Taybridge Memorial

The  Accountants Pen:

I’m always talking to independent funeral home owners throughout Canada and I’m always amazed by how many really are uncomfortable with how well their funeral homes are performing financially. They have seen the numbers they are just not sure what they mean.

I suppose this shouldn’t surprise me since the only independent feedback they get is the once a year when they sit down with their accountant and review their annual financial statements and sign their tax return. 

The feedback they get usually revolves around the tax return and if the conversation turns to profitability the advice seems to be raise prices or reduce costs. I’m not saying these conversations are not important or that they shouldn’t happen it’s just they should happen in the context of and evolving funeral industry. Financial statements are an important indicator as to how well the business is performing but it is only a snap shot at one point in time or for one period of time. Unless you build a context around them you might miss the message or the warning you should be getting.

That’s where Key Performance Indicators (KPI’s) come into play. KPI’s measure certain important activities within your funeral home that help you move your funeral home towards a bigger goal. For instance, if one of your home’s goals is to raise the total dollar revenue generated over time maybe a KPI for this goal is the number of Pre-need insurance policies assigned to your funeral home or maybe the percentage of Tradition funerals. Maybe you want to increase your market share in your area and the best way to do that is through increased service to your families so you monitor the comments you get in your suggestion box looking for the number of favourable comments as opposed to unfavourable comments or maybe the number of rings of the phone before it is answered.

KPI’s should be easily measured and understood they should help focus your organization on what needs to be done to meet your funeral homes goals. KPI”S should also be regularly followed to ensure that they a trending the way you intended or to warn you that things aren’t going as well as you thought and things are slipping.

So a bit of homework for next month 
1) Pick one big goal for your home.
2) Pick one or two KPI’s that support your bigger goal
3) Clearly define the KPI’s to ensure they are easy to understand.
4) Communicate your chosen KPI’s to your entire staff and tell them you intend to follow up regularly and publish the results.
5) Regularly review the results and adjust if you are not getting the results you desire.
Next month I will suggest a KPI of my own that I think Funeral Homes should be monitoring. 
Duncan MacFadyen
Taybridge Memorial Limited

 Bookkeeping! 

The dreaded part of business!

Properly set up and up to date books are essential to your business.

Let’s look at some of the reasons why:

When the books are always up to date (especially if you have a professional Bookkeeper) it relieves your stress!

That’s right you don’t have to worry about the books being behind and ready for tax time. You will know exactly where your business is and how you are doing and if you are making a profit. Things become clear instead of scattered

All business has goals they’d like to accomplish whether it’s growth or making an important purchase etc. With up to date books and reports you will know if you are accomplishing these goals or are in a financial position to move forward with your goals.

Well managed books keep you informed about your business and its success.

We have businesses for a few reasons. The main ones are usually we have a passion for a product, service or type of business. The second is usually we hope to make a profit.

With up to date bookkeeping at any time reports can be generated to let you know if you are profitable. You can look at the small picture of a sale verses the associated expenses. Am I charging enough?

If my sale is $1650.00 and my associated “Cost of Goods” is $1350.00 then considering my other expenses to run the business this sale didn’t really make a profit. We now know it’s time to adjust your pricing or explore other alternatives for lowering your expenditures.

Up to date books will save you money

You will have everything ready to pay on time any government remittance such as payroll or HST and of course your taxes can be prepared on time. Therefore you won’t be paying penalties and interest.

Now you’ve decided you need new equipment or a vehicle etc. How are you going to pay for it?  Will you save up? Do you have anything left that can be put away for the purchase

Do you have enough monthly cash flow to afford to make payments on a loan?

Is financing your best option and who will you go to? More important who will lend to you!

When seeking financing you need to prove your companies worth.

Lenders often ask for previous year’s income tax and reports from your bookkeeping system to show how you are doing now.

Up to date books with proper reporting creates confidence in your company and you are more likely to get the money you need at a better rate.

 

Cash flow is often more important than profitability. I have seen profitable companies go down because they didn’t have the cash flow to pay the bills and their staff. Their receivables were high but they weren’t collecting their moneys in a timely fashion.

On-going well done books keep you appraised of your cash flow.

You will always know where you are with your receivables. The later collecting a receivable the less likely you will receive what is owed.

If your receivables are under control then your cash flow is on-going and your bills are paid on time thus avoiding late payment penalties.We often start a company because of a passion. But passion doesn’t pay your personal bills so you need to know if you are profitable so you can pay yourself and look to your future. Should you decide down the road to sell your business a prospective buyer will want to look at your books to be sure there is profitability in purchasing your company.

The books are up to date this is no problem!

There is another aspect of good bookkeeping that is one of the most important.

IT IS THE LAW! Yes you are required no matter what type or size of business to have auditable books at any time on demand.

There are several types of audits: income tax, HST, payroll and sometimes even WSIB.

You will have full confidence an audit will go well if everything is done and in order.

An auditor will be looking at easy access to reports and paper files that back up what’s on the system.

To sum up having your books up to date will relieve stress, help you make financial decisions, let you know if you are making money, help financial institutes have confidence in lending to you and avoid problems at audit time.

 

By Pam Mansfield

Senior Bookkeeper

Taybridge Memorial