Developing a Financial Foundation

November 4, 2009
Advertisement

imageThis is the first article in a series that is written for the purpose of providing funeral home owners and managers with financial information and tools that will better enable them to operate a more efficient and financially healthier funeral home. The focus of these articles will be on providing useful financial and accounting information and tools that can be employed by funeral directors on a daily basis in operating their funeral home. Each article will focus on a specific financial or accounting topic. In most of the articles, as with this one, examples and/or tools will be included to supplement and compliment the written material.

This article will address the importance of developing and using a funeral home accounting system that is designed specifically for funeral homes. A sample funeral home chart of accounts is provided. It is essential to understand that a funeral home?s accounting and reporting system is the lifeline from which financial decisions are made. A funeral home?s accounting system must be designed to provide meaningful and relevant information that can be used to make prudent financial decisions. The accounting system provides the numbers that are used in evaluating the effectiveness of general price lists, in analyzing overhead and in evaluating and reviewing cash flow.

The chart of accounts (COA) (download link) is the foundation for all accounting systems. The COA is a listing of all the accounts in the general ledger. The COA determines how items such as funeral revenues and expenses are classified. Revenues and expenses must be properly classified and detailed in order to evaluate the firm. Without proper detail of revenues and expenses it is impossible to determine how much to charge for funeral services and merchandise, such as for professional services, merchandise and removals, or for complete services or packages. (See accompanying COA example.) Note that the revenues correspond to the services found on a general price list and the expenses are categorized in a manner to evaluate the cost of providing the respective services. A funeral home?s COA should show revenues that are identical or very similar to those on the general price list.

Advertisement

When inputting the revenues into the accounting system, the statement of goods and services should serve as the initial input document. By designing your COA and financial statements on the detail items listed on the statement of goods, the pertinent data will be readily available for review and analysis. For example, when evaluating a funeral home?s overhead, the income statement, which is also sometimes called a profit and loss statement, is the source for vital information, such as the total cost of personnel, which includes gross wages, payroll taxes, and employee benefits paid by the funeral home, such as health and dental insurances and retirements plans. If your funeral home?s accounting system uses the same categories to summarize revenues as used on the statement of goods and the expenses are summarized to correspond to the same revenue producing items, it is easy to evaluate the cost of providing specific services. For example, to determine and evaluate the actual costs and profitability of maintaining your vehicles, the income statement, or summary thereof, should show the total revenues received for removals, service cars and use of hearses, and the expenses directly associated with those vehicles, such as gasoline, repairs and maintenance, insurance and depreciation should be separately disclosed.

Funeral home COAs, financial statements and reporting information should not be designed for purposes of meeting compliance and reporting requirements, such as for preparing federal and state income tax returns. Instead, the complete system should be designed to provide meaningful and relevant financial information that can be used to manage the funeral home?s operations and finances. An income tax return is not designed to provide funeral directors with critical information that can be used in preparing essential analyses and developing general price lists. An income tax return can be used to extrapolate certain meaningful information, but it should not be used without being supplemented with more detailed information. A funeral home that employs a properly tailored chart of account that is designed specifically for the funeral profession will have that information at their disposal.

Author Bio

Ron began his funeral home career at the age of fifteen when he went to work part-time for the William J. Swallow Funeral Home in Northampton, Pennsylvania. After graduating from high school, Ron served his apprenticeship at the Lewis W. Mohn Funeral Home in Seminole, Florida. In 1983, he became the owner and operator of the Wilson-Cooper Funeral Home in Kittery, Maine.

Ron began his career in public accounting in 1979 with the then “Big Eight” accounting firm of Peat, Marwick, Mitchell & Co., leaving as a senior accountant to join Coopers & Lybrand in their Boston office. While operating the Wilson-Cooper Funeral Home, Ron managed the Ronald H. Cooper, C.P.A., P.A. practice, which specialized in funeral home accounting, taxes and operations. He has successfully facilitated the acquisition of over one hundred funeral homes in the U.S. and Canada. He is one of a very few Certified Public Accountants/Funeral Directors in the country. He has over twenty five years of experience providing funeral home owners with professional services in the areas of accounting, tax planning and preparation, operations, retirement planning, mergers and acquisitions and succession planning. He is the owner of Cooper & Associates, CPA, LLC, which is funeral home accounting firm that works with funeral homes from Maine to California.

In addition, Ron has designed and taught funeral home accounting and management courses at the college level. He also lectures nationwide on funeral home management, operations, mergers, acquisition and tax planning. He is a regular contributor to The Funeral Business Advisor.

Ronald H. Cooper, CPA is a funeral home accountant/consultant with Cooper & Associates, CPA, LLC. He can be contacted at 866-446-0656, or by email at ron@funeralhomeaccounting.com

CDFuneralNews

ConnectingDirectors.com is the leading online daily publication for funeral professionals with a reader base of over 45,000 of the most elite and forward-thinking professionals in the profession. With ConnectingDirectors.com we have created a global community through an online platform allowing funeral professionals to Stay Current. Stay Informed and Stay Elite.
Advertisement

You may be interested

Foundation Partners Group Adds Anderson-McQueen to FPG Family
Funeral Industry Press Releases
433 views
Funeral Industry Press Releases
433 views

Foundation Partners Group Adds Anderson-McQueen to FPG Family

CDFuneralNews - August 17, 2017

Orlando, FL – Foundation Partners Group (FPG), a leading provider of innovative funeral, cemetery and cremation experiences and products, has…

Jobs
5 views

Sales Professional – North FL/Georgia

CDFuneralNews - August 17, 2017

Wilbert Funeral Services Inc. is a wholesale product and service provider to the funeral industry. Our manufactured products include burial…

On Our Soapbox: The Truth About Cremation | FUNERAL nation 085
FUNERAL Nation
194 views
FUNERAL Nation
194 views

On Our Soapbox: The Truth About Cremation | FUNERAL nation 085

CDFuneralNews - August 16, 2017

Cremation truth and Social Media Screwup: Watch Ryan & The Commander tell it like it is on their soapbox! (more…)

Comments