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Canna Aid

Banking on Uncertainty

Tired of Managing Your Banking Relationships? Manage Your Cash Instead

Have federal laws and uncooperative banks relegated your business to a cash-only operation? You can still equip yourself for success.

By Ryan Mills

The tug of war between state legalization and federal criminalization makes the logistics of running business heavy with difficulty. If you’re lucky enough to have a banking relationship, I’m sure it’s plagued by uncertainty and upheaval. The strain this places on canna-businesses is an unfortunate consequence of a gigantic industry operating in a nebulous space between legal and illegal – the parameters of which are in a constant state of flux and left to a cranky bureaucrat’s whim.

On the regulatory side, banks are federally forced to hold no more than a certain cap of deposits in any one industry – which overflows, especially during the holidays, when banks don’t correctly forecast the amount of deposits from canna-businesses. This oversight forces unpredictable account closure with little to no warning, maybe 10 business days at best, which we can all agree is a bat-shit way to be forced to operate.

Meanwhile, the reality is that bank branches don’t have nearly as much cash in them anymore as a lot of dispensaries or cannabis retail stores do, which is just mind boggling. If anyone doubted the scale to which these businesses are operating, there’s your proof. Now what to do with all that cash? Most often, the structures that get pieced together in order to ensure success, safety and compliance don’t always necessarily ensure success, safety and compliance.

One potential solution to this is, basically, managing cash better. If cannabis retail stores and dispensaries approached their cash management strategy the same way seed to sale tracks flower, they could get a tight grip on their cash handling behavior at every touch point, from the moment of the point-of-sale transaction, up until paying vendors for increased holiday inventory. There is a huge possibility to not only increase efficiency and ultimately the bottom line, but employee’s safety as well.


Shawn Kruger, senior vice president of strategy and product of Avivatech, a cash automation financial services provider, weighs in. With a nearly 40-year history in banking and payments, Kruger has twice worked for armored security companies Brinks and Guarda where she managed 84 cash vaults across the country, what she refers to as the “trucks and guns way of managing money.”

It’s this experience of seeing the cost of cash firsthand that spawned her cannabis-focused work at Avivatech.

Editor’s note: While HQ mainly targets retail outlets specializing in smoking accessories and related enhancements for the user’s experience, the publication also reaches over 1,000 cannabis dispensaries across the U.S. This article is crafted with those dispensaries in mind, but we invite all of our readers—whether from dispensaries or accessory stores—to delve into the meat of this article and digest the applicable morsels, as there is plenty of good information to go around.

“We just wanted to find a way to improve the safety around the ways these businesses are forced to manage their cash,” Kruger said. “There’s potential to see your business through the upcoming holiday surge (and beyond) without sacrificing the up to 9.1 percent – and your employees’ sanity – that inevitably gets eaten up by the myriad costs associated with managing cash.”


More Money, More Problem?

The influx of business during the holidays makes cash an even more challenging problem. It takes a lot of money to manage a lot of money. The cost of doing business goes up, the cost of banking goes up, and the cost of managing cash goes up because there is more cash to manage. That 9.1 percent cost of doing business? That is what it takes to manage cash on a day-to-day basis including everything from paying employees overtime to stay late to ensure every penny is balanced, to hiring security escort in the closing hours and scheduling additional armored truck pickups. All this together with the 1.3 to 1.5 percent shrinkage (based on the National Retail Federation average) equals way too much money lost on cash handling.

There’s potential to see your business through the upcoming holiday surge (and beyond) without sacrificing the up to 9.1 percent – and your employees’ sanity – that inevitably gets eaten up by the myriad costs associated with managing cash.

Shawn Kruger of Aviatech talks cannabis cash management.
The average transaction amount in dispensaries is $72. A budtender will typically take four twenties for it and then from that point forward, until the cash leaves the dispensary, those four twenties are touched six more times. Money is being counted over and over and over most likely under dual custody.

“Years ago, I was onsite for observation at what was at the time, the third largest retail store in the state of Washington,” Kruger added. “The store had no automation and the manual task of balancing the day’s till took until three or four in the morning. While we were going through this process, three employee’s cars were broken into in the parking lot. An armed guard escorted us out that night—all this extra cost just to keep people safe. When really, they could find business solutions to keep them safe systemically.”


Avivatech’s answer to this problem is a cash automation system that limits the need for human interaction, creating an audit trail from the point of sale, while narrowing forecasting down to pinpoint accuracy. Getting a better grip on your cash behavior can really pay dividends. “I worked with one particular dispensary that kept $42,000 in a traditional safe because they had six different locations they needed to feed cash to,” Kruger continued. “After we did a weekly audit on their cash handling for 60 days, they began using cash automation and during the next 60 days they were able to reduce cash on hand by $24,000.” This means vendors are getting paid in cash safely, reducing the amount needed to deposit or move offsite to a secure inventory.

Anytime anything is automated, there’s bound to be time savings. That dispensary referenced by Kruger saw a 70 percent decrease in the amount of time spent on accounting, giving budtenders the opportunity to focus on what they really want to do and what they do best.

On any given day, there are roughly 700 financial institutions working with cannabis organizations – about 15 percent or so of the total banks and credit unions in this country. Dispensaries are charged about four times the rate any other general retailer pays in bank fees. And with major card providers introducing cease and desist orders on all cannabis-related debit card purchases, stores are going to be faced with even more pressure this holiday season. Kruger continued, “Entrepreneurs in the cannabis industry are unique business owners due to the sheer volume of cash they see and that they really only want to deposit the cash they can’t use. But a lot like checks that were supposed to be out of use 30 years ago – but are still 11 percent of payments – cash is still the default and will remain the default for the foreseeable future. The ins and outs of managing the sheer volume of it will continue to be one most important and strenuous factors in doing business.”

Why not just use the cash for payments? Instead of having to get cash into an account to cut a check, why not just use the cash you already have on hand to pay vendors for all that extra holiday inventory? When using a cash automation system with a cash recycler, you have the ability to withdraw a payment to a vendor for $20,000, for example, in cash that you’re not going to have to count again. The built in audit trail gives a time/date stamp as proof of payment and now you’ve also reduced what needs to go to the bank by $20K.

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