We have all heard that in business that nothing is more important than customers. Many corporations today recruit and pay steep salaries for C-Level executives that include titles such as Chief Customer Relations Officer or Chief Happiness Officer. In the cannabis industry, where reputation, community exposure and outreach are crucial for success, we work long hours to ensure customer satisfaction. To maintain customer satisfaction and loyalty, canna-businesses do their best to facilitate their clients needs throughout the sales process.
Many clients (dispensaries, cultivators, edible/extract producers) request credit terms to provide extended time to increase sales allowing their vendors time to pay for the goods/services. Since client’s are #1, it is very common to grant credit terms and trust that your clients will follow through with payment. This stage is where client-relationships can become challenging.
When your customers become late-payers or non-cooperative with payment, they put you and your business in jeopardy. How many calls/emails does it take to remind them to pay? How aggressive is your tone? Are your salespeople becoming the bad guys?
The “honeymoon” face of your client relationship was extremely positive and exciting. Making the sale, sending the invoice, delivering the product, all seemed to be smooth sailing. However, your customer isn’t writing checks when payments are due, how are you supposed to know if it is time to send this client to collections? There is a point where you need to recognize your cash flow exceeds the importance of an irresponsible customer.
The following 5 Red Flags need to be considered when deciding if collections is necessary:
🚩1. Your Account is 60 days+ Past Due.
Typically, if your customer has an unpaid invoice open for more than 2 months, you can begin to become skeptical regarding their intention to pay. It is common for business to fall a few weeks behind since there are many moving pieces and unexpected hurdles in business. However, two months of time is a strong indicator that this account is dealing with some sort of disruptive challenge. After 60 days of reminders with no results, you are left with the first red flag.
🚩2. Your Customer is Not Responding
Since payment has been due, has the account completely gone A.W.O.L? When you feel that you have been completely ghosted by your customer, you can assume something “spooky” is going on here. Consider their silence your second red flag!
🚩3. Your Customer has Broken His/Her Word or Promise
As you attempt to recover the balance of the unpaid invoice has there been an instance where the customer has lied to you? Have they promised payment and it never came through? Have they told you a check was placed in the mail, but for some reason it was never received? Just like any other relationship where there was a breach of trust, consider this your third red flag!
🚩4. You Have Heard Your Customer Owes Money to Others
Since the cannabis industry is a tight community, it is not uncommon for word to travel fast. If you have heard from another business contact that your mutual customer is giving multiple vendors a run-around for payment, you can consider it the fourth red flag.
🚩5. Your Customer May Be Going Out of Business
Steep with competition the canna-biz has a high business turnover rate! Businesses are dealing with an array of challenges which leads to survival of the fittest. There are many instances where cannabis businesses are purchased by larger organizations. The minute your customer goes out of business (and you don’t have a personal guarantee) is the minute your chance of collecting becomes 0%. If you hear that your past-due account may be going out of business, your fifth and final red flag has appeared. IMMEDIATELY seek professional collection assistance, because at this point, time is not on your side!