Credit Policies Is this an issues for most Funeral Homes? Why?

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Presentation transcript:

Credit Policies Is this an issues for most Funeral Homes? Why?

Credit Policies (cont’d) Do most funeral homes require partial payment upfront? Why?

Extending Credit What are the advantages? What are the disadvantages? What is meant by “aging receivables”? What types of consumer credit are available to funeral homes?

Collections Establish a collection policy. What should it include? When should the consumer be told about it? Why is immediate follow-up important if a bill is unpaid?

Collections (cont’d) What is an appropriate procedure for collecting outstanding bills? What can a funeral home do to stimulate/encourage payment?

Federal Truth in Lending Act What is its purpose? Funeral homes are not exempt from this Act. What does it require?

Required Disclosures Finance Charge and Annual Percentage Rate must be in bold-face. Amount Financed Finance Charge Annual Percentage Rate Payment Schedule Total of Payments

Required Disclosures (cont’d) Total Sale Price Pre-payment Penalty or Rebate Late Payment Security Interest

Establishing/Buying a FH 2 important options to consider: 1) buying an existing FH 2) building a FH It is important to seek out professional advice.

Factors to Consider Reason(s) owner is selling. Profit potential. Tangible assets Intangible assets. Competition. Human resource forecast. No. and type of funerals.

Business Valuation What is a business worth? Assets vs. Liabilities: –Preneed obligations. –Lawsuits –Underground storage tanks. –Goodwill.

Questions to Consider Is the company worth more than its assets? What are the future opportunities for the new owners? Are earnings/cashflow predicatable and steady? Will they continue in the future? Is the property worth more as something other than a FH?

Questions (cont’d) Can you improve merchandising/promotion? Can expenses be decreased? Is buying the business outright the only option, or could you lease the property?

Valuation Process Evaluate sales without cash advances Consider the categories/type of sales Market share

Valuation Methods Book Value Industry standards Fair Market Value Replacement Cost Investment Value Market Data Approach

Does the business have the ability to earn money? EBITA:EarningsBeforeInterestTaxesAmoritization

Considerations Average net profit after fair owner’s salary. Compare total expenses to net sales. Pre-tax profits and consider tax status. Facilities. Management practices. Market and competition. Current promotion and advertising. Sale and service volume trends. Pre-need: asset or liability Will employees stay?