Written by Sean M. Wonder

  I don’t know many funeral directors that aren’t familiar with Federated Funeral Directors of America. This month I wanted to share with you what is on the mind of one of their territory representatives. Sean M. Wonder, CFSP, is a consultant with Federated Funeral Directors of America, a Fiducial Company and works directly with clients throughout Indiana, Kentucky and Tennessee. Call Federated at 1-800-877-FFDA for help with your business.

  Who controls your business? You might be surprised to learn that it is not you, the owner. If not you, then who? Try the debtors on your aging Accounts Receivable. They directly control your profitability and cash flow. Cash flow is the heart of your business, pumping the vital nutrients necessary to keep your business alive. Many funeral home owners cannot understand why they are profitable but lack ample cash reserves to carry the business through lean times. Or why they owe so much tax without having anything substantial to show for their labors. Simply put, the IRS does not care whether you are collecting timely on your accounts. Neither do vendors, employees or utility providers. Given the recent downturn in the economy, the trends and norms of funeralization ever changing, cash flow is as critical now as ever and should be given top priority on your list of issues you want to improve or correct. What actions should you take to improve cash flow? Give honest answers to the following questions: Do you have a payment policy in place? If you do, are exceptions to this policy made on a regular basis? What is your weekly operating expense? How many weeks of expenses do you have tied up in your Accounts Receivable? How many weeks of expenses do you have in cash reserves? If you have more weeks of expenses in AR than you have in cash reserves, a change in your business practice is crucial. But it is not as easy as printing a payment policy and handing it to the clients you serve. Like any successful business, you must train yourself or anyone meeting families on how to present this policy without causing offense. Training also needs to yield a comfort level with the staff in overcoming objections from families. You must also be proactive in the collection of those accounts that are on the books prior to using a payment policy. Remember that with each day that passes, the likelihood of receiving payment diminishes significantly. Most of the statistics show that the age of a past due account that is finally turned over to a collection service is nearly a year old. You have better odds of hitting the lottery than collecting any significant amount of money. An account a year old is worth $.45 on the dollar and after two years the value drops sharply to $.23 on the dollar. Something else to consider is that the net profit per adult service in 2012 was $405.69 (based on statistics compiled from over 1300 clients of Federated Funeral Directors of America); if a funeral home owner writes off just one service amounting to $6,000, the funeral home will conduct the next 14.8 services without seeing a penny of profit. Got your attention yet? It should! Get your plan in place. It will be much easier than you might think. Remember plan your work and then work your plan. Good luck!