February 20th, 2018
By: Steve Calloway, president
Everybody makes mistakes from time to time. However, with every mistake there is a chance to learn, grow and improve. Finances are undoubtedly a crucial aspect of business and one misstep could be costly. The funeral industry, while it is unique in practice is much like any other business, sharing the same principles and practices. If you can avoid these seven common financial missteps your funeral home/cemetery will be on a path to financial success.
1. Not Developing a Strategic Business Plan and Annual Operating Budget
As a business owner you want to be proactive not reactive. A strategic business plan is a multi-year view providing focus and direction. It identifies actions necessary to move your organization from where you are to where you want be. Each year set specific goals, objectives, and priorities and make sure to communicate them with your staff. I recommend using an annual operating budget with a monthly comparison of actual performance to make sure you are on track. Review actual results against budgeted performance with your staff. My staff often hears me say, “What gets measured, gets done.”
2. Not Properly Managing Your Cash Flow
You need money to run a business and managing your cash flow is essential. You should continually look for opportunities to increase revenues, reduce costs and for ways to speed up collection of payment for services. In situations where life insurance is used for payment, funeral professionals should consider partnering with an insurance assignment funding company to receive immediate payment, which increases cash flow and reduces administrative cost. Adequate cash flow enables you take advantage of trade discounts and protect your credit by avoiding late payments.
3. Not Having an Emergency Cash Reserve
Monthly revenues can fluctuate considerably in the funeral industry; therefore, having an emergency cash reserve is necessary. Maintain at least a two to three months cash reserve for normal operations as well as the inevitable unexpected expenses.
4. Not Separating Business & Personal Finances
Too often in the funeral industry there occurs a co-mingling of business and personal expenses. This makes it difficult for an owner to separate business performance and profitability from possible poor management of personal finances. You should pay yourself a salary which was determined when you developed the operating budget, and maintain separate business and personal checking accounts. Your accountant will thank you! Additionally, protect your personal assets with a proper business classification, such as an LLC.
5. Being a Jack Of All Trades
As funeral professionals you are directors, grief counselors, event planners, and more to the families you serve. Time is money, and you should spend your time doing what you do best with the families you serve. Outsourcing certain tasks can save you valuable time and actually improve your bottom line. One example of outsourcing that can save you time and money is an insurance assignment funding company. Do not spend hours on the phone with insurance companies and hours completing insurance claim forms, outsource to a fast and easy insurance assignment company!
6. Not Hiring the Best Talent
With over 80 percent of funeral homes being family owned, it is common for family members and relatives to be employed in your business, but are they really the best for your business? Your employees are your greatest asset and have the biggest impact on the success of your business. Take time to find and hire the right staff. You may have to pay a higher salary but as the age old saying goes; you get what you pay for.
7. Not Developing a Succession Plan
Do not neglect retirement planning. At some point you will want to retire and fully enjoy the fruits of your labor. Start developing a succession plan and exit strategy now so you can comfortably enjoy retirement in the future.