Watching the money is key to running a successful funeral home; however, most business owners fail to do so properly–choosing to focus mainly on quarterly taxes instead of more frequent check-ins.
The reality is that conducting monthly financial reviews provide the optimal level of insight for your funeral home. By taking a proactive approach to your business’s financial wellbeing, you can more effectively track your progress and plan for any future initiatives.
Here’s why you should start monthly financial health checks as soon as possible.
To Identify Issues
Checking your accounting numbers on a monthly basis will provide you with more frequent and accurate updates on issues faced by your funeral home. With that said, quarterly and annual financial reviews might be adequate. It’s important to find a partner who can accommodate your funeral home’s specific needs.
For example, if your profits are down over the course of a month, you’ll want to know as soon as possible, allowing you to pin down the issue and create a plan of course correction. If you only run quarterly financial reports, then you risk discovering an issue several months after it has begun.
Alternatively, you might notice a certain product experiencing significant growth in sales. For example, over the last few years––particularly in the wake of the pandemic––many funeral homes experienced an increase in cremation rates. The businesses that run monthly financial reports would be able to note this change and adapt, further shaping their business model around that growth.
To Check In On Performance
As a business owner, you should keep track of your revenue, expenses, profitability, debt load, and ability to meet financial benchmarks as these variables can change relatively quickly, making it essential to examine them proactively.
The resulting numbers can be used to calculate profitability ratios that essentially serve as a shorthand for how well your business is performing. In one method, Return on Investment (ROI), you divide your monthly revenue by the monthly cost of operation. Alternatively, Operating Margins consist of dividing your monthly earnings by your monthly revenue.
To Create and Monitor Goals
In any business creating goals is crucial to your overall growth as it provides benchmarks and motivation for growth. By monitoring these goals along the way you ensure your funeral home is staying on the right track.
For example, to gain a certain level of preneed funeral sales, you’ll need to create a target number to be reached over a period of time. This is where monthly financial reports come in handy, as they’ll inform you of your progress toward this goal.
Additionally, as you track your progress on a monthly basis, you’ll be cued into any roadblocks or issues with falling behind. By remaining abreast of your financial situation, you’ll more effectively adapt, ensuring that you still reach your target in the long run.
How to Create a Monthly Report
To begin creating your monthly reports, you’ll want to record your funeral home’s finances in three different documents. Altogether, they’ll give you an accurate picture of your current financial health and help you forecast future opportunities.
1. Balance Sheet
A monthly balance sheet will provide a clear picture of where your funeral home currently stands. This document includes your business’s assets, liabilities, and (if relevant) shareholder equity. By subtracting your total liabilities from your assets, you’ll come up with a total amount of owner equity.
2. Income Statement
Also referred to as profit and loss statements, monthly income statements measure your profitability. To create this statement, you’ll need to subtract your monthly expenses from your revenue.
3. Cashflow Statement
As the name implies, a cashflow statement demonstrates both the inflow and outflow of cash to your funeral home. While similar to an income statement, a cashflow statement will inform you whether or not your business made or lost cash on a monthly basis.
To compose this statement, you’ll need to measure your operating activities, cash inflow, cash outflow, investing activities, and financing activities.
Benefits of Leaning on Funeral Home Experts
While most accountants will be well-acquainted with the process of monthly financial reporting, only a funeral business accountant will understand the nuances of this industry and be able to use specialized accounting practices.
At Johnson Consulting Group, our team of death care accountants and financial managers has the experience it takes to successfully manage any type of funeral home or cemetery. We’ll assign a dedicated Accounting team to your business. They will create customized monthly financial reports and provide key insights into your business’s performance.
Through our industry-specific accounting practices, balance sheet analysis, concise cash flow updates, and annual budget creation, we’ll help your funeral home understand its current positioning and how to reach your enterprise goals.
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