business practice; it’s a strategic necessity. Brett notes how retailers who maintain close relationships with their sales reps tend to have better payment habits, which reflects the importance of a proactive approach in AR.
Jared shares that one of his strategies has been to ensure that his team develops multi-level relationships within client organizations. Beyond the buyer, it’s important to connect with decision-makers involved in finance to maintain a clear line of communication. By building these relationships, cannabis operators can more effectively negotiate payment terms, offer tailored solutions, and avoid scenarios where unpaid invoices stack up. Jared encourages operators to view these relationships as a crucial part of credit risk management.
Exploring the Impact of 280E and Regulatory Complexities
No discussion about cannabis finances is complete without addressing the notorious 280E tax provision, which disallows standard business deductions for cannabis companies due to federal regulations. Jared points out that while credit and AR issues are significant, the tax burden imposed by 280E can be equally devastating for businesses that operate at or near breakeven. Cannabis companies often find themselves in a situation where they’re technically profitable, but tax liabilities erase any gains, creating an additional cash flow strain.
For companies grappling with both tax and AR issues, cash flow management becomes an even more complex balancing act. Brett and Jared emphasize the need for financial expertise and proactive planning to navigate this volatile regulatory landscape. For cannabis operators who are already dealing with thin margins and price compression, these tax restrictions represent yet another layer of difficulty.
Practical Takeaways and Risk Mitigation Strategies
Brett and Jared wrap up the episode by discussing practical ways that cannabis companies can mitigate credit risk and strengthen their AR strategies. Here are some of their key recommendations:
Establish Clear Credit Policies: Set boundaries early on regarding payment terms and credit limits. This can prevent future complications and set expectations with clients.
Consider COD Discounts: Offering customers discounts for cash on delivery (COD) can help encourage faster payments and reduce AR burden.
Implement Late Fees and Interest Penalties: While not a perfect solution, adding a late fee or interest penalty to overdue accounts can serve as a deterrent.
Require Down Payments for High-Risk Accounts: For customers with shaky payment histories, it’s wise to ask for a down payment to reduce exposure.
Leverage CCA Resources: The Cannabiz Credit Association provides cannabis companies with data on customer payment histories, helping members make informed credit decisions.
While these strategies are effective in reducing risk, both Brett and Jared agree that they should be tailored to each company’s unique needs and market conditions. The complexity of cannabis credit means that no single solution will work for every operator, but having a proactive, customized approach is the best defense.
The Value of the CCA in a Volatile Market
As Brett and Jared reflect on the challenges facing cannabis operators, they stress the importance of community resources like The Cannabiz Credit Association. CCA members gain access to exclusive tools, such as industry-specific credit data and AR management solutions, that help them make informed credit decisions and reduce risk exposure. Brett encourages all cannabis operators to take advantage of CCA membership, as it offers a competitive edge in a field where financial missteps can be costly.
This #UOWEME episode is a compelling reminder that navigating credit and collections in the cannabis industry requires a blend of strong relationships, structured policies, and strategic resourcefulness. Jared and Brett’s conversation provides valuable insights for anyone looking to strengthen their credit practices, but to dive even deeper, members are encouraged to listen to the full episode.
Want to watch this episode?
Episode 1 of #UOWEME offers just a taste of what’s to come as we continue exploring critical issues with experts in the cannabis industry. The Cannabiz Credit Association is committed to equipping its members with the insights, tools, and strategies they need to thrive. As we move forward with future episodes, #UOWEME will remain a forum for real talk on the financial challenges facing cannabis operators and a valuable resource for those seeking stability and growth in a turbulent market. For those looking to gain access to this exclusive content and tap into a community of industry leaders, consider joining the Cannabiz Credit Association today.