New York’s integration of cash-on-delivery restrictions into Metrc on Sept. 15 has increased enforcement of existing payment rules.
Retailers have 30 days from delivery to pay suppliers, with an additional seven days for suppliers to report overdue invoices.
Retailers are shifting to smaller orders to manage cash flow, potentially sacrificing volume discounts and facing higher delivery costs.
Distributor Nabis has lowered its order minimum to $1,000 across more than 50 brands, giving retailers greater purchasing flexibility.
Cannabis store owner Jayson Tantalo used to place $40,000 orders with a single supplier. Now, he splits them up and buys more often – and he’s telling other New York cannabis retailers to do the same.
Since Sept. 15, New York’s Office of Cannabis Management has used Metrc, the state’s track-and-trace system, to track overdue payments and enforce cash-on-delivery restrictions. The change is prompting retailers to rethink how they purchase inventory.
Cannabis retailers must pay suppliers within 30 days of delivery, and suppliers have an additional seven calendar days to report overdue payments. Retailers reported for delinquent payments are placed on the state’s cash-on-delivery list, which included 87 retailers owing a combined $3.9 million in September.
Through Metrc, suppliers cannot extend credit to retailers on the COD list, requiring those retailers to pay for new orders upon delivery until their outstanding debts are resolved.
Why did OCM change the system?
The integration is intended to strengthen oversight of overdue payments and ensure existing payment rules are enforced consistently across New York’s cannabis industry.
It also aims to prevent suppliers from giving certain retailers preferential treatment, which is prohibited under state cannabis regulations, OCM Chief Operating Officer Patrick McKeage told MJBizDaily.
“If someone can get preferential treatment and terms from a distributor, that sets up an unfair market,” McKeage said. “This stops the side-deal relationships … to have a consistent approach to how these transactions are handled on the compliance side.”
How are distributors adapting to the payment rules?
Cannabis distributor Nabis is adjusting its ordering model to help New York retailers manage stricter payment terms while keeping products on shelves.
The company has eliminated minimum delivery fees on its marketplace, allowing retailers to meet a $1,000 order minimum across more than 50 brands rather than meeting individual brands’ minimums of $5,000 or more.
Higher order minimums helped distributors offset fixed delivery costs, including vehicle insurance that runs about $35,000 per vehicle, said Smrita Choubey, general manager of Nabis’ Northeast operations, which serves about 700 New York cannabis retailers.
Industrywide, invoices typically are paid 65 to 95 days after delivery, Choubey said.
“Asking an industry to pay in one month when they’re used to three – there’s going to be a sector of retailers that won’t have enough cash flow to keep products in their stores,” she said.
