Why Do Cannabis Companies Look for a Cannabis Collection Agency?

By Danny Batler

In life, there are two ways to approach an adverse situation: tackle the issue head-on or let the situation inhibit your success. Unfortunately, in the rapidly growing cannabis industry, adverse situations are a near-daily occurrence. Unrefined and complex transaction policies have drastically increased the chances of having companies' liabilities. The most common liability owners think of is collecting accounts receivable. However, this common issue troubling the industry is not a liability. Instead, it should be viewed and listed as an asset. 

The Important Difference Between Assets and Liabilities

On the road to becoming financially literate, an emphasis is placed on the difference between assets and liabilities. Understanding these two terms are essential for maintaining a healthy balance sheet. To most, the difference between the two seems clear: An asset earns you money, while a liability takes money away. Although true, the difference is more complex. The complexity is extremely evident when examining accounts receivable for cannabis collection.

Experience is the key to Collect money in the cannabis industry

When writing a balance sheet, accounts receivable can be listed as either an asset or a liability. Companies doing well will almost always have them listed as assets. Unfortunately, this is not the case across the board. Some companies handle outstanding debt collection efforts differently. Those that delay their collection efforts drastically increase their likelihood of the account receivable becoming a liability. As accounts receivable sit for extended periods, debtors are less likely to pay. If you don't receive payment or obtain only a fraction of the balance owed, you are left with a liability that should have been an asset. Despite some companies' lack of experience in collecting, many companies have mastered the collection process.

Importance of Quick Debt Collection in the cannabis industry

When companies begin the collection process immediately, the account receivable is more likely to become an asset. Confronting debtors early leads to higher conversion rates. If you can collect quickly, the benefits are plentiful. At the end of the day, it is up to companies to decide whether accounts receivable will become assets or liabilities on the balance sheet. 

Getting the best Cannabis Collection Agency on board

There is a term known as days sales outstanding (DSO) in finance. It is essential to keep that time to a minimum when operating a business. Having a low average DSO helps your business in a number of ways. In finance, it is widely accepted that when accounts receivable sit for 45 days, they start to become liabilities.  Therefore, the collection is crucial to minimize your DSO and avoid liabilities. The best way to convert accounts receivable is to use an experienced CBD Debt collection agency.

Our recommendation: Best Debt collection Agency for Cannabis Business

Within the cannabis industry, nobody does collections better than CannaBIZ Collects. As industry leaders, we have helped hundreds of businesses settle for over five million dollars. An important mission is to minimize your money's time in accounts receivable. We understand the importance of quickly collecting money in the cannabis industry. Thus we offer the fastest collection times in the industry. When a collection need arises, trust CannaBIZ Collects to turn your AR into an asset rather than a liability.