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FDAK Newsletter 03/02/18

Show Me the MONEY

Tips for directors on collection Policies

Source: The Texas Director by Melanie Carr of Directors Choice Assignment Services

“Show me the money” is line made famous by the 1996 hit movie Jerry McGuire.  In the movie, the character played by Cuba Gooding, Jr. is essentially telling his sports agent that he wants to be paid what he’s worth.  Don’t we all?  This is probably a sentiment that, although not verbalized, you have probably felt at some point in your career providing funeral services.  Every funeral home has families that promise to pay but weeks or months following the service their balances remain, and the family cannot be found.  It’s frustrating, but worse, it is terrible for your cash flow.  Money is always going out to pay your bills and expenses, but if you do not have enough coming in, your business could be in financial jeopardy.

This time of year can be especially problematic, as families unprepared for a death may have just overspent during the holidays, and cash, or even credit, may be in short supply.

So, what can you do about this?  I’d like to share three practices that can help you get through the holiday crunch and improve your overall cash flow throughout 2018.

1.      Communicate Your Collections Policy

For starters, you need to come up with a collections policy and this policy needs to be shared with your families as soon as you go over pricing and payment options.  Do not wait 30 days after a service to send out an invoice as it can be too late at that point.  Some people offer an incentive for full payment within the first week, or they may implement penalty fees for late payment, or they may use some kind of combination approach.  The key is to educate your families.  Some will love the idea to save money by paying early, while others just need to know how long they have until prices go up to pay.  Be proactive and figure out how your funeral home is going to handle this now, not after a problem occurs.  And there will be problems, so do not be naïve and think this will not happen to you.  Many funeral homes have a drawer filled with good intentions and uncollected IOU’s.

2.      Be Aware of Potential Risks with Insurance Assignments

When cash flow is an issue for families, they may ask your funeral home to accept a life insurance policy as payment.  While this is a common practice in most funeral homes, accepting such an assignment and handling it yourself can be very problematic.  For starters, insurance companies often take 6-8 weeks to process and pay a claim, and this is providing they do not run into any problems or issues that may delay their approval.  It can also be very time-consuming dealing with the insurance companies as the process typically involves many lengthy phone calls and back and forth interactions.  Finally, it can be extremely risky.  While an insurance company representative may tell one of your employees that a policy looks good and gives you a verbal or written verification, most companies do not stand behind their verifications if they make a misquote.  Most insurance companies have a clause at the bottom of their verification form that states verification is no guarantee of payment of benefits and that all claims are subject to review.  That means if you accept a policy as payment for a funeral after getting verification from the insurance company, you could still be left with a contestable policy or one with outstanding loans on it and you might not find out about this until weeks after the death and funeral.

3.      Consider Using an Insurance Assignment Company

 One way to improve your cash flow and minimize your financial risk is to work with an insurance assignment funding company.  For a small fee, they will advance funds to a funeral home within a couple of days instead of having to wait weeks or even months to get paid by an insurance company.  Not all funding companies are created equally so this is where your due diligence comes in.  You need to find out: what their fees are; how quickly they fund; if there are any limits to the funding amount; do they provide funding to beneficiaries; and, what is their policy for recourse.  You should also find out how your account will be serviced and by whom.  We all want to know who we will be working with, as relationships matter in this industry.  This is important because your representative(s) will become, in essence, your remote employee.  The great thing is that instead of paying an employee at the funeral home full-time or part-time wages plus benefits to handle insurance assignments, you only have to pay the funding company when you have an assignment, and if you pass the fee along to the family, you do not have to pay them at all.  Free help…how good is that?

Cash flow is imperative to a business’ financial success and if you are going to stay financially healthy you need to take measures to get paid quickly.  You need people to “show you the money.” While never ideal to act as a bank for families if you have one that needs time to pay you, make sure you clearly lay out your collection policy and them follow through on it.  A collection policy will not help you if you allow excuses or procrastination to further delay payment.  Be kind, be professional, but be firm.  Your business depends on it.  And if they want to use an insurance policy, make sure you use an assignment company to provide you with quick funding and financial protection. These small steps can save you time, aggravation and will improve your financial outlook.





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