How do you collect cash and control receivables

I came across this article entitled “Lending USA introduces FastScreen, a New Tool for Pre-Loan Qualification for Funeral Home Merchants” and it reminded me of the struggles I had over the years about implementation of tougher credit policies on client families.  The age old “push-pull” credit decision is that you don’t want to make it difficult for families, however, too much leniency and you may be doing your work for less than full payment or, in some cases, no payment at all.  Credit decisions were always a delicate balance for me to make.

The old days of funeral directing, let’s say from the 1930’s probably into the 1970’s credit issues didn’t seem to be a problem.  Funeral homes covered costs, including cash advances, and then following the funeral sent the family a bill which usually offered an incentive to pay within 10 days or a full balance due in 30 days.  Life was simpler then, we knew our neighbors. . . and this just seemed to work.

I started work in 1980 and our funeral home still operated by those types of rules at that time.  We, however, had learned of the value of pre-arrangements and beginning in 1964 started advocating for families to put money into “Funeral Trusts” to pay for funeral costs at a later date.  In the 1980’s when funeral insurance became legal in Minnesota we advocated for that method of preneed funding and by the time I left in 2013 about 60% of our business was preneed turned at-need.  That level of preneed cases certainly helped out cash-flow.

Today, the modus operandi for most funeral homes is that they receive most of the total cost of services at the arrangement conference.  Sometimes that is difficult for families who are used to the traditional easy credit terms of many family funeral homes.  However, ask yourself if you could buy a refrigerator or a television and leave the store with it without making arrangements for payment.  It doesn’t happen anymore.  So, you have to have a way to bring this up with families and get payment at this time.  Trust me. . . families are expecting you to ask.

I was never one for pushing credit card sales.  Simply put, I did not like taking a 3% haircut on a payment I was pretty sure I was going to collect.  Yes, a VISA payment by a client family might stop a bad or slow debt once in a while, but if lots of your families chose to pay by credit card you lost 3% of margin on calls you would have otherwise not.

Tom Anderson
Funeral Director Daily

However, experience has taught me that you also have to meet your customers where they are comfortable.  And, I would suggest that most American consumers are very comfortable using plastic today. . . .whether it be a debit card or a credit card.  Americans simply don’t pay by check or cash anymore.  For instance, I find that I never use cash — it’s just too impractical.  Even at Starbucks where my cashier’s checks are only $2.67 for a cup of coffee I whip out the credit card.  When I was younger I never would have used a credit card for that small of an expense.  But today it is just simpler. . . and as a bonus, I have an electronic record of my purchase and payment.  Now, Starbucks only realized about $2.58 on that sale after card fees are deducted, but it is almost instantly in their bank account. . . In essence, they turned that sale into cash pretty efficiently.

As a matter of fact, America relies so much on credit and debit cards I’m pretty sure that we could not function without them.  I recently drove 1,900 miles from Minnesota to Florida and did not spend one cent of cash.  One thing I thought about on that drive is what would happen if gas station pumps could not connect electronically with the payment services for a period of time?  We certainly would have an awful lot of unhappy people stranded without being able to buy fuel for their cars.

Cash in the bank is King in most businesses and the death care business is no different.  Whatever manner that you turn your sales into cash in the bank is part of your business operation.  Doing it efficiently and cost-effective is an art that can be a real asset to your business.  If you have cash drawing interest or you can pay cash for products instead of financing them, that helps your business.  On the other hand, if you have receivables that are slow-pay or difficult to collect. . . you don’t have that cash to use and, sometimes even more detrimental to your business, is that you spend time and money on the collection process.

Take some time and take a look at how you are turning sales into cash.  Can you do it more efficiently and effectively?

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1 Comment

  1. Edna Hall on January 26, 2022 at 6:36 am

    I opened your email with great expectation, even thinking it was a “sign” that an experienced FD/ owner had innovative answers to this topic. Disappointing that none were given.
    Our firm has been discussing this concern more passional the past few months after a family sat at our conference table a bluntly wrote a check for over $10,000, on a Friday ,
    Took the paid contract, submitted it for a federal Covid refund within the hour of leaving our firm!
    Services were performed the next day.
    The check bounced !!
    No phones were being answered. Weeks went by.
    There had never been that amount of monies in any of their bank accounts!!
    We are working for a different breed of families….broke . without a morale compass!
    We are a 2 red light town funeral home first generation FD with a 98% collection rate,who are struggling to understand how to implement a system of vetting families financially prior to expenseing our resources . You are probably thinking 98% collection , we should be happy! Well, no , we performed 100% of the work to satisfaction, we offer pre-needs,and 30 day, but we expect our paycheck just as they received thiers.
    We know firms with more on the “books” than in the bank! Our industry needs correction in this area,our compassion for others will always be our motivation for answering our phones at 2 am. However it will not buy that refrigerator .
    We are open to any suggestions.

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