California cannabis companies’ recent attempts to recoup substantial debts have many in the industry asking: How did this credit crisis happen, and how can my company prevent similar issues?
The problem with extending credit is that unless you evaluate the credit worthiness of a company you are extending credit to, you may be taking an unreasonable risk.
One issue is that most cannabis companies that are extending credit do not have a formal “accounts receivable” or “credit” department to help manage the order-to-cash process.
These facilities exist to ensure that customers are held to their credit terms and that payments are collected in a timely manner.
Not having these controls is probably the biggest mistake a cannabis company can make.
If you are extending credit, you must have a process in place to manage and ensure consistent cash flow to meet your company’s operating
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