Do you find that keeping your funeral home’s finances tidy can often be a tedious and time consuming process? Nowadays it really doesn’t have to be a pain as there are so many tools at your disposal to assist in keeping your accounts in order. By visualising exactly what revenue and expenses your funeral home has, you will be able to better predict the future income and make the right decisions for the business. Keeping your financial records tidy also helps to keep your taxes up to date, anticipate cashflow squeezes and make invoicing more manageable. From financial reporting to VAT here are our top tips to help to keep the finances of your funeral home in order:
Develop a financial plan
The most important starting point for every business is to give yourself some structure with financial planning. By staying organised and planning ahead, you will give your funeral home a good financial structure for the short and long term of the business. Financial planning does involve some time and thought but by comparing financial patterns from previous months and years, you will have a better understanding of potential peaks and troughs in future income. This will better help you to predict your staffing levels, taxes payable and other business expenses to make better long term decisions for your funeral home. Throughout the coronavirus pandemic, many funeral businesses have suffered financially and have had to rapidly come up with a financial “plan b” as national lockdowns disrupt their normal operations. Despite demand for their services increasing, the restrictions placed on funeral services meant that overall profitability was reduced. The businesses that have remained solvent throughout the pandemic are the ones that had a solid plan in place, which they could adapt when the scale of the pandemic became clear. As part of this planning it is essential to give the home a financial structure by creating a budget.
Create a budget
By creating a projected budget for a funeral home, you provide yourself with a structured framework for financial planning. Each home is individual and should have a separate budget so if you have more than one branch in your business, each home needs a personalised budget to meet their needs. When you set a budget in advance of the financial year, the funeral home will have a structure and monthly targets for your team to work towards. In budgeting the income and expenses of the funeral home each month, you instantly give yourself a better insight into the potential profits of the business at the end of the year. A budget for a funeral home should be structured into 7 main categories:
- Revenue income (without cash advances)
- Cost incurred from goods (the costs associated with the merchandise sold by the home, coffins, urns, flowers etc.)
- Payroll costs - staff wages and national insurance/taxes etc.
- Rental/Location - building costs incurred
- Cars/Limousines expenses
- Advertising and Marketing expenses
- General Admin expenses
A well structured budget is much like a good business plan, it is simply a guide to help you make informed decisions on spending and to help plan any incurred expenses, don't feel obliged to keep it to the exact figure each month.
Hire an accountant
The easiest way of maintaining your business finances is to hire an accountant to make sure the books balance. By hiring a professional bookkeeper to audit your income and expenses, you will remove a lot of the day to day stress associated with financial management. This will allow you to focus on the funeral home and growing the business yourself. It is definitely advisable for tax purposes to have a qualified bookkeeper looking after your finances as they will be able to better advise on the laws associated with the business expenses and tax write offs too. It is advisable to find an accountant with specialist knowledge of the funeral industry as they will know the specifics associated with the business, such as the differing rules on VAT for funeral products. Some services/products are VAT exempt whilst others incur the tax - see the gov.uk advice here for more information. It can become very complex so an accountant specialised in the funeral industry will be better placed to advise on these matters. Not everyone can be good with numbers so it’s okay to leverage outside help for these things when required!
Keep your personal and professional finances separate
Many independent business owners make the mistake of tying up their own personal finances with their company’s finances. You should separate your personal and business finances to insure yourself against financial liabilities. For example if you had any legal issues and costs were subsequently incurred, your personal finances, property and assets would not be liable.
Take out business insurance
Public liability insurance is essential for any business who interacts with customers on a daily basis. This insurance covers the business should any accidents occur and the following lawsuits associated with them. The insurance covers compensation claims made by customers or the public, including legal or medical costs associated with the claim. Employee liability insurance is essential in protecting you from compensation claims from employees, should they allege to have an injury or illness as a direct result of working for the funeral home. Buildings & content insurance is advised for the home and car insurance for the hearses is a legal requirement too. Some brokers such as Seib provide additional optional policies such as business interruption cover up to £2 million for a maximum of 24 months. These additional policies are worth reviewing to weigh up the best option for your funeral home finance in order to protect your assets in the future.
Use financial planning tools and accounting software
Many funeral directors will already have accounting software in place, whereas some may still be using a simple excel spreadsheet and passing a pile of paperwork on to their accountant! Choosing the right accounting software is important as there are a number of different solutions on the market. From QuickBooks to Xero, the right accounting software depends on the needs of your business. Investigate thoroughly which one works best for your funeral home and also consider the funeral home software that you are using to integrate the two together. Obit for example, integrates seamlessly with back office system Sage and has upcoming integrations with Xero and Quickbooks coming soon. This allows for a smooth invoicing process when planning each funeral. Much like Obit, which is a cloud-based funeral home software, look for online accounting software to move your financial data from your desktop to the cloud. This will allow for accessibility anywhere, anytime and produce real-time insights into your businesses finances. It also encourages a much easier and potentially more cost-effective relationship with your accountant as the books are automatically tidier when these software programmes are in place.
Don't forget to keep a digital copy of important documents on a third party secure service and reduce the physical paperwork in your funeral home. When using financial planning software, keep copies of your accounts, bank statements, contracts, licences, permits and employee records will make your financial planning and taxes easier to deal with in the future.
The reality is that many independent funeral directors often have difficulties in keeping track of their finances due to the strains and pressures of the industry. By ensuring that you have a handle on your funeral home's finances, you will have a better chance to minimise your expenses and maximise your profits. The initial step of organising your finances using an online business account can take some time, but will pay dividends in the future. Plan your finances, budget ahead, insure yourself, take professional advice and leverage the technology available to you to ensure the long term stability of your funeral business.