Tommy Truong: [00:00:00] You've, you have a fairly unique background in the industry. you've ran two dispensaries in Colorado. You ran a brand in Colorado. You saw what dispensaries and brands go through, and then you've. You went off and you solved a problem that a lot of brands are solving.
Can you talk a little bit more about the problem that you're solving?
Brett Gelfand: it was definitely a rollercoaster back then. 2015, I was right outta college, honestly, and got hired to help build a cannabis company. So I was thrown in the fire and learned a lot, and one of the biggest challenges we faced right off the rip 'cause we were brand new. I mean we were vertically integrated, 40,000 square foot grow processing edible, and then two dispensaries.
But our big portion of our business, the biggest portion was wholesale across the state. So one of the initiatives was, let's extend credit terms to help increase sales velocity. [00:01:00] Especially because we're selling to Denver, Boulder, all across the state, and we were out in the mountains, so we needed some time, to be able to pick up the cash anyways.
And so we said let's start doing net 30 day terms. Disaster. Six months later, half a million dollars of AR being racked up. We were just getting the company off the ground. We had all these plans to reinvest and cash flow was everything. So that's what I learned because I was on the front lines of having to call. Dispensaries for payment. 'cause if not, how was I supposed to pay the 50 plus employees we had at the company? And it led me to realize that this was going to be a massive avalanche that was gonna follow suit throughout the country. And thankfully my father was a commercial collection attorney for 30 years, so he always wanted me to take over his collection, agency, and law practice.
And I was like, why would I ever want to be in collections? But. Decided to give him a phone call, being like, dad, there's a big opportunity to help solve the issue that I was facing at that time, which was [00:02:00] managing accounts receivable and collecting funds to build a business. And seven, eight years later, I wake up every day to try to do the same thing here for the many clients we service.
Tommy Truong: Your experience is quite insightful because you were on the other side, and unfortunately we do have, there is a stigma in our industry, particularly in states that are mature. So the more mature the states you are, the longer I have a theory, the more mature of a state that you operate, the more excess tax and taxes that the government is collecting from you, which is a, it's, it is a problem that gets, it's spiraling outta control and, to compete with the listed market, I don't envy.
Retailers at all. That's a very tough business. But I wanna talk a little bit about your experience and why it's good to have a relationship with your supplier and [00:03:00] what can be done before things get outta hand and, 'cause I'm a big believer this is a supply chain, in a supply chain, you have to have strong relationships with across the board.
So what are some of the things that you've seen that retailers could do before getting in trouble, and why is it advantageous to have open communication and strong relationship with brands?
Brett Gelfand: Absolutely, and I like to think that the. Buyer behavior in the industry today, and let's talk specifically dispensaries and retailers is almost binary, where you have half being, let's say, good intended companies, they really want to do the right thing. They just have so many challenges that they're up against, maybe a lack of resources or a lack of information or experience that they're unable to have a positive relationship with a vendor, but they wish they could. wouldn't say half. I'm gonna [00:04:00] talk about binary on or off, but not maybe 50 50. 'cause I think a lot less of these buyers are actually ill intended that they actually have negative intention to take advantage of their vendors and in a dog eat dog world, do whatever it takes. To survive or whatever pressures they're dealing with.
They're purposely not paying their bills or having poor relationship with vendors because they're out for themselves. And we see that with probably more than anyone else does in cannabis because that's all we do is deal with debtors in the industry. But I do think a majority of them are trying their best.
But like you mentioned, there's so many factors applying so much pressure and such a competitive landscape that I can't blame them. They're having problems. I was there myself. I had to call all my vendors and say, I'm really sorry, but I did a really good job to keep the lines open. Sometimes, people don't have the time to do that, or there's a lot of other reasons why those relationships break down.
So it's critical [00:05:00] today because the industry's now maturing vendors are getting smarter. Brands are getting, much more careful in how they're doing business. especially with what we're doing with the Cannabis Credit Association and providing data so people know who are the good and bad payers in the industry, this will start making an impact in the ability to get terms.
And since banking, as we all know, is still a massive issue and you're not able to get the operating capital like you could if you were working in another industry you've gotta be careful about your reputation Credit is good. Being able to have a credit card, as we all know, is a good thing.
And if you're a buyer and you're starting to make a name for yourself that you don't pay your bills on time. At least what I'm trying to tackle every day my team is tackling every day, is to make sure if you're not paying your bills, you shouldn't be getting those terms, which means you can't buy as much product, which means you can't sell as much, which means you're not gonna be in the same position that maybe your, retail competitor is gonna be down the street if they are doing rightful business. Paying within their [00:06:00] terms and holding their end of the bargain. And I think the tide is shifting. And honestly, that's what we're trying to do. We're trying to create those guardrails so people have a reliable and transparent way of doing, fair business.
Tommy Truong: So you are a platform that highlights both sides of the coin. Really. If I was a retailer and I have impeccable credit, I would want to be on your platform to show the world that, Hey, my credit's impeccable. And if we're forming a new relationship, here's my financial history.
Brett Gelfand: Exactly, and it. It's wild because this is so new. Just like collections was new eight years ago. You can't imagine, Tommy, the amount of conversations that I had in 20 17, 20 18 explaining what a collection agency even was to cannabis operators. But still, I have those conversations, but a lot less now the conversation is.What is a credit bureau? What is credit reporting in general? What does it mean to, contribute your data to a credit association? What is actually the definition of trade credit? a lot of smaller brands [00:07:00] just think, this is how things are done. We're fronting product, right? we'll get paid in 30 days. But do they actually realize that this is extending a free loan to another business? The same way that if you're gonna go to a bank and they're gonna give you a loan, it's the same thing when you're. Giving your product to someone and not getting paid on delivery. It's a free loan. So we're finally, I wouldn't say finally we've got a long way to go, but we're starting to educate the industry what it actually mean to have credit and to have good and bad credit. we have conversations with leads and prospects and members every day of the CCA that say, we don't wanna report our current accounts receivable 'cause we don't wanna make them look bad. I'm trying to explain if they're current, that's gonna make them look good. The whole point is to shed light on payment trends, payment behavior, not just, a blacklist what they call it, and I hate that term, but there's even websites now that basically have vulgar language saying, gonna try to expose and shame the bad actors.
I get the reason why it's important to know who you're doing business with, but the way [00:08:00] it's being done now has led a stigma and a taboo of what does it mean to actually share and shed light On your customers. It's not a bad thing to report your current customers. That's a good thing.
And that's a positive net effect, which you mentioned is what we're trying to do is let people that pay their bills be exposed as good payers and the ones that pay late be exposed, that they pay late, but also say, Hey, if you start paying on time, you'll get a better score and you might be, getting better credit terms in the future.
So it's a live, active, trend. It's not just good or bad. That's absolutely the furthest thing that we should be trying to do as an industry.
Tommy Truong: So how does your platform work? how do you capture the data and how current is the data?
Brett Gelfand: So essentially the CCA set up like one of the standard credit bureaus out there. I dunno if you heard of Dun and Bradstreet Equifax experience, major Bureaus. The difference is. If these bureaus don't have a lot of credit data on cannabis companies, because like I mentioned, [00:09:00] it's really hard to even educate the industry to know what a bureau does and then actually submit their AR data monthly consistently so we can have those trendlines.
The reason that we were able to do it is because were founded by cannabis collects the nation's leading cannabis collection agency. We had over $160 million of debt placed with our firm, which was like over 8,000 individual placements. We had this data and no one else did. And because of that, we published that data anonymously.
So you didn't know who submitted those collection claims, but you could see who owed money. And because we had something to give, we were able to offer a membership to an ancillary cannabis companies, operators, brands across the country to sign up, see a list of all the ones that have owed money. Then in return, get them to share their accounts receivable.
Again, it's purely anonymous. No one knows that you're sharing it, but to see who's paying you on time within 30, 60, 90 days. So it's in order to [00:10:00] get access to the database that we've built now to over 220 members, over $2 billion of ar with the collection information you have to share your ar. So it's a ball that keeps rolling and the better. Data we get, the more members come online, the better the product gets and the more reliable the information is. so that, that's really how we were able to leapfrog this to where we are today. And it wasn't easy because there was a lot of education that came with it, but now that we've got some of the top brands and multi-state operators reporting their AR data on our platform, I speak to anybody out there, it's wouldn't you like to know who owes. Companies like Leafly and Jeter and Pax and Connected Money, wouldn't you like to know who owes them money and who's paying them on time? Because if you join our association, you can see that. But the only condition is you have to share your AR too. 'cause it's only fair.
Tommy Truong: Got it. Oh, I see how that works. there's a network effect that happens. The more brands that come onto the platform, the [00:11:00] more data you get across the board.
Brett Gelfand: Exactly. It's a pay to play model. But the big different factor here is we're not charging a lot for membership fees. Because we really don't wanna isolate, just the MSOs. We're not just going after enterprise licenses. Our whole goal here is truly help be proactive and help anyone from a small mom and pop to a large MSO proactive on their credit terms.
That's our main goal here.
Tommy Truong: If I was a retailer, would I be able to see my credit score?
Brett Gelfand: As of today, no. Unless you signed up as a member because maybe you had some kind of wholesale operation or you had some reason, to be extending B2B credit.
Tommy Truong: It's advantageous as a retailer that's operating well and is fiscal responsible to have their data on there so that they can really negotiate more favorable terms
Tommy Truong: What are some of the things, and, as an operator, so you've operated dispensaries and you're on the other side now where you are seeing problems as they [00:12:00] occur. What are some pitfalls that dispensary owners should think about when managing their inventory or managing their budgets?
Brett Gelfand: First of all, the fact that you need to manage your inventory and manage your budgets is number one. I think the biggest thing is a lot of dispensaries, at least that I know of back when I was in Colorado, or that we deal with on a day-to-day basis on the collection side, they don't have anybody seasoned or anybody fairly seasoned that knows how to run proper inventory planning, proper cash flow planning. It's just not there. They lack the resources to have that kind of insight, and I think the biggest issue is you're either over ordering or you're not managing your cash flow cycles correctly. Where you get yourself into a pinch. So think as of today, because we all know how difficult it is to run a successful cannabis retail operation or operation in general, it is harder than a lot of other industries out there because of the [00:13:00] tax implications, because of the banking issues, because of so many different factors.
Because we know that if you're gonna get in the game. You better have someone on your team that knows how to run proper inventory planning and cashflow planning. You better have some sophistication around how to run a business. to try to get into cannabis today and fly by night, wing it, gonna end up out of business like we're seeing them. Even some of the most sophisticated companies that we thought. We're leading the industries from the high times, the med mens of the world. Look at them. So let's get really clear about to run financial models, how to run inventory planning before you jump in, long-winded answer to say, just that alone I see is missing. And then on top of that, you definitely need to look for different softwares data aggregators. That can help you understand, are you over ordering? Are you under ordering? 'cause trust me I was [00:14:00] there, I was trying all these different type of systems to manage my inventory QuickBooks and it was a mess. So now that there's a lot of new SaaS players out there and a lot of nice tech out in cannabis, you do have to make that investment and leverage what's available to you because it is very hard to manage a business that you cannot measure. Like that's something that we try to stand by here is you have to have measurables in your business.
If not, you can't manage it. You have to have measurables with your people or else you can't manage them. So again, I think those are two major things to look at is just who on your team is looking over your inventory and finance and what tools are you using and providing that asset to those people to make good decisions.
Tommy Truong: Yeah, and I come across this quite a lot in the pitfalls of not having a tight budget and not having. Accurate p and ls, right? Oftentimes where owners get themselves in a pinch is the cash in the bank has already been allocated. You [00:15:00] just need to know where your cash in the bank is being allocated to, and oftentimes, cash in the bank is not necessarily cash that you can spend.
It's been allocated already.
Brett Gelfand: on top of that, 'cause this is the world that I live and many people don't see it the same way and they need to, is that a sale does not mean cash. many people that I talk to every day when we're trying to get them onboarded to run credit checks, tell us directly, Brett, we'd rather get the sale.
We don't want to cause friction in our sales process our sales team needs this deal. We need to get, this $10,000 order delivered, but the customer's requiring that 30 day term. So we gotta do what we gotta do. And if they don't pay us at the end of the day, we'll deal with it then. That makes my kind of head spin, because that's the biggest issue here, right? Is you're making decisions to give somebody free product without getting cash. And the [00:16:00] mindset for majority of cannabis operators that I've spoken to directly is I'd rather get the sale. That lays priority over the cash and I understand it, right?
Because then if you say no from the get go, you may forfeit the chance to get any money at the end of the day. 'cause maybe like we need the net 30 or else we're gonna go somewhere else. I get it. But there's still this mindset, even when someone's sending accounts to collections, being like, Hey, we don't know if we want to pay your collection fee. cut out of our margin. And I'm saying this isn't about margin anymore. This is about you getting a dollar back, a single dollar back from the $10,000 that you delivered before. This is not about what margin you have after an account goes past 90 days old and the customer's not responding to you.
This is a collection, this is a write off. So there's just a lot of education around what cash flow planning mean and what's the difference between accrual and cash accounting, and a lot of these things that it takes some sort of savviness in [00:17:00] your accounting and finance department.
Tommy Truong: there's a really good saying in business is cash is king. So you can't operate your business from receivables. You have to leverage used cash to pay your employees to pay for the raw goods that you need. If a dispensary is coming to if I'm a dispensary owner and I know that there's gonna be a financial crunch that I'm gonna experience, what would be the best approach with my suppliers and communicating this and to ensure myself that my reputation doesn't get ruined.
Brett Gelfand: I think you have to spend the time and put in the effort to have those conversations and set the expectations up front. Everything in business is about expectation setting in general. And I think that wing it and deal with the issues later is not the way that business should be handled, especially now in such an uncertain climate.
So if you potentially are going out of business [00:18:00] or your company is just out of cash, then you need to have those conversations sooner than later, and there's potentially a way out of it for you if you still want to be in the game. If you're smart about it, you can figure out a way to negotiate settlement amounts with the dozens of vendors that you might owe money to.
And we've actually done that work, what we call debt settlement, where we've helped, good people in a bad situation try to get out of a bad situation by flipping our hats around and helping them negotiate terms with their vendors and reducing their AP amount to get 'em out of a crunch. A lot of them in those companies are still in business today. But if you're going to hide behind your liabilities and hide behind your issues, there's a good chance it's gonna piss a lot of your vendors off. They're gonna submit accounts to collections, they're gonna escalate to legal. You're gonna get sued. They can come in and garnish your bank account. There's a lot of things that could happen when it could be as simple as [00:19:00] having. Rightful conversations the best you can and working out payment agreements and settlement plans the vendors that you've run into hot water with.
So you're saying the best way to renegotiate a repayment plan is to get in front of it before it's due. Have an open and honest conversation with your supplier, and then be honest about what you can do in the future. Communicate is really all that I think most vendors are asking for. but honest communication, if you're gonna give them two, three excuses, then you know, at least what we tell our clients, like after the third excuse, you send 'em the collections and let it rip, enough's enough.
But when it comes to you being honest and saying, Hey, we really don't have the money right now let's set up a monthly payment plan up until, the end of Q2. Then I think I can get you the balance, but let me put in good faith and I'm gonna get you something. Now, long as you're putting your money where your [00:20:00] mouth is, you can avoid escalated matters.
And these escalated matters aren't just being reported to the CA and having a bad credit score. These consequences are you being sued, having to pay a lot more money at the end of the day to try to defend the suit if you're to try to defend it. There's just a lot more headache. And a lot more issues that you're gonna have versus getting in front of it and communicating with honesty and integrity.
Tommy Truong: How important is it to if you mentioned a really good point in that you have to be honest. With what you can do. So it's one thing to negotiate a repayment plan. It's another thing to follow through with it.
Brett Gelfand: Yeah, and it goes back to financial planning, because even if you're in a crunch, maybe you're like, all i'll get you a couple thousand dollars a month and I'll be fine. Things are taking, a positive swing in the future will be good, but unless you really know that, unless you really have assumptions that are clear, [00:21:00] then yeah, you're gonna break your promises and that's just as bad as making another excuse.
There's actually nothing worse in, in our collection mindset is these broken payment plans are broken, broken promises. We even have pretty strong language in our settlement and payment plan agreements that if they break, there's a lot, there's a lot of escalated action that we can take that they're already agreeing to to get 'em out of the pinch.
I think it's critical to make sure that if you're gonna make, any sort of agreement, you should, probably under promise and over deliver and don't mislead vendor that's already been so patient with you for months on end.
Tommy Truong: these are really good. This is really good advice. A lot of dispensaries in our industry are going through some really difficult times. And what are your, I'm thinking right now about some of the cases That you've gone through, you've probably seen a lot of stories. Are there [00:22:00] any common trends that you see on reasons why businesses get themselves into the position that they're in?
Brett Gelfand: the one that comes to my mind that probably most people can expect is just market conditions. Like it's just oversaturation of product. California has gotten absolutely crushed the last year or so. And as much as want to point fingers, I can't, number one, I didn't run a dispensary in California. And I know how hard it is to run cannabis operation, so I really do want to empathize with retailers that, yeah, we're a collection agency and you might have heard from our group in the past and. Maybe you didn't like being demanded for payment from us and whatever it is, nobody likes being contacted by a debt collector or an attorney. However, understand the [00:23:00] reasons why things get difficult and our position is to be, really work out specialists. How can we help you work out a situation that has become difficult and market has become very difficult. So that's a common trend. It's just. You've got states now, like Michigan Oregon was really bad.
It's less bad now because there's been so much consolidation. Same thing with Colorado, but still California, Michigan, Massachusetts has been pretty nasty over the last few months, but not as bad as maybe California and Michigan as well. And that's just because the market has gotten bad and it's surprising that these states aren't learning from. The other states that have already gone through it. Just how can we help regulate the market a better fashion? And I'm not gonna stand by which states are doing a better job than others. Just from a collection standpoint, we don't have a lot of collection activity, let's say in Illinois. 'cause there's only so many, licenses out there and there's not an oversaturation of product, right? So because of [00:24:00] that. They're mostly the MSOs are controlling those markets, which I don't think is great for the small guys that can't get, licenses. And I don't think it's necessarily fair there, but at least there's not a ton of collection problems happening.
And we'll see how things are developing in New York. New Jersey's starting to have some issues. But that's really the main issue is in my opinion, it's been very difficult to find an equilibrium and a balance between the economics in these states. And when you have too much supply, prices go down. And people can't afford to pay their people.
Tommy Truong: I always think about if I was an entrepreneur getting into this industry, how important it is to keep my fixed costs as low as possible, so having a minimum viable product approach to the build out to where the location is. All the way through to ensuring that my monthly costs are as low as possible, and then it comes down to how much inventory do you wanna have on hand, and can you [00:25:00] have just 10 days worth in the beginning or to calibrate accordingly.
Brett Gelfand: We started in 2015 with an insane overhead. We had our master edible chef, our master grower, everyone making a hundred, 200, $300,000 a year, off the rip. And the minute that those prices fall, or the minute that sales opportunities change. It becomes extremely challenging, so I totally agree that, one, if anyone's looking to get into the industry, you have to be very strategic around what your angle's gonna be.
You can't just start a cannabis company anymore. I hope that people can realize that it's not don't just start a grow or start a dispensary with very little positioning and very little market identity. You have to know very clearly who you're servicing. And what product or service is gonna add significant value that's not already there. And on top of that, getting very [00:26:00] creative with your initial startup expenses especially your payroll and how do you use equity and how can you use maybe profit share to ensure that you're not gonna come off the rip, overpaying for overhead that might not return the profit. I totally agree, and it's not easy. I think the most important part is making sure that what you're selling actually has true value in today's market versus back in 2015 and we raised $20 million off of, off of almost a phone call because everyone was so excited to throw money at cannabis.
That's not how things are, being managed today. Unfortunately.
Tommy Truong: Yeah, and every industry goes through that cycle, and I think everything goes through that cycle. There's always a, crypto, for example, goes through that cycle every few years, right? Where there's just so much money that goes into the space where you feel like it's gonna be there forever.
And then when it's not, are you [00:27:00] positioned to withstand the downswing? A few times where entrepreneurs they have a retail concept. They get overzealous with what they think how the public will react, how their neighborhood will react. They overspend their lease costs are too high and their fiscally not responsible in the beginning and.
Being late on multiple vendors and now nobody wants to work with you and you're just stuck there. Cash and demand, that's not the, it is not the way that you'd hoped for sure, but things can spiral outta control.
Brett Gelfand: Yeah, and I do think that through. market changes, and I would call them learning experiences of most cannabis entrepreneurs or operators that have been in the game for a few years to see the ups and downs of what's happening. My optimistic approach here is that the ones that have been around the block are truly learning how to withstand [00:28:00] these issues, how to make sure they have strong vendor. buyer relationships. How to make sure they know how to run a financial model and a budget how they know how important it's for cashflow planning. Where, for instance, if four or five years ago things went federal and more money started flowing in and injected into the industry, I think this would've been just a bigger bubble that would've blown up with a lot of unsophistication and a lack of expertise to run a successful business.
And I am taking an optimistic approach that when we do weather this storm, the operators that are still in the game have been there, done that they've felt. The difficulties and the challenges of what it took to get to the place that they are now. And they're gonna be able to raise the money they need to raise or scale the way they need to scale to be a front runner and a pioneer in this industry that we're all trying to make better.
But it's gonna take the people that have the skills, the knowledge, the experience, and the know-how to turn this thing into what we all want it to be.
Tommy Truong: If I wanna talk a little bit about the other side, if I was a brand [00:29:00] and I'm. Seeing that there are some of my receivables are breaching and I'm a little bit concerned that I won't, be able to collect on some accounts what should be my go-to what should be my SOP?
Brett Gelfand: Sure. Again you're nailing all the buzzwords here that it's like people throw them around, but first you need to have one. You need to have an SOP of what happens during a credit and collection cycle. And I'll say that and people are like, Ugh, ooh. What does that mean?
But if you are going to give somebody net 30 day terms, you are extending credit and you're gonna have collection issues, period. And because of that, you need to know. What the steps are to take to extend credit properly and then collect your money efficiently. So to do that, number one, how are you checking credit?
How are you extending credit from the very beginning when you have a new client that's asking for terms? What is your credit process? I don't care if it's a 1, 2, 3 on a napkin, or you have a full blown built out SOP with a credit manager. It doesn't matter, but [00:30:00] you better be doing something to assess if that customer deserves. Any sort of terms, or if you're gonna give them net 30 for a $10,000 line or a $50,000 line, you should have some understanding of what constitutes for credit terms. And before, honestly, we started CCA, unless someone could tell me there was another solution, I hadn't seen any other way to, to check someone's credibility other than like checking references.
But now that there's a resource to go to a platform and search a company name and see what their payment behavior is like, and even gives a full risk score through the CCA, you can see extremely low or extremely high credibility.
So now we've got some data and tool for you to use. If you don't have that or you don't have access to that, then at least have some understanding of. What constitutes for someone to get credit terms yes or no? If you don't know how to do that, then don't give terms at all. Okay.
Tommy Truong: So what? What are the factors that I Should look at.
Brett Gelfand: So is if you do have some sort of credit score available, some [00:31:00] distributors have some sort of credit score. We obviously have a credit score now through the CCA. There's some Facebook groups and social media sites that are. shedding light on good and bad or on bad payers, which I think is a short term solution.
And there's a lot of risks there also with antitrust laws of what's happening on these blacklist Facebook groups. But I'll leave that for another conversation. You need to basically understand who you're doing business with. So you either have them fill out a credit application, which. Rarely happens in cannabis, but that's how typically you would fill out an application to say certain metrics to say, what are your sales?
What's your liability? How long have you been in business? You really wanna just know the customer. And that's what we're trying to do at the CA is to do that for you. So either go on our site and check it, or if you're gonna do that yourself, you need to know who your customer is. Is the license still active? Is this an operating company or is it a scam? 'Cause that could happen. You need to know if any of your competitors are doing business with this customer. So you could [00:32:00] check references and ask, Hey, are they paying you? Yes or no? So that's valid and the biggest thing that it's the hardest to get access to, but it's the same thing when you apply for a personal credit card, is, does this person or this company pay their bills on time? And that has to be usually aggregated through some sort of third party middleman. like the CCA.
Tommy Truong: Gotcha. And. Let's say they pass the credit score, you give them credit. One year down the line, there may be issues that you're seeing. Are there any leading indicators that you can look at before things get outta control and you can change the terms?
Brett Gelfand: Totally. The first thing that you'll probably notice is, Are they paying you on time or are they starting to get late? The minute they start getting late, the next step is why are they getting late?
Usually we like to look at it as, do they have the means? Is it the means or the motive for them not wanting to pay you? Is it because they don't have the means they don't have the assets anymore or is there some sort of motive that they're [00:33:00] vindictive or there's some reason that they are trying to take advantage of you and not pay you, but they could pay you, but they don't want to. So you have to really isolate what's the reason that you're not getting paid. Those two things alone should give you a red flag of are they becoming, a troublesome account. And I always like to say, if it gets past about 60 to 90 days, 90 days should really be the max. And they haven't paid you within 90 days. That's when you need to have an SOP your collection process. Where you know at first, maybe your sales rep makes one call in the very beginning. 'cause you don't want your sales rep being a collector, and I can reinforce that a million times. You do not want your sales team chasing past due accounts, but maybe you know, if they're a week late, your sales rep calls and says, Hey, just notice that you hadn't paid your invoice. If they don't respond to your sales rep, that's when it should go to someone else on your team, your AR rep, your accountant. But you don't want your sales rep spending their time chasing accounts that are old versus new accounts, so then it needs to escalate to someone else that has maybe weekly [00:34:00] touchpoints. Well, Ivan, you paid why I have you paid. Friendly reminder. Friendly reminder up until about 90 days. That's when you need to have some sort of official final demand. Maybe it escalates to a CFO or at that point escalates to your owner. We have a really strong demand. Hey, we've given you 90 days. We haven't heard anything from you.
If you don't pay by this time or date, you're forcing us to send this to collections and at that point, if they don't pay you, then it should be pretty clear in mind that there's something wrong with this customer and it shouldn't be worth your time anymore to continue to follow up after three months of not getting your money. And it's amazing how many people still will hold onto that, still spend their time, drain their energy, go on LinkedIn and Facebook and post all about these people not paying and take it so emotionally. And, I can't believe they wouldn't pay us. And it's such a personal attack that they're feeling.
And I always try to remind everyone, this is business and you really have to maintain a line between, business. And emotions when it comes to collections because it's easy for you to get sucked up and drained [00:35:00] into chasing someone. Oh, I thought we were friends and now they're not paying us. I get it.
Like it is so frustrating. It is so annoying. But that is why you have to have an escalation policy in place or else you're gonna be not only spending your time, but so much of your energy chasing a customer that might not be and probably won't be in business in six months.
Tommy Truong: If I was selling to a customer and. Maybe initially I'm giving them a credit of 10,000. They've been purchasing, well paying on time, and they want to increase their credit, say 30. do you recommend businesses to another credit application to increase credit limits?
Brett Gelfand: It's a great question, and I would say absolutely you should. Will people do it? No. 'cause they might say, okay, they've been paying on time, in good credit standing, we want to sell more product. This is gonna help them, let's go for it. I would make sure you [00:36:00] check and ensure that it's not like they could just be paying you on time and then they could be paying everybody else late, which could show that they're, maybe not doing that great, but they're just, they really like your product or there's something that they just wanna maintain their relationship with you. So I absolutely do think it's vital to make sure any time of credit. Credit worthiness or credit limit changes, you do have some sort of a checks and balance in place to say, okay, should be some sort of limit, right? If the customer is within this range of credit score, then they can get this much of credit extended to them at a certain period of time. And it's not so easy. It's, I will say it's more of an art than a science, but right now the industry is so far behind where it needs to be. That it's hard enough for us to get people to check, to see if the customer's been sent to collections or has legal liens and lawsuits against them.
A lot of our industry is still willing to extend terms to someone that's been sent to collections 30 times because they'd rather have the sale than have the cash. And it blows my mind. But that's where we are
Tommy Truong: [00:37:00] Yeah.
Brett Gelfand: And I think, I hope to, in the next couple years we'll be at that point where. There's those type of controls in place because again, are acting as a bank when you're extending terms and when you're receiving terms. You should be acting like a borrower from a bank. But right now The paper trail, the agreements being signed, the sophistication and savviness of how that term process is being done on both sides is just, it's not there.
So a borrow doesn't feel like they have that much of a responsibility to pay back the debt, and there's not that many consequences. And then the lender is getting absolutely annihilated by extending terms and never getting paid. So it's just really not helping anybody.
Tommy Truong: Yeah, that's, it's unfortunate. It's unfortunate where we are, but I agree with you. I hope that I know things will turn around as operators get more and more experienced and consolidation happens. Inevitable, but.
Brett Gelfand: Yeah. I sound like the doom and gloom a lot in the collection space. And we go to trade shows and it's oh the [00:38:00] collectors right. Talking about chasing down people for money. But to be very frank, like you said, cash is king. Like without being able to recoup money that you spent so hard to earn. It's worthless. You spent so much time to build your business. You spent so much time to build a great product. You finally get it to the finish line, you finally deliver it, and then you're not gonna get paid for it. And then many times the buyer makes you feel like the bad guy or girl for chasing your money.
Now all of a sudden, you are rude for asking for your money after putting all this time and energy into delivering a great experience and product or service for your customer. And then they're gonna say, oh, I can't believe you guys are asking for payment. I'm only five weeks late.
And it is so frustrating, but it absolutely needs to change. And I do think that this change, like you mentioned, is gonna lead to a much, more optimistic and honestly just a freer trade, a more positive experience in general. in the space that we play in.
Tommy Truong: Brett, I know that we're running out of time. [00:39:00] Before I let you go, how can our listeners find you?
Brett Gelfand: Sure. I'm pretty active on LinkedIn, so if you search my name Brett Gelfan, you can connect with me there. If you have any collection questions or you potentially have a collection issue. You can go to canna biz collects.com, that's C-A-N-N-A-B-I-Z collects.com. And then anyone that's interested in learning more about the association or what we're doing on the credit reporting piece and the credit bureau side, that's canna biz credit.com.
C-A-N-N-A-B-I-Z credit.com. So that's the CCA the sister company of cannabis collect.
Tommy Truong: Brett, thank you so much for joining me today.
Brett Gelfand: Thanks for having me, Tommy. It was awesome and appreciate what you're doing out there, alright?
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