Paying for a funeral
I ran across this article the other day that is entitled, “Financing a Funeral: Crowdfunding, insurance, credit cards, loans, and payment plans”. The article comes from a publication called “The Enlightened Mindset” and appears directed towards the consumer.
I don’t think it is a “bad” article, but you can also tell it is not written from someone who knows the death care business. There is some good basic information in the article, albeit not a lot of details. And, if I operated a death care business to the consumer I would be a little nervous that “Crowdfunding” was listed as the first listed option.
As a funeral home owner or manager I’m guessing that there are very few of you, if any, who would let a family charge a funeral and then tell you they are going to go on GoFundMe to see if they can pay you. Don’t get me wrong, there are crowdfunding options that may work for some families, but my thought process is that your business’ success and cash-flow should not be dependent on that form of payment for services.
What does your funeral home do for payment requirements? Over 40 years ago when I started it was different. It seemed that funeral homes knew their clientele and the general mode of conduct was that selections were made, services were concluded, a billing statement was sent out, and the surviving family member paid the bill within 30 days. . . .sometimes within a week for a small discount. It seemed to work and non-payments, as a percentage of revenues, were probably less than a credit card fee so many funeral homes did not get involved with credit cards at that time.
Preneed insurance was legalized for us in Minnesota in the 1980s and that made a world of difference. We found out that an active preneed program not only allowed families to have what I always told them was a “bundle of cash” to pay future expenses, but the quick collection effort on our part also provided very good cash-flow management.
Historically, while there have been isolated funeral homes with a lot of receivables on the books, lack of rapid payment has not, in my opinion, been a detriment to most funeral businesses. However, the world does change and your funeral home needs to have a system in place to collect on the services and merchandise you have provided.
Because of all the options available today funeral or cremation services probably come in as wide a range of costs as they ever have. I’m guessing that you can find direct cremation with no services for $1000 or less and a consumer can easily rack up over $20,000 of expenses for a traditional casketed service with in-ground burial.
Fortunately, there is a lot of options that a consumer has at their disposal to deal with these expenses if they are hit with them. I’ve always been one to believe that a Preneed insurance policy is the best situation of all worlds. Not only do you, as a funeral home owner, get paid very rapidly but at the time of the issuance of the policy your funeral home should bring in ancillary revenue for the sale of the policy. And, over time, the policy holder has had the ease of mind that their death care wishes have a financing leg behind them. It seems to be about the best win-win situation in the death care business.
I’ve also noticed that as society moves forward we seem to operate almost cashless. I notice that when I travel and sometimes think of how traffic would come to a halt if the interstate convenience gas stations lost their ability to process credit cards. We would all run out of gasoline with no way to pay for more since we rely on our credit cards or debit cards so much.
I’ve checked and there is a wide variance on average credit limits among localities and cardholder ages. It just makes sense that, in general, those with the largest limits because they have built up credit over a lifetime are those in the over 50 age brackets — the same demographic that uses funeral services.
Here’s what I found in this article from WalletHub, the average line of credit on a “single” credit card in America is $12,945 and the median (1/2 of the population over the amount and 1/2 of the population under the amount) line of credit for a single credit card is $5,394. Another article from CNBC states that the average credit card limit among all credit card held by an individual is $22,751 (2019 date).
Those numbers would indicate, that dependent on their credit usage and balances, most Americans would be able to finance a portion of the expenses via credit card.
Finally there is good, old cash that many older Americans have in the bank and can pay by check. And, don’t forget life insurance policies on the insured’s life. With the help of a good assignment company those death benefits can be accessed in a short period of time too.
I was one who was very understanding and trusting of my families and many times took the family’s word on the payment situation. But, I was in a small town and had a pretty good inkling of who I was dealing with. Virtually every time I was paid as promised. . . .but, I’ve also got some pretty good stories about accounts receivable that gave me some gray hairs and other anxieties.
However, regardless of how good your policies are you will eventually find yourself in a situation where there is almost no way to conduct part of your services before you know how you are going to get paid. In those cases you have to get all the information possible, assess the upside and downside risks, and make a decision if you will go forward. And, how you make that decision, whether you go forward or hold up services for payment, may make a mark on your brand image (positive or negative) going forward.
This article should just be another reason why every funeral home should be speeding ahead with preneed marketing and sales.
Related — Here’s a list of the Top Ten most popular death care crowdfunding websites as listed by Cake.
More news from the world of Death Care:
- Celebration of life becomes face of funeral industry. Business Observer (FL)
- Ads misleadingly claim to offer thousands in funeral benefits. Yahoo
- As Covid surged in China so did spending by funeral providers. Reuters
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Have you heard about ILOF (In Lieu Of Flowers)? We use them frequently. ILOF is crowdfunding, specifically for funerals. Funds can be designated to be paid directly to the funeral home or the family or any other institution. https://www.ilof.com/