Safeguarding Your Cannabis Business: Navigating Payment Challenges with Confidence
There are many factors that set the cannabis industry apart from others. Wholesale cannabis brands and retailers have to navigate through a web of regulation challenges that are uncommon in most industries. Within the complexities of the industry, cannabis payments remain a persistent headache for wholesalers.
Traditionally, wholesale cannabis brands have relied on cash and checks because of the regulatory constraints put on digital payments and the lack of traditional banking services. However, the tide is turning, and wholesale cannabis brands are increasingly turning to digital payments, such as ACH (automated clearing house) payments to make day to day operations easier and safer.
Steer Clear of Cash and Check Scams
The rise in payment card fraud is a pressing concern across all industries, and the cannabis sector is no exception. According to Eftsure, payment card fraud losses are projected to reach a staggering $49 billion by 2030, highlighting the urgency for robust fraud prevention measures. By eliminating the use of paper checks, which expose sensitive personal information, wholesale cannabis brands can significantly mitigate the risk of fraud.
Additionally, a payment fraud study revealed that nearly one in five organizations experienced disruptive incidents with financial impacts exceeding $50 million, emphasizing the critical importance of safeguarding payment processes.
Theft incidents present a considerable risk to cannabis enterprises, spanning from armed robberies to overnight break-ins. Due to the over abundance of cash historically on premise, dispensaries and growers are vulnerable to criminal activities, highlighting the need for improved security measures – especially when it comes to payments. According to the San Francisco Standard, cannabis businesses reported 329 loss incidents in 2022 alone, almost double the previous year, with manufacturers and distributors increasingly becoming targets due to their larger inventory of cannabis products.
Switching to digital payments reduces the risks linked to cash transactions, safeguarding assets and ensuring seamless operations. By eliminating the need for physical currency, cannabis businesses can avoid potential theft and fraud, while still maintaining a record of all transactions. This not only protects against loss but also helps with compliance by accurately tracking sales and taxes.
Faster Payments: Enhancing Liquidity and Efficiency
The delayed settlement process associated with conventional payment methods like checks can restrict liquidity and disrupt business operations. In an industry where cash flow is imperative for reinvesting in business operations and inventory, the ability to access capital quickly is paramount.
According to Green Market Report, wholesale brands and distributors find themselves caught in a challenging position, facing delays in payments from both ends. Payment to growers is often postponed until retailers settle their dues, creating a financial squeeze. This delicate balance is further complicated by narrow profit margins and the high cost of fast loans.
“Our lingering Accounts Payable is a direct result of our open Accounts Receivable,” one distributor said. “We pay obscene interest rates on capital to fund our customers’ inventory and expansion.” – Green Market Report
Digital payments, particularly ACH payments like LeafLink’s Direct Pay, offer a faster settlement speed, providing wholesale cannabis brands with expedited access to funds. This enables businesses to reinvest in growth initiatives, cover operating expenses, and maintain financial stability. Platforms like LeafLink optimize the payment process, allowing businesses to get paid on delivery and easily track all purchase orders and payment records.
The Implications for Wholesale Cannabis Brands
For wholesale cannabis brands, the decision to transition to digital payments is not just a matter of convenience, but a strategic imperative. The staggering amount of overdue payments, equivalent to approximately 1.6 months of revenue for the entire industry, as reported by Green Market Report, underscores the urgent need for a more efficient payment infrastructure. Delinquencies exceeding 45 days account for over half of the total delinquencies, disproportionately impacting smaller and minority-owned businesses. Embracing digital payments not only mitigates the risk of fraud and theft but also accelerates payment cycles, fostering financial stability and operational resilience.
The cannabis industry stands on the cusp of a significant shift, ready to adopt digital transformation in its payment landscape. By leveraging digital payment methods like LeafLink’s Direct Pay, wholesale cannabis businesses can mitigate fraud risks, safeguard against theft, and enhance liquidity and operational efficiency. As the industry advances, prioritizing secure, swift, and efficient payment processes will be extremely important for nurturing sustainable growth and success.
Interested in learning more about LeafLink and Direct Pay? Reach out to us here!