The marijuana sector is facing a growing financial crisis that’s been developing quietly while many businesses ignore the signs. The core issue? An explosion in unpaid invoices that’s threatening to destabilize the entire supply chain. Despite some whispers in online forums and informal industry circles, there has been little serious discussion about the scale of the problem or the risks it poses.
Currently, over $2.2 billion in unpaid invoices is circulating within the industry. This issue has rapidly expanded over the last four years, particularly in states like California, Massachusetts, and Michigan.
California alone is dealing with more than $770 million in debt, Michigan follows at $231 million, and Massachusetts comes third with $144 million. In some places, over 30% of outstanding payments are overdue—an alarming figure in any sector, let alone one already struggling with razor-thin cash flow.
The heart of the problem lies in a shift away from cash-on-delivery practices toward credit-based sales. While that move was meant to align cannabis businesses with broader retail norms, many companies skipped crucial steps like credit screening and risk evaluation. That oversight has created a broken payment system where businesses often add on inventory without being financially equipped to pay for it, and with little to no consequence if they don’t.
Effectively, sellers are offering unsecured credit, just like handing out loans, with no collateral, no vetting, and no real guarantee of repayment. That’s a dangerous position to be in, especially in a market where payment delays can ripple through the supply chain, impacting growers, processors, brands, and tech vendors alike.
The aging data for the receivables shows just how deep the problem goes. While nearly half of AR is less than 30 days old, a staggering 24% has been outstanding for more than 91 days. What’s even more telling is the sharp jump in delinquency after the 60-day mark. Once an invoice is more than three months old, the odds of collecting that money drop below 50 percent. After two years, recovery becomes almost impossible.
These unpaid debts don’t just hurt the books—they crush a company’s ability to operate. As cash gets locked up in uncollected payments, companies lose the ability to invest in growth, product development, or even meet day-to-day expenses. Some make the mistake of extending more credit just to keep revenue flowing, only digging themselves in deeper.
The solution starts with real credit controls. Basic checks can cut the chances of ending up in debt collections by more than half. No bank would lend money without assessing risk. Cannabis businesses need to apply the same logic if they want to survive.
The warning signs are clear. Ignoring them isn’t just risky—it’s reckless. It’s time for cannabis operators to adopt strict payment policies, use credit data to guide decisions, and move away from informal deals that leave them exposed. Companies that take this seriously will be the ones still standing in the years to come.
It would be interesting to hear how vertically-integrated medical marijuana entities like Trulieve Cannabis Corp. (Cboe CA: TRUL) (OTCQX: TCNNF) are managing to keep credit from affecting their cash flows.
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