Credit PoliciesCredit Policies

Is this an issues for most Is this an issues for most Funeral Homes?Funeral Homes?

Why?Why?

Credit Policies (cont’d)Credit Policies (cont’d)

Do most funeral homes require partial Do most funeral homes require partial payment upfront?payment upfront?

Why?Why?

Extending CreditExtending Credit

What are the advantages?What are the advantages?

What are the disadvantages?What are the disadvantages?

What is meant by “aging receivables”?What is meant by “aging receivables”?

What types of consumer credit are What types of consumer credit are available to funeral homes?available to funeral homes?

CollectionsCollections

Establish a collection policy.Establish a collection policy.

What should it include?What should it include?

When should the consumer be told about it?When should the consumer be told about it?

Why is immediate follow-up important if a bill is Why is immediate follow-up important if a bill is unpaid?unpaid?

Collections (cont’d)Collections (cont’d)

What is an appropriate procedure for What is an appropriate procedure for collecting outstanding bills?collecting outstanding bills?

What can a funeral home do to What can a funeral home do to stimulate/encourage payment?stimulate/encourage payment?

Federal Truth in Lending ActFederal Truth in Lending Act

What is its purpose?What is its purpose?

Funeral homes are not exempt from this Funeral homes are not exempt from this Act.Act.

What does it require?What does it require?

Required DisclosuresRequired Disclosures

Finance Charge and Annual Percentage Finance Charge and Annual Percentage Rate must be in bold-face.Rate must be in bold-face.

Amount FinancedAmount FinancedFinance ChargeFinance ChargeAnnual Percentage RateAnnual Percentage RatePayment SchedulePayment ScheduleTotal of PaymentsTotal of Payments

Required Disclosures (cont’d)Required Disclosures (cont’d)

Total Sale PriceTotal Sale Price

Pre-payment Penalty or RebatePre-payment Penalty or Rebate

Late PaymentLate Payment

Security InterestSecurity Interest

Establishing/Buying a FHEstablishing/Buying a FH

2 important options to consider:2 important options to consider:

1) buying an existing FH1) buying an existing FH

2) building a FH2) building a FH

It is important to seek out professional It is important to seek out professional advice.advice.

Factors to ConsiderFactors to Consider

Reason(s) owner is selling.Reason(s) owner is selling.

Profit potential.Profit potential.

Tangible assetsTangible assets

Intangible assets.Intangible assets.

Competition.Competition.

Human resource forecast.Human resource forecast.

No. and type of funerals.No. and type of funerals.

Business ValuationBusiness Valuation

What is a business worth?What is a business worth?

Assets vs. Liabilities:Assets vs. Liabilities:– Preneed obligations.Preneed obligations.– LawsuitsLawsuits– Underground storage tanks.Underground storage tanks.– Goodwill.Goodwill.

Questions to ConsiderQuestions to Consider

Is the company worth more than its Is the company worth more than its assets?assets?

What are the future opportunities for the What are the future opportunities for the new owners?new owners?

Are earnings/cashflow predicatable and Are earnings/cashflow predicatable and steady? Will they continue in the future?steady? Will they continue in the future?

Is the property worth more as something Is the property worth more as something other than a FH?other than a FH?

Questions (cont’d)Questions (cont’d)

Can you improve Can you improve merchandising/promotion?merchandising/promotion?

Can expenses be decreased?Can expenses be decreased?

Is buying the business outright the only Is buying the business outright the only option, or could you lease the property?option, or could you lease the property?

Valuation ProcessValuation Process

Evaluate sales without cash advancesEvaluate sales without cash advances

Consider the categories/type of salesConsider the categories/type of sales

Market shareMarket share

Valuation MethodsValuation Methods

Book ValueBook Value

Industry standardsIndustry standards

Fair Market ValueFair Market Value

Replacement CostReplacement Cost

Investment ValueInvestment Value

Market Data ApproachMarket Data Approach

Does the business have the ability Does the business have the ability to earn money?to earn money?

EBITA:EBITA:

EarningsEarnings

BeforeBefore

InterestInterest

TaxesTaxes

AmoritizationAmoritization

ConsiderationsConsiderations

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