April 16th, 2017
By: Deanna Dydynski, marketing & public relations manager
A successful business truly rests on maintaining proper financial management. Without a solid financial foundation, it impossible to predict the success and future of your funeral home. For many funeral professionals, keeping your “business hat” on can be difficult when serving grieving families, but preserving consistent financial stability is crucial to the success of your business. From outsourcing professional accountants to simple cash flow management practices, these are the top five financial suggestions to keep your funeral home’s finances in order:
1. Outsource An Accountant
Have you ever looked up the definition of funeral director? According to the Merriam-Webster Dictionary, the definition of a funeral director is: One whose profession is the management of funerals and who is usually an embalmer. As funeral professionals, this is probably insulting, after all this definition hardly describes the multitude of services you provide. You do not just manage funerals and embalm bodies, you are an event planner, a community leader, a therapeutic support system, the list goes on. The point is that you are already wearing an array of hats, so when it comes to your business finances, let a professional take on the task.
Accountants have been trusted and respected allies to small business owners everywhere for centuries. They provide an infinite amount of financial and tax knowledge that can save you money. While it can be tempting to want to cut costs by managing your own finances, hiring an accountant will be more cost effective in the long run. As you invest your lively-hood into serving families in your communities, accountants invest their lives into helping business thrive by maintaining financial records, finding deductions and keeping you penalty free. Financial management is the pillar of any successful business and should truly be left to the experts.
2. Free Your Receivables
Now that you have an expert to manage your accounts, you need to free your receivables and to maintain cash flow. It seems easy enough, you provide a service and you get paid, but in the funeral industry receiving payment can be difficult. Often, payment for funeral services is a sensitive topic, funeral directors do not want to stress grieving families any further and grieving families want funeral professionals to be sensitive to their financial situations.
Most funeral homes offer a variety of payment options to families, from cash and credit cards to payment with life insurance policies. While accepting life insurance policies as a form of payment can be extremely beneficial for both the funeral home and family, many funeral homes are decreasing their cash flow, because of their poor insurance policy payment retrieval procedures. Along with time consuming claim paperwork, challenging insurance companies and potential for inaccuracies in verification, funeral directors are leaving themselves and famlies vulnerable to errors with this method of payment. Not to mention, some insurance companies can lengthen payment retrieval for several weeks, even months, depending on the nature of death. As business owners you cannot afford to wait a significant amount of time to get paid for services you have already provided, resources you have already utilized and time your employees have invested. You have overhead costs, supplier charges and unexpected expenditures you need to pay for as well.
The best way to free receivables and benefit from accepting life insurance policies as payment, is to outsource to an industry funding company, that can provide fast and easy services. Utilizing a funding company that can eliminate claim paperwork, accelerate the insurance verification process and get you and your families money within 24 hours frees your receivables and improves your cash flow instantly.
Freeing your receivables by utilizing a funding company to complete life insurance payments provides immediate cash flow. Imagine, having money on hand to: avoid late charges on overhead costs and take advantages of trade discounts, to pay your employees, give bonuses and pay yourself! There will always be challenges when running a business but if you can eliminate financial risks you will see great reward.
3. Keep Personal Expenses Separate
While it may seem obvious to keep personal expenses separate from business expenses, many business owners suffer from financial management challenges due to combining accounts. If you own a funeral home, most likely your life revolves around the business, making it easy to combine personal finances with your business finances. Sure, you can pay back your business for a personal expenditure or the other way around but combining expenses can get complicated fast.
Aside from creating complex financial confusion, legally it is recommended to keep your business as a sole entity. What happens if your business is sued? If you are set up as sole proprietorship, all of your assets are fair game when someone decides to sue you, leaving you in financial term oil.
How should you separate personal and business expenses? Create a separate business checking account, open a business credit card, pay yourself a salary and utilize your accountant, to inform you of further opportunity to create division of your finances. Your personal future and business success depends heavily on the stability of your finances. Taking the effort to separate your finances now can help you to avoid potential financial problems in the future.
4. Measure Performance
While it is extremely beneficial to hire an accountant and/or financial adviser to manage your funeral home’s finances, it is important to stay current and engaged with all financial reporting. You cannot improve or change your business if you do not measure or track results.
Measuring the performance of your funeral home will help you to adapt to changing consumer preference, create competitive strategy and realize growth potential. Tracking the performance of your business allows you to see what is successful and unsuccessful. You would not continue to use a lamp if it was not working, right? You would replace the bulb or get a new lamp. So, why would you keep investing in extravagant burial package offerings if the families in your communities are choosing cremation services? Well, if you are not measuring performance and tracking where your business is creating its greatest revenues, then you will never know. Analyzing key business insights also allows you to track expenses and project cash potentials. There are numerous reasons to monitor and keep track of your funeral home’s performance. Whether you monitor on paper or invest in a financial management software, you must analyze your business and measure performance for financial success.
5. Keep A Reserve
While your funeral home may have a solid foundation of financial order, a business owner should always keep a cash reserve. Unexpected costs and accidents occur all of the time, it is a part of life. Imagine, your funeral home gets completely swept away in a natural disaster that your insurance plan does not cover, or an employee makes an accidental error costing your funeral home thousands in a lawsuit? You may recover eventually but your business is going to take a hit, and it is going to take a harder hit if you do not have any cash on reserve.
Cash reserves can help you pay employees and suppliers during slow times and it can help your business take on new growth opportunities. While it is unwise to keep more money on hand than is necessary, your reserve should still provide enough cushion for security. Some experts recommend having three months expense, others six months, there are a multitude of varying factors. Speaking to a financial expert can help distinguish the amount of cash reserve you should have but the first step is realizing your business needs one.
As a business owner you will encounter challenges, so developing a strong financial plan and safety net is essential to maintaining a successful business.