The Year-End AR Cleanup: What to Write Off, What to Escalate, What to Chase Before December 31

Every cannabis receivable you're carrying on December 31 ends up in three places: the balance sheet a lender reads, the numbers a buyer prices, and the tax return you already paid on. Under 280E, the tax on adult-use revenue came due whether you collected it or not. The year-end aging report is where you find out how much of that revenue was real.

Industry economists put delinquent cannabis receivables above $4 billion. Commercial recovery data puts the odds of collecting an invoice around 70-80% at 90 days past due and 45-55% at six months. Every account you leave alone until January is worth less by the time you get to it.

Here's how to sort the book in the eight weeks that are left.

First, make the aging report true

Before you chase anyone, check the report against what customers actually owe. Unapplied payments, duplicate invoices and credits that never got issued are common in cannabis books, and phantom receivables are the fastest way to damage a retailer relationship in December. Chasing a store for money it already paid costs more goodwill than the balance is worth.

Run the Aging Detail, not the Summary, so every line has an invoice number and a due date. Then sort every open balance into one of three groups.

Chase: 0-60 days past due

These are still collectible at close to face value. The job is to keep them that way.

December is short on working days, and holiday time off slows down AP departments. Get a payment date in writing from every account 31-60 days past due by mid-November, not a promise to "look into it." An account that pays on December 28 instead of January 15 changes your year-end cash position and your aging report.

Escalate: 61-120 days past due

This is where most of the year-end value is won or lost.

Put these accounts on credit hold before holiday orders. Retailers restock ahead of Green Wednesday and December. An account more than 60 days late that places a big holiday order is asking you to double your exposure. Ship against payment, or ship once the old balance clears.

Move from email to the owner's phone. At this stage the person who decides is rarely the AP clerk. Call the owner or the CFO and ask for a written payment plan with dates and amounts.

Know your state's rules. In New York, OCM caps trade credit at 90 days, and retailers who miss the window move to COD. Other states leave it to contracts, and some vendors report slow payers to industry credit lists. Use what applies to you.

Write off: when there's evidence, not just age

Age alone isn't a reason to write a balance off. Evidence is: the store closed, the license was revoked or surrendered, the customer went into receivership, or months of documented collection attempts got no response. The tax rules for bad debt start from the same idea: the debt has to be real and the facts have to be documented.

For balances that are doubtful but not dead, book an allowance instead. It's the honest middle ground, and it's what a buyer or lender will want to see.

The math is worth doing before the close. Say a brand carries $1.2M in open receivables: $840K under 60 days, $240K at 61-120 days, and $120K past 120 days. Using the recovery odds above, the 61-120 group is realistically worth about $180K and the oldest group about $60K. The balance sheet says $1.2M. A realistic number is closer to $1.08M. Better to find the $120K gap yourself in December than to have a buyer find it during diligence.

The 280E catch: don't expect a tax break

A bad debt write-off is a deduction, and 280E disallows deductions for adult-use activity. Writing off an uncollectible adult-use receivable cleans up the books, but it may not lower your tax at all.

Medical activity is different this year. It moved to Schedule III with relief that Treasury says goes back to January 1, 2026. But the IRS still hasn't said how to split activity between medical and adult-use, so whether a medical write-off is deductible depends on rules that aren't written yet. Tag each write-off by channel now, and let your CPA decide the tax treatment. Clean up AR because the books need to be right, not for a tax benefit.

Your year-end AR checklist

1. This week: reconcile the aging report and clear unapplied payments, duplicates and missing credits.
2. By November 15: a written payment date from every account 31-60 days past due.
3. Before holiday orders: credit hold on every account more than 60 days late.
4. By December 1: written payment plans or final notices for everything 90+ days.
5. Before the close: write off what has evidence behind it, book an allowance for what's doubtful, and tag both by medical and adult-use.
6. In January: reset 2027 credit terms by account, using this year's payment history.

None of this is tax or legal advice. The rest of the year-end list is in our Q4 checklist.