Given the recent economic gyrations, how can funeral homes and cemeteries best gear up for 2010?

JJ: Funeral homes and cemeteries will need to be sure to budget their income, expenses and capital needs very carefully. There are a lot of business owners that do not seem to budget to begin with, so budgeting at all actually will be important. If you are not monitoring your cash needs, you could find yourself in a need for a line of credit or loan, which may not be obtainable, no matter how good your relationship is with your bank.

When you budget, you should determine your actual cash (EBITDA) and then compare it to your principal and interest payments on debts you have. Banks call it the fixed charge coverage or debt service coverage ratio. If you are below 140 percent of coverage then you need to watch your budget closely. The business can be slow one month and busy the next. All of us funeral professionals understand that, but sympathy from banks right now is very low.

What are the consequences?

JJ: The long-term consequences could be layoffs, reduction in health plans and 401Ks, deferred maintenance and then ultimately customer service. Don’t let this happen to you. Those businesses that watch their expenses through budgeting and good accounting should be well ahead of the curve during these tough times.

OK, what is step one?

JJ: As I mentioned, having a budget and a plan in place for at least one year is the first step. Be sure you have good accounting records in order so you can respond to change quickly when it occurs (even when the change is good). If you end up operating on a very tight budget, you will want to be sure you have good collection policies in place and receivables are being collected on a timely basis. How is your collection policy? If your receivables are more that 30-45 days of business sales, then you may need to adopt some better policies that generate more timely cash flow. Proper scheduling for funerals is a very interesting item we see with the clients we are working with or have worked with. If you are not masterminding your scheduling, you could set yourself up to have poor customer service on some funerals and unnecessary overtime resulting in a risk of volume
and profit to your funeral business.

What are the questions the managers should be asking themselves?

JJ: As we see in our management services, you need to constantly be focusing on Workplace, Marketplace, Customer Service and Financial aspects of your business.

• Is your organizational chart correct?
• Do you have the right people in the right spots doing the right thing?
• Do people know what their job description is?
• Do they have one? Are you price shopping your competition?
• Are you competitive in your market? Why do people choose your business? (You can’t simply say that it is because you offer a good service — they should already be expecting that!)
• Are you surveying your customers and taking those opportunities that are posed through surveying to follow-up with a thank you or correcting an issue the family may have had?

All this being said, if your “house is in order,” you are that much better off during these times when banks are tightening up their potential for credit lines and loans.

How would this affect a funeral home as it approaches time to set up the budget for the next fiscal year?

JJ: Again, when it comes time to do a budget, you should not just think about “normalizing” just the revenue versus the expenses, but you also need to figure out what your net cash will be from those results after you pay debt and then be sure to budget money for capital needs that would probably go to your balance sheet and not be seen on the P&L. If you don’t like the result after you do this or if it is too close on an annual or even a monthly basis, then you need to make some adjustments — if you can!

With the way the credit market is going, you may need to perform an interest rate stress test. How high can the interest rate go before you are negative? For some, this answer could be a scary one. Lastly, all of this being said, interest rates are at their lowest rates in years. Starting the process now to test the waters for re-amortizing your loan and getting a better interest rate should be done if you feel you fixed charge coverage is low. All they can say is no. Through our loan sourcing services, we can even prepare the presentation of those loans in the best light to increase the chances for success even in a financial market as it is today. Remember, with good planning and careful control and accounting of your business, you should be able to tackle these times and come out of it that much stronger in the end.

From the Chairman’s desk:

Welcome back. Happy Thanksgiving. It’s truly a time for us to give thanks for our families, friends, associates and all the blessings bestowed upon us. We, at Johnson Consulting, are very fortunate to have the many clients and friends that we work with each day and throughout the year.

Our year has been a very busy one. We relocated our corporate offices to give us additional space to better serve our clients and make room for our product enhancements and some new innovative products that have been well received in the marketplace.

We are very fortunate and excited to have added three widely recognized individuals as new associates to the Johnson Consulting Group: Alan Creedy, Rich Sells and Manny Francisco. Rich and Manny’s highly successful careers in pre need funeral and cemetery marketing and operations have given us the opportunity to expand our services in this area. Our first client is a large cemetery operation in Mexico.

2009 has been a very interesting year for us in funeral service. Our economy has had some effect on average funeral value. Cremations are still increasing. Credit is beginning to loosen up, but not back to where it needs to be. Our new Loan Sourcing Program has helped several of our clients. We had an excellent year in our M&A division, but it came more from quality than quantity. And then there is Wal-Mart entering the casket business. If they win, we only have ourselves to blame.

A few issues ago, we added a survey to our newsletter and we received an excellent response from our first one. Last issue we ask just one question: “This summer our nation lost two very influential and trusted public figures, Walter Cronkite and Ted Kennedy. We ask you: Who, in your estimation, is the most influential living person in the funeral service industry today?”

I must be candid: our responses were underwhelming to say the least which may have said a lot. “I just cannot think of “the person” The one that got the most votes was nameless but a very powerful and influential individual in our society: THE CONSUMER. We better all listen to what they are saying.

Since we are fortunate to have a large subscriber list that is made up of both funeral home owners and associates as well as suppliers, we thought we would ask you to respond to a few questions pertaining to the supply side. We will again make it short and easy to reply. We sincerely appreciate you taking the time to respond.

As we begin to close out the year 2009 and put it in the record books, my perspective will be that it was a challenging, but productive year. We worked with several firms that made a commitment to change and make improvements to their operations. Their potential worst of times turned into much better times and for them the best is yet to come. Doing more with less and doing the right things, right will make all the difference.

We hope you enjoy this issue …

Regards,

Tom Johnson
Chairman

Year end tax tips from our tax service partners

Johnson Consulting does not provide tax advice, but relies solely on the experience and expertise of:

Tax Services

As the year end approaches, now is the time to start planning for your 2009 income taxes. Conventional tax planning calls for deferring income into 2010 and accelerating tax deductions into 2009. However, these are anything but conventional economic times. With large federal deficits and an expanding federal debt, we see increased tax rates in the future. The only question is how high and when will these tax increases take effect. Much will depend on how the economy performs in 2010. If the economy continues to struggle in 2010, we feel that the tax cuts scheduled to expire at the end of 2010 will simply be allowed to expire. However, if the economy improves during 2010, we think that we could see increases as early as 2010.

Most taxpayers have thus far experienced lower taxable incomes in 2009. Many taxpayers have large capital losses generated in 2008 that are being carried over to 2009. Investment income in 2009 will most likely be lower. This means that for many taxpayers, their marginal tax rates will be lower in 2009 than they expect to have in 2010. Therefore, it may make sense this year to accelerate income into 2009 and defer deductions into 2010. When looking at any tax strategy, the alternative minimum tax should be considered. Continue Reading Funeral Home Tax Tips>>>

Feature article

Johnson Consulting highly recommends that you survey your families that you have served. It is a gold mine of valuable information that will help you formulate your marketing plans and strategies….

2010 – THE BIG QUESTION – “DO WE REALLY KNOW WHAT IS GOING ON?” Todd Van Beck

This is a powerhouse of a question for funeral service and cemetery work. Do we really know what is going on out in the world? Of course we do, certainly we keep tabs on how the community is changing, we keep our fingers on the pulse of the funeral/cemetery environment; of course we do, been doing it for years.

These responses are predictable and totally natural and understandable. However they do not answer the question – do we know, really know what is going on out there? It might be that we don’t know precisely the details, and the realities, and nay the unpleasant news that might be, could be, and is most probably is floating around our communities about you and me.

Here is an example. I once had occasion to perform a focus group for a particular funeral home. Most everything was changing for this particular funeral home and unfortunately the owners were in psychological denial. In other words they truly and honestly “thought” they knew what was happening but in reality there were many gaps in their “knowledge” base. So they asked for a focus group. Continue Reading about the value of Funeral Home Surveys

Product Highlights for 2009 and What we will be featuring in 2010 ….

2009

1. JCGPerformanceTracker™ Web-Based Customer Survey and Sales Analysis Program
2. Accounting Services Growth
3. Management Service Growth
4. Expanded services in Preneed Consulting Through Rich Sells and Manny Francisco Coming on board
5. New Enhanced website with client portal
6. Introduced our Funeral Business Performance Analysis and Improvement Package along with Summary Strategic Plan
7. Busiest year ever at Johnson Consulting for Private funeral home acquisitions and divestitures

2010

1. Web-based client access and interactive menu for reviewing funeral business customer ratings and sales performance
2. Summit Meeting in early 2010 (March)
3. Johnson Consulting Group’s (Memorial Classic Golf Tournament in Las Vegas, NV)
4. Monthly benchmarking reports for our accounting clients (new enhancement to accounting)
5. Johnson Consulting Group funeral study group financial analysis package for study group’s wishing to make the most of their financial discussions
6. Expansion of the already extensive training library

From all of us to all of you have a great Holiday Season

Johnson Consulting highly recommends that you survey your families that you have served. It is a gold mine of valuable information that will help you formulate your marketing plans and strategies….

2010 – THE BIG QUESTION – “DO WE REALLY KNOW WHAT IS GOING ON?” Todd Van Beck

This is a powerhouse of a question for funeral service and cemetery work. Do we really know what is going on out in the world? Of course we do, certainly we keep tabs on how the community is changing, we keep our fingers on the pulse of the funeral/cemetery environment; of course we do, been doing it for years.

These responses are predictable and totally natural and understandable. However they do not answer the question – do we know, really know what is going on out there? It might be that we don’t know precisely the details, and the realities, and nay the unpleasant news that might be, could be, and is most probably is floating around our communities about you and me.

Here is an example. I once had occasion to perform a focus group for a particular funeral home. Most everything was changing for this particular funeral home and unfortunately the owners were in psychological denial. In other words they truly and honestly “thought” they knew what was happening but in reality there were many gaps in their “knowledge” base. So they asked for a focus group.

A focus group as most know is simply an elaborate survey of the attitudes and opinions of the community concerning a funeral home/cemetery operation. They are extremely valuable, but not used very much in this line of work – for a variety of reasons.

Before the focus group started the owner took me to dinner and with great confidence proclaimed that in “my town, my name is synonymous with funerals.” I sat quietly sipping my drink.

Family surveys, community focus groups, in fact any type of truly inside information that we a glean about our operations is today terribly important, in fact I can’t remember a time in funeral service when this importance was not greater.

Years ago most funeral homes had their clientele. That was it. The Catholics went here, the Protestants went there, the Jews went here, the rich went there and the poor went here, the Masons when there, the American Legion went here, and so on. It was indeed what the marketing guru’s call a “niche” market. Not so today.

The culture is and has been homogenizing itself for years, and make no mistake this social movement which units many different cultures, traditions, beliefs, mores, and folkways has had a tremendous effect upon funeral service. Because of the tremendous effect, focus groups and family surveys have emerged as the most economical, safest, and more accurate method for any operation to gauge just what is actually going on in their world instead of depending on speculation after speculation, random opinions, and finally idealized hopes and dreams which are not based in reality.

Here is a case in point. I have a good friend who is a manager of a large Jewish funeral home on the East coast. This firm has over a 100 year history of being the Jewish funeral home and is known throughout the United States. I took my friend to dinner in Manhattan one evening. In the course of conversation the issue of Jewish funerals came up, and my friend quickly shared this experience of reality which was happening in his very funeral home. He told the group that the greatest challenge to the future of Jewish funeral service was of all things inter-marriage between Jew and Gentile, and these unions in the next generation basically eliminated the firm connection that generations of Jewish families had towards this historically Jewish funeral home.

I asked my friend where he got this information from and he simply replied family surveys and random focus groups.

The information which is taken from such outside sources is indispensible for obtaining a true and realistic portrait of what is the state of the state of any funeral/cemetery operation. In fact the longer the survey the more accurate the information, and remember my friends when a negative survey comes in it means that 25 other people thought and/or experienced the same thing and said nothing – except to all their friends.

Surveys work. Focus groups work. Mystery shoppers work.

In tough economic times the two main expenses which are usually cut are advertising and training and education. While this is common business practice, the commonality of it does not equate into the practice being right or wise.

Training of the staff is essential to prepare for dealing with the future – they go hand in hand. Training of the staff improves what Dr. Deming called “invisible numbers.” You know things like being self-directed, autonomous, excited, dedicated, goal-oriented, practical common sense improvements. In bad economic times any business needs and should want this to happen instead of the opposite which actually can destroy morale, destroy loyalty, destroy commitment, destroy quality service, destroy, destroy, and destroy. Do we even need to give examples of this in recent United States business experience and history?

Training creates a new environment, an escape from the day to day. Training allows the staff to express deep feelings which are just as valuable to the future of the business as is any family survey and/or focus group. Training can be fun and entertaining.

In fact just last week, for the first time in my training career, I had an owner ask for a “fun” seminar. No doom and gloom, no end of the world FTC or OSGA stuff, no feat mongering, none of that old standard seminar stuff. This one was just light and fun. In fact I personally almost did not know how to begin because for 35 years most of the seminars I have presented appeared to be in the realm of funeral crisis management, when in reality the funeral profession chugged ahead in a mighty fine way with or without my deadly serious seminars.

The fun one however elicited laughter, giggling, shoulder poking, smiles, applause and a variety of real nice emails after the seminar was completed.

Training is basically the connection to the people, the vital people who make up the organization and in whose very breath the future of the organization rests upon. Possibly a funeral home/cemetery might survive without the umpteen thousand dollar Yellow Page ad very well, but without training – I personally would not take the risk. It is time and money well spent, for it all goes to people – our people.

Tax Services

As the year end approaches, now is the time to start planning for your 2009 income taxes. Conventional tax planning calls for deferring income into 2010 and accelerating tax deductions into 2009. However, these are anything but conventional economic times. With large federal deficits and an expanding federal debt, we see increased tax rates in the future. The only question is how high and when will these tax increases take effect. Much will depend on how the economy performs in 2010. If the economy continues to struggle in 2010, we feel that the tax cuts scheduled to expire at the end of 2010 will simply be allowed to expire. However, if the economy improves during 2010, we think that we could see increases as early as 2010.

Most taxpayers have thus far experienced lower taxable incomes in 2009. Many taxpayers have large capital losses generated in 2008 that are being carried over to 2009. Investment income in 2009 will most likely be lower. This means that for many taxpayers, their marginal tax rates will be lower in 2009 than they expect to have in 2010. Therefore, it may make sense this year to accelerate income into 2009 and defer deductions into 2010. When looking at any tax strategy, the alternative minimum tax should be considered.

On the estate tax front, the estate transfer tax is scheduled to expire at the end of 2009. We do not feel that Congress will allow this to occur. We think that the $3.5 million estate tax exemption and 45% tax rate in effect for 2009 will continue into 2010.

Taxpayers should remember to take advantage of the annual gift tax exclusion. The annual exclusion for 2009 and 2010 is $13,000 per donee. The exclusion applies to each donee. In addition, unlimited medical and educational gifts can be made on behalf of a donee provided the gift is paid directly to the medical provider or educational institution. Care should be taken when considering gifts made late in the calendar year. Time should be allowed for checks to clear the bank so that two years worth of gifts are not deemed to have been made in the same calendar year.

The one wild-card in the tax arena is health care overhaul legislation. Various health care plans have been proposed. We feel that some type of health care bill will be passed in 2009 or early 2010. It is still too early to determine how any new health care plan will be paid for and how this will impact tax rates.

If you have further questions, we would be glad to get you the answers…. Just give us a call

We called Tom Johnson who has been a personal friend for some thirty years. Tom and his team listened to us and assisted us in putting together our succession plan. They did a masterful job that exceeded our expectations. My son and I feel confident that our family firm is well positioned for the future.

When your firm reaches the point of ownership transition, give Johnson Consulting Group a call or call me first and I will be glad to share with you our success story.

Tyson McLane, McLane Funeral Services, Valdosta, Georgia

Concord Funeral Homes

My good friend Harry, who made a career in large business operations, accounting, and consulting (and was also an economic advisor to the White House), told me that the Johnson Consulting Group’s written valuation was the finest he had ever read.

You have always been a friend and mentor, and have fulfilled your role in your usual upstanding manner. You are certainly a wonderful asset to the ever-growing talent at Johnson Consulting Group.

Linn-Hert-Geib Funeral Homes, Inc.

New Philadelphia and Dover, Ohio

It may seem a little picky, but I also want to make sure the reader understands that the sole scope of this discussion is in the area of managing the financial sector of your funeral business for a good profit in a consistent way year in and year out.

Let us further clarify. There are, of course, multiple areas of Management including People/Staff, Time, Public Relations, Service, Client Family Satisfaction, Recruitment, Training, Continuing Education and others that are a very integral part of a successful funeral business. Each of those individual areas is all-important, and a funeral business that ignores any of them will never reach its true potential. However, I have observed several hundred funeral homes be successful otherwise, but most will fall very short ever reaching the profit levels of which their business both deserves and of which it is capable.

In my career of over 40 happy years serving the funeral profession, I have performed Business Valuations for over 250 funeral firms. There are many elements that will determine the value of a funeral home, but almost nothing will trump a good profit history. It is very simple. If I buy a funeral business and finance the transaction, both the amount I am willing to pay, and the amount I can finance will be determined by the ability of the business to handle debt service with a comfortable ratio. If I pay cash, then it is a matter of what kind of a return on my investment (ROI, remember?) upon which I am able to count based upon the history of the business.

So, among other things there are two very important messages for the reader. The first message is that when your business is adequately profitable, in at least 90% of the time, your staff will be a lot happier because of what you can pay them in salary and benefits, and your client families will be better satisfied because of the great service your happy staff will provide. Greater profits can also give you (not necessarily guaranteed) a better Quality of Life.

The second message is that when you are ready to hang up your trocar and pass the business on to a family member, third party, or competitor, etc. your business will be of a much higher value with good profits than if you slug along at the current level, according to what we see published, to which profits have dropped—more than 50% in the last 20-30 years.

Managing your funeral business for a profit, while not rocket science, does have several pitfalls. If this were not true, funeral profits would be significantly higher than they are. Each June, since 1983, the amount of profits of funeral service for the previous year has been announced in a leading funeral publication. For the purpose of clarification, 1983 was the last year National Funeral Directors Association commissioned Vanderlyn Pine to survey NFDA’s members for financial information on income, costs and profits.

Since 1983 the source of knowledge about funeral profits has been from a national accounting firm that specializes in consulting and accounting for funeral directors. According to these sources funeral margins that were 14% in 1980 have fallen to 6% in 2008.

The Management Profit this article will discuss is about achieving margins of a minimum of ten percent, with close to 15% a desirable target. It may seem to be a statement of the obvious, but profit is achieved when income is at a level well above the total of cost of goods and operating expenses.

I know exactly what is on most funeral director’s mind as this is being read. How in the world can I make a consistent profit year in and year out when the number of families I serve varies with the ups and downs of the death rate in my market area? My 300 call funeral business may go from 275 in a down year and 325 in an “up” year. This may appear to be a valid point, but there is a very good answer.

No one can predict how many families your 300 call business will serve in any given year. What we DO know, however, is that you will serve 1500 families over five years. There is only one element you cannot control in any given year, but if you completely understand how your business truly operates, you CAN control every single element of your profitability except volume. The key to consistent profitability is to know, understand and identify every single Profit Center in your funeral business.

(See Sidebar “A” for five year average case volume recovery schematic-in which we use a 400 call firm with a 62% ration of adult casket, service and vault)

The crux of the above statement is “completely understand and identify”. In order for this to happen, you must be able to treat your funeral business exactly the way a physician treats a patient. In med school, each medical student dissects a human body. By the time med school is completed, the future doctor knows every muscle, tendon, ligament and organ. Now he understands the way the body functions, as opposed to just seeing the body from the exterior.

It is the same thing with an auto or airplane mechanic. The mechanic must be able to take an engine completely apart with all the components, and then put it back together again. Otherwise, the only thing he would know about the engine is what he sees on the outside.

Have you done the same with your funeral business? What do you work with when you put your business plan-or budget together for the coming year? What do you use? When do you do it? If you are using what comes from your accountant-whether in-house or externally-then you are only looking at the bare surface of your business.

OK, Dale, what in the world are you talking about? The answer is not that I am saying your accountant is giving you bad information. What I am saying is that you are getting FINANCIAL INFORMATION from your accountant. What you need is MANAGEMENT INFORMATION.

Slow down and think about it. The FINANCIAL information from your accountant gives you data in the form of hundreds of thousands or millions of dollars of income and expense. That is NOT how your business comes through your door.

Your Funeral Business comes to you ONE FUNERAL AT A TIME!

(See Sidebar “B” for a “simple” diagram of funeral pricing. Refer to explanation that accompanies this schematic.)

If you are going to be able to control the elements of your business for next year, you must have complete knowledge and understanding of each single component of your business on a PER-FUNERAL BASIS. In order to accomplish that, it requires much, much more than what comes from an accounting set of data-That is, unless, you are dealing with an accountant that understands all the income and cost components of your business on a PER-FUNERAL BASIS.

I want to make sure what I am about to state is not misunderstood. This is not to demean accountants or good accounting. Some of my best friends are CPA’s. However, in 40 years of successful management consulting in funeral service, I can count on one hand the number of accountants that fully understand what the bowels of a funeral business actually look like down in the belly of the beast.

If you doubt this, just ask your accountant to calculate, in a form which you can use for profitable pricing, how much it costs to conduct a funeral in your business (this is what you may have referred to as “Overhead”). Along with that, one of you must know how much your service charge recovers on an adult casketed service, as well as how much on a graveside service, how much on cremations with full services, and on and on.

The same is true with the way you price caskets, vaults, urns, etc. You have up to a dozen profit centers in your funeral business, and you must know how much you can expect from each, and then monitor each on a monthly basis to understand what each is doing to contribute to your profits—or to rob you of what the profit should be from each.

Does this sound silly? The object of putting together a budget or business plan-call it what you will-is to set a specific profit target with every single component of pricing based upon your firm achieving its average number of calls, with the mix of caskets, cremations, vaults, etc. which you have calculated by a very careful detailed study of your past five years history. You need to accurately calculate what your casket margins will be as a combination of a specific mark-up on a clearly identified wholesale casket cost. Still sound silly?

This is the way I have been preparing client business plans since the 1970’s, with client profits remaining around 13-15%. This process takes the combination of accurate accounting information along with management information in the form of a complete breakdown of each funeral with service charge, casket and vault retail, casket and vault wholesale, other revenue such as extra transportation, clothing, urns, cash advance and sales tax.

This system—yes, it is a real bone fide SYSTEM-that literally takes your business apart, service by service, part by part, analyzes exactly how all these components come together in conjunction with accounting information, and then put the PLAN together, ready to go, on the First Day of the Up-coming Business Year.

You start this in October, calculating payroll and every single operating expense on a line-by-line basis. And, of course, you MUST know what your costs are on a PER-FUNERAL BASIS. Remember that unless you can accurately identify your costs, how in the world can you accurately set your revenue components?

Let’s stop and analyze exactly what we are discussing. You must know your cost of operation BY THE FUNERAL. If you do not know your cost of providing service, then your entire pricing structure is done with only cost of casket and vault invoice.

We still are in the SERVICE BUSINESS, are we not? If you do not understand how much your service cost is, then you are still pricing the way funeral directors did 30-40 years ago.

This discussion is not a “How-To” exercise. It takes a seven hour work-shop to address all the variables of the process, but you start by dissecting your business with an analysis of your entire business funeral by funeral. Go back at least five years. Not only do you count the number of services for each year, but, on a line-by-line basis, you list each service charge, each casket and vault retail, and the wholesale-invoice face value (not including discounts), other revenues such as extra transportation, clothing, flowers (sold), cash advances, sales tax. You can put these into an excel spreadsheet. What you will end up with will be the calculation of the number each year of casketed services full funeral, casketed service with partial, cremations with service, those that are direct and some in between. (very different revenue levels)

What information are you looking for? Every little smidgen that helps you identify how your business profile is likely to develop for next year. Example: Your service charge total for a full funeral on your GPL is $4,400. It may be that amount when it is totaled, or you may have a “package” service price. In either case you must compare what you actually recovered for all your full service compared to what you “quote”.

These are just the beginnings of the process of “dissecting” your business, but certainly are what you MUST do for a complete and full understanding of how you set profit targets, pricing, and then track them through the year. There is much more to the process, but I can guarantee you that just completing this exercise will help you understand your business much better than what you have in the past. And, it can start you on the path to improved profitability in your funeral business.

Sidebar “B”. It is very simple. If you want to accurately calculate a profit, accurate cost knowledge is an absolute must. The cost of the casket and vault comes from an invoice. The cost of providing Service comes from accurately using statistical information of costs, ratios, volume trends, etc., along with correctly identifying the differences in “Cost of Goods” and “Operating Expenses”. (If these two are incorrectly mingled, the number you end up with is garbage.)

By Bill Bischoff

My 35 years working the funeral service industry has been quite an experience and very rewarding.  During all those good times, I have met 1,000’s of funeral directors and their families and have visited 100’s of funeral homes. There is no better industry or better people than those dedicating their lives and careers to serving the needs of others at a very difficult time in their life. In my experiences, there is no better profession than the funeral profession.

My travels and times that I visited funeral homes were by far the most enjoyable, rewarding and always educational. I learned a lot more than I ever taught. For those who have shared my good fortunes, we know there are many stories to share, some more memorable than others.

In this article, I want to share with you how I first learned the non academic principles of funeral home accounting. I was traveling in southern Indiana in the late seventies with an associate from my company. We called on a funeral home in a medium size community that had four independent funeral homes. Our goal was to convince the owner to use our products and replace the competition.  We did our homework and had a presentation prepared explaining how our products and services would increase his ROI and overall profitability.

After a nice introduction and tour of the funeral home, I remember sitting in the owner’s office making our presentation. We had profile charts, best selling products in the area,  wholesale casket averages, and a tracking system to show the progress made toward achieving our mutually established goals.  The owner, I recall, was very nice and seemed to listen to what we had to say. He didn’t ask many questions, but allowed us to go through our entire presentation.

When we were finished, I remember the owner, paused, and then with a gentle voice responded. I will paraphrase his response:

I am a second generation funeral director…I remember him saying…”Our funeral home has been in business for 62 years. My father taught me funeral home accounting and how we make the money.  We have been using this system all these years. See this desk where I am sitting. This is our accounting system. Here in the right drawer is where I put all the monthly checks and cash we receive. In my left drawer, I put all the billings and the employees’ time sheets.  At the end of the month, I count the money from the right drawer and I add up the bills from the left drawer. If we have money left over, we had a good month.  That is the way we have run our business since my father started the business.

This, I found, was a rather common practice in those days with funeral homes especially in small town settings. There was obviously more to it than he described, but all of the transactions were entered into the ledger book by hand and the numbers were added up on a desk calculator printed on a roll of paper.

Needless to say, we did not impress him with our charts and graphics or tracking systems. But he was kind enough to buy a few caskets from us.

As I was writing this article, I looked up the funeral home name in the “Yellow Book” to see if that funeral home was still in business. It was not listed.  What happened I do not know, but my guess is the left hand drawer outperformed the right hand drawer. The fact is there are many funeral home businesses today that do not have an up to date accounting or financial system to help guide them to make timely decisions and mange their business.

In times like these, when we are experiencing a slow down in our economy, an accounting system that is tailored and customized to the funeral home’s business can be vital to maintaining the heath and prosperity of the business. Detailed budgets, chart of accountings specifically for a funeral home’s operations, and a tracking system to record and compare the various types of service and product offerings are becoming a must have instead of a nice to have system.

Here’s a checklist of the features and advantages of a web based accounting system that is designed specifically for a funeral home operation:

• A 24/7 web based system
• Have immediate access from anywhere in the world at any time
• Chart of accounts are set up in funeral home operation terms
• Budgeting and forecasting are part of the accounting package
• Requires less accounting and administration staff
• All locations are broken out separately and then consolidated
• Reports are all paperless viewed on a computer screen and can easily be printed out
• Month end reports are received within 15 days of previous month’s closing
• Historical trends are part of the system
• Experienced funeral home operators interpret the data and provide an analysis and recommendations
• Highlighted  areas to focus on and improve
• Benchmarking results by peer groups and industry standards
• All valuable information is on one summary report, avoids paging through multi reports

Things to consider when choosing a computerized and web based accounting system:

• Be sure it is encrypted transmission
• Be able to print reports from an offsite system
• Easy and cost effective to upgrade
• All training can be done on line

Today we are in the midst of a technology explosion. The speed at which information is transferred is amazing. E-mails have now been replaced by text messaging and Twitter. Google can put one in touch with anyone in the world and find information on any subject within seconds. The I-phone has made just a simple cell phone a complete entertainment center.  E-Bay allows you to sell or buy items worth a dollar to millions of dollars. And then there is YouTube and Face Book.  The list will build and the options will continue to grow. A website for your business is a must have. Webcasting a funeral all over the world will become standard in all progressive funeral homes. Audio visual programs are now a part of the funeral service.

Why will the funeral home employ many of the technologies available today?  For one simple reason: The most influential person in funeral service today is the Consumer.  They live and function in a world of high technology and expect it as a standard part of the funeral service. So a web based accounting system would seem to be fit very well in the mix…

My experience today talking with funeral home owners about their accounting systems has been very interesting and enlightening. The accounting procedures and systems fall into 3 basic categories:

• All accounting is done in house
• Local CPA firm
• Industry Accounting firm

These categories make up the majority of the independent funeral homes.  When asked how satisfied they were with the results, the responses were more to the middle to the lower range of the scale.

Improvements desired out of their accounting function.  The following are the top five:

• Better budgeting
• More timely month end reports
• Access to the reports online
• Better interpretation of the data
• Standards and benchmarking for performance comparisons

The next obvious question, why the resistance to change:

• We have always done it that way
• Bookkeeper does not want to change
• It will be too disruptive
• Too much to learn with a new system
• Breaking the ties
• Too costly
• Learning a new system

The funeral industry has come a long way from the days of the right drawer, left drawer methods of accounting. We all live in a world of instant messaging, information and communications. The experience curve of how to operate a successful business has steepened. The need for immediate financial up to date information to make more timely decisions is becoming a “must have’ no longer a “nice to have” function of all size businesses. And the cost savings over the current systems is getting better everyday …

Bill Bischoff