Demographics How has COVID-19 affected budgets? In budgeting for a funeral home business, case mix tends to have marginal and fairly predictable changes year over year. Furthermore, average sale by case type can be accurately budgeted through careful sales analysis and pricing adjustments. One of the many challenges independent funeral home owners are experiencing with COVID-19 is the drastic shift in case mix due to regulations on gatherings and the preferences of families. Even average sale by case type has varied greatly from budgeted amounts. Beyond all of this, some firms are seeing a decrease in call volume while others are experiencing nearly double their monthly budgeted call volume. In the end, the annual funeral home budget for 2020 has become a much less accurate measuring stick due to the coronavirus pandemic. Revenue forecasting is a way of taking some of the uncertainty out of the financial management equation. As a fundamental of a successful funeral home business, financial management requires timely financial statements and an accurate picture of cash flow. But the recent turbulence in case mix, average sale and case volume may leave many independent funeral home owners wondering what next month’s profit and loss statement will look like. Revenue forecasting utilizes micro-periods of recent sales data to project future funeral home revenue. By using assumptions based on recent evidence, revenue forecasting models can generate projections of revenue when certain variables are expected to change or stay constant. Revenue forecasting can complement a traditional funeral home budget by providing snapshots of different scenarios. If the exercise is done monthly, revenue projections will converge toward the actual total revenue for the year as the projection window narrows. In the case of COVID-19, this tool allows firms to see yearend revenue projections based on the drastic changes to business experienced in recent months. By calculating variances to the company’s original budget, precise expense reductions can be implemented to ensure cashflow and operating profit remain healthy. Revenue forecasting paired with the annual funeral home budget takes much of the guesswork out of expense reduction and overall financial management. Revenue forecasting requires detailed sales contract analysis software so that case mix, average sale and case volume can be analyzed for specific time periods. These variables must be understood to produce an accurate revenue forecast. Funeral home businesses benefit greatly from the ability to monitor this data monthly. But it is the ability to leverage this data for financial decisions where the true value lies – especially in times of business disruption. Revenue forecasting is a prime example of leveraging detailed sales contract analysis data for specific financial decisions. In a year such as this one, the tools of demographic analysis and revenue forecasting — while vastly different — can help you make the smartest decisions for your business and successfully lead it into its next chapter. Vince is a Senior Business Consultant at Johnson Consulting Group. He is a Licensed Funeral Director, Certified Funeral Celebrant and former funeral home manager. He holds a degree in economics with High Distinction from the University of Michigan - Dearborn. To connect with Vince, call him at (480) 5568520 or email vroberge@ johnsonconsulting.com. OGR members can get their choice of a high-level demographic analysis or revenue forecasting analysis from Johnson Consulting Group - for free 14 www.ogr.org | Fall 2020
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