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3 Ways Accounts Receivable Monitoring Benefits Your Canna-Business

Long live the days where a verbal reference would tell you everything you need to know about the companies you work with in the cannabis market. As the industry continues to grow, business practices are evolving in such a way that it is vital to incorporate predictive data that tracks the transactions between businesses.

There is nothing more telling about a company’s priorities than where it is currently spending its money. As an example, if you’re a grower and a particular dispensary is making an increase of purchases with you or other growers in the area, that dispensary is showing signs of growth and therefore a strong candidate for trade credit. On the contrary, if you’re a grower and one of your customers is making fewer and smaller purchases, they should be considered high risk; even if they are paying on time.

As businesses attempt to make their mark within the cannabis market, they must begin to establish trade credit. Just as consumers’ credit worthiness changes and evolves over time, a business’ credit worthiness is constantly adapting to its current financial environment. For suppliers and providers in the market, accounts receivable (A/R) monitoring is the key to avoiding B2B credit risk. A/R monitoring protects your canna-business in 3 major ways:

  1. Keeps You Abreast of Anything that Could Keep Your Customers from Paying You

As such a new industry, there will be many cases of businesses suddenly closing their doors without warning to their providers. This is especially dangerous if those businesses owe yours money for product loaned out on trade credit. Behavioral changes are tracked and monitored through automated analysis of monthly A/R so that providers can keep an eye on any drops in spend. If a business is showing these warning signs, pay close attention – it could mean that the customer will soon be unable to pay you. These credit risks often go unnoticed, unless A/R monitoring is in place, helping you stay on top of behavioral changes and overall risk. By identifying the right clues, you can take action to protect your business financially before it becomes too late.

  1. Demonstrates How Your Customers are Paying Businesses that are Similar to Yours

There’s no better insight into how a company should be paying you (vs. how they actually are) than a numerical comparison to your competitors. The more companies submitting their data, the better view you will have. A/R monitoring tells you what a company buys and how it pays other businesses like yours, including the average DBT and sum of balances. Are some of your customers paying you more slowly than their other providers? A/R monitoring widens the view into how your customers pay other companies within the cannabis industry, enabling you to identify your most collectible or late accounts, and collect faster. Faster collection leads to faster cash flow, and ultimately increased profitability.

  1. Provides Portfolio Summaries and Segmented Buckets for Side-by-Side Comparison

It’s important to be aware of where your customers rank against portfolio and industry averages. As the cannabis industry continues to grow, these numbers will become more important to decision makers in the trade credit process. By comparing a particular dispensary or head shop to the industry average, providers will know who should be getting the highest level of credit. They’ll also know when those credit limits need to be adjusted. Maybe some customers have credit limits that are set too high, while others have limits that are set too low. By comparing your current portfolio to industry-wide data, as well as balances with your competitors, you can identify up-sell opportunities. Revenue growth insights and risk segmentation will help you determine where these adjustments need to be made.

A/R monitoring may be a new concept within the cannabis industry, but it is far too important to be ignored. By remaining ahead of potential risk, your canna-business remains safe from significant financial loss.

 

Kerri Byron

Kerri Byron

Kerri Byron is the Marketing Manager at Boca Raton, FL-based Cortera. Cortera provides information-centric solutions that power business-to-business interactions. Cortera’s innovative information and technologies deliver behavioral intelligence on millions of businesses. The wide range of applications of these insights include credit decisioning, sales & marketing intelligence, supply chain insights and other risk management needs. Kerri oversees various marketing, advertising and public relations campaigns at Cortera. Kerri can be contacted at [email protected].

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