Collecting Accounts Receivable
While accountants may tell you that account receivable collection are an asset, you know they're valuable if they'll pay. Just as important, everyone who owes you money is impairing your cash flow and putting your own credit rating at risk. Too many funeral homes accumulate accounts payable almost by accident rather than as the result of a planned credit program. And, not surprisingly, those accounts receivable pile up to dangerously high percentages and too many of them end up not paying at all.
Here are some steps you can take to control your accounts receivables before they control you, and in the process improve your cash flow and overall financial practices.
Think about accounts receivables in three phases:
1. The decision to extend credit (and the emphasis here is on decision). 2. Recordkeeping and invoicing. 3. Collections and, if necessary, write offs. The first category is the most important. After all, once you've provided the service and merchandise, your options are limited. Yet, for many funeral directors, this is the most overlooked. You are not alone. Many providers of medical related and emergency-type services face the same problem. Many doctors, for example, may have a sign at the reception desk that says "payment required when services are rendered," but still end up having to bill patients. For funeral homes, particularly in connection with at-need families, the extension of credit is less a conscious decision than an ad hoc situation that arises when the family doesn't settle its bill before the funeral. It is the rare funeral director (thank goodness) who will stop a funeral in mid-procession and say, as one was alleged in a recent lawsuit to have done, nobody goes anywhere until I get paid. But there are things funeral service professionals can do to reduce their exposure. Use your own bank, which has a significant interest in maintaining your own financial health, to check on your customers' standing with their own banks. Or formalize the credit portion of your business. Bring in a partner for that portion, acting as a lender, whose interest charges are passed along to the consumer (and need to be disclosed, along with a variety of legally required disclosures, at the time credit is extended). Spell out your credit policy clearly, both for customers and for any of your employees who are involved with sales or other financial interactions with them. Make it clear that you don't discriminate on any improper basis. Have the material prepared in advance for clients, and when you first discuss price with them include with your other written material a statement that financing is available. That will not only make it clear that you're offering credit to appropriate people, it will make it clear that families who don't seek financing are expected to pay when services are rendered. And, make clear that people who don't pay on time will have a late fee added to their bill.
Account Receivables
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