What this page covers

• The difference between revenue, profit, and cash
• Why inventory timing creates cash strain
• The 30-day vendor payment squeeze in NY cannabis
• Payroll timing mismatches
• 280E tax accrual shock
• Delivery receivable illusions
• A working capital math example
• A simple cash flow model you can use immediately

The Confusion

You look at your monthly report.

Revenue: $900,000
Gross Margin: 45%
Net Income: Positive

But your bank balance is low.
You are stressed about payroll.
Vendors are calling.

What is happening?

Revenue Is Not Cash

Revenue is the total value of products sold.

Cash is money physically available to pay:

• Payroll
• Rent
• Vendors
• Insurance
• Taxes

You can record revenue today and still not have usable cash.

Accounting profit does not equal liquidity.

Inventory Timing vs Payment Timing

Cannabis retail is inventory-heavy.

You usually:

1. Buy inventory upfront
2. Pay vendors within 30 days
3. Sell the product over time
4. Deposit cash gradually

The timing mismatch is the problem.

You pay for product before the cash cycle finishes.

That gap is working capital pressure.

Example

You purchase $400,000 of inventory in March.
Vendor terms: 30 days.

You owe $400,000 by April.

But you sell that product gradually from March through June.

You are funding sales growth with your own cash.

Profit may exist on paper.
Cash leaves your bank immediately.

The 30-Day Vendor Pay Pressure in NY

New York cannabis vendors commonly expect payment within 30 days.

If you cannot pay:

• You risk brand holds
• You lose purchasing leverage
• You damage relationships
• You trigger supply gaps

Rapid growth makes this worse.

The faster you grow, the more inventory you must buy.

The more inventory you buy, the more cash you need before revenue cycles back.

Payroll Timing Mismatch

Payroll is fixed and predictable.

Inventory sales are variable.

If:

• Payroll hits every two weeks
• Sales fluctuate weekly
• Vendor payments are due monthly

You can have profit but still miss payroll timing.

Timing kills liquidity.

280E Tax Accrual Shock

280E prevents cannabis retailers from deducting most ordinary business expenses.

This means:

• Taxable income appears higher
• Estimated tax payments increase
• Cash outflow for taxes is heavier than expected

Operators often:

• Underestimate quarterly payments
• Fail to set aside reserves
• Get surprised mid-year

Tax accrual is not visible in your daily cash balance until payment is due.

Then it hits.

Accounts Receivable Illusions (If You Offer Delivery or B2B)

If you extend payment terms:

• Delivery accounts
• B2B partnerships
• Corporate purchases

Revenue may be recorded.

Cash may not be collected yet.

You can look profitable and still be waiting on payment.

Receivables are not cash.

Working Capital Drain Example

Monthly revenue: $1,000,000
Gross margin: 40%

Gross profit: $400,000

Monthly fixed expenses:
• Payroll: $220,000
• Rent: $80,000
• Insurance: $20,000
• Utilities and overhead: $30,000

Operating expense total: $350,000

Accounting net income: $50,000

Now add:

Inventory purchase for next month: $450,000
Quarterly tax reserve: $90,000

Cash outflow exceeds inflow.

You show profit.

Your bank balance shrinks.

That is working capital drain.

Growth Makes This Worse

When sales grow:

• You buy more inventory
• You hire more staff
• You expand menu depth
• You increase tax exposure

Growth consumes cash before it generates usable cash.

Without reserves, growth becomes destabilizing.

Simple Cash Flow Model for NY Dispensaries

You need to track three numbers weekly:

1. Inventory purchases
2. Payroll obligations
3. Tax reserve requirement

Then compare them to:

• Actual bank balance
• Expected deposit flow

Basic formula:

Available Cash
minus
Inventory Payables
minus
Upcoming Payroll
minus
Tax Reserve
equals
True Liquidity Position

If that number approaches zero, you are operating on risk.

Signs You Are Cash-Strained (Even If Profitable)

• Delaying vendor payments
• Increasing discounts to move inventory
• Using short-term loans for payroll
• Skipping armored pickups to delay deposits
• Not setting aside tax reserves

These are liquidity warning signals.

What To Do Now

• Model 90 days of cash forward
• Limit inventory growth to sales velocity
• Negotiate vendor terms when possible
• Create a tax set-aside percentage
• Track working capital weekly, not monthly
• Separate accounting profit from bank liquidity

Profit keeps you attractive.
Cash keeps you alive.

FAQ

Why does my accountant say I’m profitable but I feel broke?

Because accounting measures margin, not liquidity timing.

Is this normal in cannabis retail?

Yes. Cannabis is inventory-heavy, tax-distorted, and timing-sensitive.

How much cash buffer should I have?

Many operators aim for at least 2–3 months of fixed operating expenses in liquidity.

Source Material

• What is §280E?
• NY Cannabis market rules (OCM)