Client Relations vs. Collections in the Cannabis Industry

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The cannabis industry is growing. However, with adult use being first legalized in Colorado 4 years ago, the industry is still in its infancy. Like all other businesses, reputation is extremely important and canna-businesses must create brand awareness, create valuable relationships, and scale operations to one day become a leader in their space. Cannabis, CBD, and ancillary companies seeking top-level success do their best to do right by their customers. One such example includes extending net credit terms. This kind gesture can help increase sales for their organization, but can also create conflict down the road when customers do not hold up their end of the agreement.

When a business client does not pay within their agreed upon terms, a business is forced into becoming the “bad guy”. Similar to lending money to a friend for dinner and having your “Venmo” request remain open far longer than it should, you end up feeling guilty for having to ask for YOUR money back. This often happens in business and has become a prominent issue in the cannabis industry.

Today, cannabis companies are worried of jeopardizing precious relationships with clients, since severing that relationship may result in the loss of future sales. Cannabis companies can and should be worried about the perception this creates. To most however, this may seem backwards. They extended their client the courtesy of an interest-free loan, but get concerned about asking for their money back when it is time for their client to pay their bill. It is easy to neglect the value of your cash-flow when trying to maintain relationships with your business customers, because eventually those will become experts in making excuses and creating runarounds.

As a canna-business, an important decision to be made is deciding on your input to the perception your business has in the marketplace. A mother that lets their child into the candy jar at his/her leisure is allowing them to have unrestricted access to take advantage of a situation they shouldn’t have had access to in the first place. The net result is that the child has a tendency to become overweight, and due to a lack of oversight of access; greedy. Much like the metaphor above, a company that allows their clients to be loose with contractual payment terms is doing the same. These companies set a precedent that it is ok to ignore agreed upon terms.

Sending a client to collections passes the “bad guy” nature of collections onto a professional agency, but also shows that you will not tolerate this behavior any longer. Your company becomes known in the market to professionally conduct business and as a force that understands the value of cash flow. The questions you need to ask yourself while analyzing client relations vs. sending a client collections comes down to: Do really want to do business with this customer? Do you truly want to have to beg for what is rightfully yours? To hear excuse after excuse? Personally, I would prefer to work with 10 honest companies that pay me on time, rather than 100 companies that I have to chase down with no guarantee I will ever see my cash again.