The thirteen-week model
A thirteen-week rolling cash forecast is the standard tool for cash-intensive businesses because it is long enough to see a problem and short enough to be accurate. We build it from the operating ledger, update it weekly against actuals, and track forecast accuracy so the model earns trust.
Inputs include collections by channel, wholesale receivables aging, inventory purchases, payroll, debt service, and every tax obligation on its own line.
Funding the tax that has already accrued
The single most common failure in this industry is spending gross profit that the federal government has already claimed. We compute a tax reserve as a percentage of gross profit, sweep it on a schedule, and treat the reserve as untouchable working capital.
That reserve sits alongside the state and local cannabis tax collections, which are similarly not the operator's money.
- Weekly reserve funding based on rolling gross profit
- Separate accounts for federal reserve and collected cannabis tax
- Estimated payment schedule tied to actual results
- Distribution policy set after reserves, not before
Working capital in an inventory business
Cash is trapped in inventory, and cannabis inventory turns slowly compared to most retail. We manage the cash conversion cycle directly: purchasing cadence, vendor terms, aged inventory disposition and receivables discipline on wholesale accounts.
In a Missouri wholesale market where pricing has compressed, aged inventory is a double loss — carrying cost plus a write-down at a lower market price.
Cash handling controls
Where currency volume remains high, forecasting has to be paired with physical controls: dual-control counts, sealed bags, vault logs, armored pickup schedules and daily ledger reconciliation. Controls protect the forecast from being fiction.
Frequently asked questions
What percentage of gross profit should be reserved for federal tax?
It depends on entity type, license mix and how much cost is properly capitalized, but the reserve should be computed from the operator's own modeled effective rate and funded weekly rather than estimated annually.
How is cannabis cash forecasting different?
Tax is a much larger line, receivables risk on wholesale accounts is higher, capital is more expensive, and physical cash handling adds a control layer most industries do not have.
Can you help us prepare for a lender conversation?
Yes. Cash forecasting is usually the first thing a cannabis lender examines, and a model that reconciles to the ledger changes the tone of the conversation.
