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Five Tips for Crafting the Perfect Budget

man with laptop coffee and budget

By Jason Gazaille, Vice President of Finance

Let’s imagine for a moment that you are a seasoned pilot. Your staff members are your passengers, and it’s your duty to deliver them to their destination safely. You take your place in the pilot’s chair and harness yourself in, only to find you have a blank instrument panel and no communication tools! There are no gauges that show your route, airspeed, altitude, or fuel level. No tools to show if your landing gear is down or the position of your flaps. No air traffic controller to help guide you to your destination.

In the above scenario, I would argue that most of you wouldn’t feel comfortable piloting the plane or carrying passengers. Could you get the plane off the ground? As a seasoned pilot, it’s likely. However, would you be able to navigate the course and land the plane safely at the desired destination? Maybe, but the chance is low.

So, what does this have to do with the funeral industry?

The pilot’s instrument panel and navigational tools are all necessary to ensure a successful flight and the safety of the passengers, and believe it or not, similar tools are necessary for a funeral home. As an owner, your job is to guide your business and employees to success, and you can’t do so without the proper tools.

One of these tools that is often overlooked – but extremely necessary – is a proper budget. An improper budget is like missing navigational panel; you don’t want your funeral home to be without one. After talking to hundreds of funeral home owners who (9 times out of 10) tell me they don’t have a budget, I thought it was time to share why a budget is so essential.


Budgeting: A 30,000-Foot View


Every funeral home should have a strong strategic plan that covers its mission, business plan, marketing strategy, proforma, and budget, to name a few. The budget is one essential piece of that strategic plan.

For a funeral home, a budget should not simply project income and expenses. An effective budget:

  • Provides a roadmap for the future
  • Is aligned with the overall strategic plan of the funeral home
  • Highlights strengths and exposes improvements
  • Is updated and analyzed on a routine basis
  • Is fluid and versatile

The creation of a budget can seem overwhelming, daunting, or at times, even impossible, but I’d like to share five tips you can use when creating (or improving!) your funeral home’s budget.


Tip #1:  Utilize Technology


Historically, funeral professionals have been slow to adopt and incorporate technology in their day-to-day operations. You might be surprised by the number of funeral home owners I speak to who are still utilizing pen and paper to run their business!

To build an effective budget, you’ll need as close to real-time data as you can possibly get. The use of a cloud-based case management system greatly increases the efficiency of data access in a funeral home.    The data contained in these systems can help you identify and quantify important metrics, including monthly revenue and expense trends, cremation rate fluctuations, peak vs. slow times, and more. This technology is also crucial to help you efficiently update your budget on a monthly basis.


Tip #2: Establish a Quality Accounting Process


Most funeral homes I speak with rarely produce financial statements (we’re talking once or twice per year)! Their financial decision-making process usually involves their current bank balance or their last tax return. If this sounds like you, creating and maintaining a budget will be challenging, but not impossible.

Much like having adequate technology identified in the first tip, establishing a quality accounting process is crucial in many ways. Quality accounting:

  • Is consistently up to date
  • Contains monthly financial reports
  • Has an organized chart of accounts
  • Increases visibility in accounts receivable and clarity in revenue lines

If you are already accomplishing the above, then congratulations to you! If it all sounds impossible, I can assure you, it isn’t with the right help. Like pilots with air traffic controllers, some funeral homes choose to enlist the help of funeral home accounting companies to assist with their bookkeeping processes and to deliver financials on a consistent basis.

The real accounting magic happens when you combine tips 1 and 2. Then, you have reporting that shows the performance metrics of your funeral home (in funeral home language) and how those metrics affect profitability.


Tip #3:  Analyze Industry and Funeral Home Trends


As funeral professionals, you know the industry has experienced enormous change in the past decade. Cremation rates have risen exponentially. You may interact with your families more digitally or no longer market your funeral home in the yellow pages.

Keeping these industry changes in the front of your mind is extremely important to your budgeting process. For example, if you are seeing a 5% increase in cremations year over year, you should be budgeting for that increase in future months and years.

Estimating how many dollars you’re expected to spend to operate your facility is also important. To identify your funeral home financial trends, start by categorizing expenses into main categories, such as auto expenses, cost of goods sold, and administrative expenses, and show those categories as a percentage of revenue. Those percentages should then be compared to industry standards to identify any abnormalities that might exist.


Tip #4:  Use Historical Data as a Benchmark


For funeral homes that have been in business a while, leveraging historical data is a great jumping off point when creating a budget. This will allow you to analyze your past performance and expose any improvements that can be made either immediately or over time.

For newer funeral homes, you won’t have historical data to guide you on your budget creation journey, but that doesn’t mean creating a budget is impossible! Instead, you’ll need to focus on building a budget based on a proforma (projections).


Tip #5:  Be Consistent (Or Partner with Someone Who Is!)


Let’s be honest, staying on top of your strategic plan, specifically your budget, can be challenging. But just like everything else in life, consistency is key! If you are not regularly maintaining and updating your budget, it will lose its relevance and effectiveness. That said, if budgeting is an area of weakness or inconsistency, there’s no harm in finding the right partner who can guide you through the process and maintain that consistency!

You likely entered your career thinking, “I can’t wait to do what I love: serve families,” not “I can’t wait to budget for my funeral home!” However, now is time to use your navigational tools and pilot your funeral home to success. That way, you can avoid having to deploy your parachute, and instead, apply these five tips to ensure a healthier business, less financial stress, and – quite possibly – an increase in revenue!



About the Author: Jason Gazaille currently serves as the Vice President of Finance for Funeral Directors Life Insurance Company (FDLIC) and Directors Business Solutions, a division of FDLIC that offers accounting services to funeral homes. With years of experience in the banking and funeral industries, Jason understands funeral home analytics and how funeral homes should be valued in the current climate.

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