Ep 7: Cannabis AR: From Spreadsheets to a Video Game — The Shift

with Milos Stankic · The Shift, a podcast by Headquarters

Headquarters' most experienced AR manager breaks down how data, dashboards, and a healthy collections-to-sales ratio are reshaping risk and cash flow in California's cannabis market.

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Auto-generated from the episode audio and lightly edited for readability.

0:00 So, how long have you been doing AR?

0:03 I've been doing AR um for more than 10 years, but in cannabis I've been working in AR for five and a half years.

0:16 Five and a half years. I'm trying to think. I I believe that you might be the person that did AR the most that I personally know um from HQ. I could be wrong, but I think that's really it.

0:36 Yeah, that's actually factually correct because I was the first AR person in headquarters.

0:43 Nice. And and this is interesting because and and here's the reason why I wanted to talk to you specifically is because you remember what it was AR five and a half years ago in California and cannabis and you know what it is right now. So that that gives us like a lot of um a lot of stuff to talk about. But um you've been collecting money from California cannabis retailers for so and so. What's the biggest difference between California cannabis market when you started versus what it looks like today?

1:22 I would say the biggest difference is that now we have some kind of um payment history, payment behavior history um across the state. When when I started it was just process of collecting information about payment behavior and now it seems like that industry is shifting towards uh more knowledge about how people pay if that makes sense.

1:55 Yeah. So ultimately the data that we've accumulated throughout the years and the information sort of got us to this point where we're like, "Oh, we know exactly what this person's going to do, when they're going to do it, why they're going to do it, and so on, right?"

2:11 Yeah. Yeah.

2:12 So when you think about that, obviously the data itself is extremely impactful today. How does this make your job easier? How does this data make your job easier in terms of making decisions when communicating with retailers?

2:30 Well, it makes your job easier in um a way that you can do better job prioritizing who you reach out to, how um how often you reach out to them, um how do you approach them, what are their preferences? we basically know a lot more than we used to know. Um so you can save time by um calling someone instead sending them 300 emails they're not going to open because you know that that person or that particular shop operates the way they operate and it is via phone calls or texts. So having the knowledge about their payment behavior and how they used to behave historically saves a lot of time when you um don't shoot blanks. You just um you're straight to the spot. You know when you call them, they're going to pick up.

3:39 You're going to have the conversation about payment. it's going to be easier for them, easier for you, and no blanks. Do you feel like there there was an evolution from the point where we're like, okay, my job is just to reach out to people and make, I don't know, 20 calls a day or 30 texts or 50 emails, whatever, to the point where we're right now, which is it's not really based on the number of calls, number of emails, but rather the success of collections per se, per associate or whatever.

4:17 Yeah, I would say that um keeping your aging report in order does not mean like it does not correlate with higher number of reach outs if you ask me. Um I think the focus is shifting towards um making better decisions creditwise and that's also where data comes in. So you know who to approve terms to or not.

4:45 Mhm.

4:46 You're in constant communication with sales. And it's just shifting towards not increasing sales just to increase sales, but have meaningful sales. You put it in a perspective of if we're going to collect what we sold.

5:06 Mhm. Um, so all the data, all the knowledge that we have, um, have us being instead of just email spammers to decision makers that's going to proactively make the success rate better by making better decisions before the order actually leaves the facility. Would you say again when you compare back in the day AR with the AR today obviously there's a lot of data that's not only useful for you but as you said like it goes to sales so that they know who to sell to or they're going to be more successful but that again the payments are going to be coming in. So when you compare your initial experience to today were you communicating with sales in the same amount as you are today?

5:59 No. Um it was way less in the beginning. Um the departments then back then were more disconnected because it seemed like cannabis was a new industry and that everything was built ground up. Even if there was a lot of experience from the other industries, um we needed to wait for that learning curve to um just do its thing. Um

6:33 we needed to wait for the cannabis industry to absorb the the good practices from other industries. And I think that is happening and it's still a process. It's probably going to be a process forever. As much as we take the good things from other industries, there are also some like negative things that we can absorb from other industry like like bureaucracy that we don't need. But it all goes down to the whole system. Like if we're going to have difficult um taxes to look at and we're going to have difficult process to do those taxes, then it's going to cause bureaucracy and and stuff like that. But let's focus on the positives.

7:23 like I think that um a lot of um positive things came from other industries and we are going towards more strategic type of doing things in cannabis business instead of doing the like extra work with no strategic impact. And this is this is a a conversation that I had with a lot of people and uh um the concerns versus sort of the positive traits about this sort of cannabis transition to like corp more data oriented industry. Um when you compare it to what it was before which is like literally go and that's it. you don't really plan as you said and uh and it's it's something that a lot of people are talking about right now and I feel like as you said like it is a process it's probably going to take a long time but ultimately if you make sure that you pull out everything that's good do that but make sure you keep the as one of the previous guests said you know keep and maintain the spirit of cannabis which is a sense that that I really like um but going back to data very quickly I want to touch on that as well. Um because obviously as we now understand there is very relevance towards data and it's important to store data.

8:48 How does that look like for you? And again give me like a comparison to what it was before versus what it is right now. You know looking at what a typical aging report used to be before and how you look at an aging report right now from you know techwise and data wise and so on and so on. Well, back in the day, it was an Excel spreadsheet where we um were looking at a lot of data that meant something to us, but a lot of data that was just spam like it was just like unnecessary for us at any point. Um, so how the time passed, we learned what to focus on, what we needed to go over, what we needed to actually do our job. So it was structured in the way where we now are looking at meaningful data and we are having a lot of knowledge to to take that data and make it into information and we know what we want to look at every week, what we want to um look at from the strategic perspective. For example, when we are doing reporting and we are discussing um the collection's success with um C-level um people and what we want to look at granularly when we are doing actually our job. So when we do our job in headquarters, we are building the AR dashboard which helps a lot making our a lot of spam data is structured into a dashboard where you can access the correct data points that you need at the time that you need them such as how much is due, how much is overdue, what's the latest update, What's their contact information? What's their um basically um latest event that happened such as payment pickup? You can see how they pay. Um, we can basically use um we can do collections like it's a video game basically like you can navigate through through the dashboard and just look up whatever you need faster and it looks better. So that's something that is involving how how we are evolving as an industry as well

11:44 to to put it more in perspective right back in the day you had just like an Excel spreadsheet and that was everything that you were going

11:53 yeah um and and now it is this ultra fancy dashboard that has all the data classified stored and then you access it depending on your needs and who you're supposed to talk to, who you're go um to collect money from and so on and so on. So, it's like in a in a sense it is sound versus noise where noise was um five and a half years ago and then now it is actual sound made out of that noise. That is something that you can leverage for real to be more successful at what you do. When you look at your dashboard, you said it was like a video game. Does that mean that you know everyone is able to use it or is it a complex tool? How does that work?

12:48 Everyone that's tech-savvy and know what they want to do, it makes their job more organized and standardized. So I think it's having a learning curve of being faster. If you're on boarding with headquarters doing AR, you're going to get up to speed faster with standardized dashboard instead of just using bunch of different spreadsheets that are different with every company in the industry. Going back a little bit to the retailer side, one of the things that I'm assuming your dashboard is doing is it's kind of classifying retailers based on their information you have uh about them. What are the different types of retailers that you're working with? Like if you can put them in boxes, like how would you classify them right now with with the experience that you have?

13:50 Well, in the dashboard, you can classify them however you want. um you can customize basically the attributes that you put to the to the retailers. But how would I classify them is um it has to do a lot with their payment behavior. Like do they pay on time? Do they need reminders? Do they like reminders? Um and obviously they are there are the the usual suspects as I call them. Um there are retailers that just pay slower for various reasons which is why we have our jobs as well. But um on the other hand there are um yeah let's focus on the ones that don't pay on time. There is that type that um will just ghost you until they have payment for you. So they will ignore your reachouts. They will they will dodge your calls. They will they will just ghost you basically until they recoup the funds and send you the payment which is when they will reach out to you basically bragging about them paying. Um there are also the the ones that are really struggling. They're ghosting you.

15:12 They're not paying. um they're just trying to get an update and my message to them is an update is an update even if it's a negative one.

15:24 Um

15:26 sorry, let me here for a second. I I have a follow-up question to what you said, which I think is very important to address, especially with brands that are, you know, wanting to make sure that they're making the right decisions in advance and stuff like that. you know, as you said, like projecting a little bit further into the future. Do you recognize now with the level of experiences you have, do you recognize the patterns of like, oh, this seems like a pattern of someone that's struggling or going out of business slowly. Let's just make sure we put a full stop before crazy stuff happens.

16:01 Um, or is this something that that's still not fully developed? How would you how would you talk about that? I would say it's not fully developed because I feel like it's still based on what I as an individual feel looking at the data. Um it's not structured in a way that everyone can make the decision. But if you ask me about me, I would say that I know how to to predict that something is off and it's just based on the experience like and also I moved a lot between different brands and I've been working with the same retailers from the

17:04 from the perspective of different brands. and their payment behavior is the same towards different brands. So having that knowledge I can see that brands have different strategies when it comes to um providing terms provide um leveraging their exposure to a retailer how much they sell versus how much they collect from a particular retailer. So you can see when someone is risking too much um and it doesn't seem like every brand is let's say managing that risk well enough and that's where the room for growth is in the industry for sure.

17:58 So I feel like because you've worked so much with these guys, you know by heart almost sort of fundamentally or sentimentally of when you see these patterns emerge and you're like, "Oh, this is the moment." But you cannot put a number to it. So it's not really technical that much and it's just more based on the feeling that you have in the moment. So what do you think if we were to do an experiment right now and if I asked you put three things that would you know that based on your experience you can you can uh quantify them that would make you a system that can recognize this patterns what those three specifics would be. I will have to think about it for a bit. But the first one that comes to mind would be their payment cadence on average. how overdue their AR gets until they pay on average through time like historically like in the past let's say 6 months um how they their aging buckets move if I should put it that way that we probably the most fundamental one and the most obvious one if we would need to quantify the others it would probably be how responsive they are over time. So we would need to track and kind of grade the responsiveness to the AR outreach if we are just looking at and gathering information from the AR team and not syncing up with other departments uh um in the company.

19:53 I use a lot of insight that I can get from sales from the sales reps that that actually visit the shops.

20:01 Um they can tell you a lot but that is that is not easily quantifiable. It's more like subject

20:12 if you

20:13 need you need to to to listen to the rumor mill.

20:17 That would be so amazing. I think that would definitely help a lot. Um, but at the end of the day, that's the reason why this is one of those jobs that you cannot easily replace by AI. It's like you have to take these sort of sentimental/fundamental information in into consideration and not just technical value, right? You have to be like, "Oh, but I got information from the sales guys that they're closing and even though it seems like they're paying everything on time, God knows what's going to happen. So, let's just make sure we put a stop to it before it goes out of hand." Um, and that makes sense. Um, so and and then same goes because you did mention that you also worked between multiple brands and you've worked in uh with distribution as well. Um, so I would like to know like if you if you look at those brands, what's something that cannabis brands consistently misunderstand about getting paid by retailers? Because you said that there's different strategies or or approaches when you know get giving terms to retailers. How how do you go about that?

21:21 Well, it it all comes down to that um forever battle between sales and AR. And that battle is real. Um every company has um situation where one or the other department has the upper hand and it all comes down to to personnel. like it's like the CFO of the company and the COO need to to be in balance like they need to work together and kind of set the KPIs in a way that makes sense that we need to have more sales but the collections need to follow and The indicator strategically that I like looking at the most is collections versus sales ratio.

22:22 Like it needs to be around one. And if it's not around one, some some decisions about leveraging risk as we talked about are not made correctly. So that's the main thing that's that's different across the board. Um if and I understand that a lot of companies have um their obligations towards investors. They need to um increase their revenue. Um it all makes sense to me. But if we're looking at the like theoretical perfect situation, you need to um have the sales that are collectible because in the long run that's the only thing that's important. Like if you pump your sales up at the end of each month at for every month, like you need to to have higher and higher sales and then after like 3 months the the invoices that were on net 30 are 60 days overdue, then you're in trouble. Um, and then you need to address those sales as kind of bad. Like if we did not collect on them, then do they actually make sense? So yeah, that that's basically the the main thing that's different across um different brands that I worked for. There are some that

23:57 Yeah. Sorry. Sorry for cutting you off. Uh but but you know me knowing that you swim very well in this sort of relationship between sales and AR, what is your secret to making both parties satisfied? How do you swim through these waters? because you're very good at it and I'm interested in what are how what do you do so that you're not having issues and that the sales guys are actually satisfied with what you're doing but you're also satisfying the need of getting those payments in.

24:30 I think it all comes down to trust um for the for the retailers that sales reps does not want me to to touch their relationship. I need to have complete trust that they're going to provide me with updates and that the retailer is not going to go out of control when it comes to to collections. On the other hand, um sales reps need to have complete trust in me that that I'm not pushing credit limits, credit holds on particular retailers damage their sales at the end of the month. kind of over time when you build trust then you work together better towards the the same goal and the my goal is to collect everything that they sell their their goal is to sell as much as they can. There are also practices about bonuses for sales reps where some companies just um hold the bonuses until the we collect money for product sold. So that makes us work for the same interest because as soon as we collect they're going to have their bonuses and apart from that trust that we are trying to mutually build. I think it all comes down to that as well. But yeah, as you said, you need to swim in those waters and just over time it feels naturally to me that it is going towards a good outcome. Um,

26:16 and yeah,

26:18 it's like making sure that you're a good mediator by doing or by convincing sales that without them selling, you don't have anything to collect. So ultimately, your goal as well is to make them sell as much as possible so that you can collect. Um, which is probably something that sales guys should take into consideration as well. All right, last one. And this is something that I really like talking to people about. It's just because it's a bunch of information that I mean, you know, it's just forecasting.

26:50 But tell me, what do you see or how do you see California market in three years from now?

26:56 No one has issues with having a bank account. They're making a payments and it's clearing automatically via blockchain and I'm out of my job. But realistically, I don't think that's going to happen. Yeah.

27:14 Um real realistically, I think three years from now, it's we're going to make progress towards um quantifying the indicators that we talked about.

27:27 It's going to move more towards leveraging the risk and making meaningful sales. But I wish that um cannabis industry as a whole is going to have more access to capital. It's going to have more access to banking um like kind of factoring capital for their cash flow to be faster. I would like to see that moving in a positive direction 3 years from now.

27:59 Thank you very much. Where can people find you? They can find me in this spreadsheet probably and in the AR dashboard.

28:07 Thank you very much. Have a great rest of the day, evening.

28:11 Thank you. Really enjoyed it.