Parliament Issue 2, Volume 2
-
Upload
lemasters-consulting -
Category
Documents
-
view
217 -
download
0
description
Transcript of Parliament Issue 2, Volume 2
Winter 2011
Lemasters Consulting Parliament
Parliament is a quarterly journal focusing on the deathcare profession.
Winter 2011
Winter 2011
Lemasters Consulting Parliament
In This Issue:3 LetterFromthePublisher7 MakingtheSeeminglyUncollectible,Collectible12 CaseStudy|AStep-by-StepGuideofHowNotto CollectMoney16 HowtoKeepMoney|StepstoTaketoAvoidTheft23 HowtoCollectMoney|StepstoTaketoAvoid AccountsReceivable
Winter 2011
Lemasters Consulting Parliament
yourbusiness–whataboutthemoneythatdoesn’tcomeintoyourbusiness?Themoneyyoulose.
ThisissueofParliamentfocusesonmoney.Specifically,thisisacloserlookathowbusinesseslosemoneyandhowtopreventit!Everyoneinthedeathcareprofessiondealswithmoneyandprofessionalswalkthelinebetweencompassionandbusinesswhendealingwithfamilies.Crossingthelinecanleadtosomebigproblemsandmanyinstanceswherewelosemoney.IhopethisissueofParliamentwillshedlightonsomepotentialissuesandafewpracticesandprocedurestohelpyourbusinessstaygreenfortheyear.
BestRegards,
PoulLemastersPublisher
AstheHolidaysrollinalongwithcoldweatherhere,youcan’thelpbutreflectontheyear.In
factasIwaswritingthisletterIgotacallfromsomeonewholovestolookbackattheyear–myaccountant!Heaskedhowtheholidaysweregoingandslidrightintohisrequesttogettogethertolookattheyearandgetreadyfornextyear.That’shisextremelysubtlewayofsayingit’stimetostartthinkingaboutpayingtaxes.But,it’spartofbusiness.
WhenIsatandtalkedtomyaccountantheaskedlotsofquestionsandthenhesaid,“Youknowyoulostsomemoneylastyear.”Lostmoney?Idon’trememberlosingmoney.Butheexplainedthatbusinesseslosemoneyallthetime,forexampleaccountsreceivable,thedreadedAR.SoasIthoughtaboutmyownbusinessandlosingmoneyIstartedthinkingaboutmoney.It’snotmyfavoritethingtothinkabout,butasIsaid,it’spartofeverybusiness.
Youcan’tstayinbusinessifyoudon’tmakemoney.Manybusinessesthinkthataslongasthereismoneyinthebanktheneverythingisok.Othersthinkthataslongastherearecustomersatthedoortheneverythingisok.Whileit’seasytolookatthemoneyandcustomerscominginto
Letter from the Publisher
•3
Winter 2011
Lemasters Consulting Parliament
Parliamentispublishedquarterly.
Publisher:PoulLemastersArt Direction & Design:DothBrands
Questions?info@lemastersconsulting.comSubscriptionsarefree.Pleasevisitlemastersconsulting.comtosignup.
© Copyright 2011 Lemasters Consulting and Poul Lemasters. All Rights Reserved.
ABOUT DONALD B. FERFOLIA, JR., JD, CFSPDonaldB.Ferfolia,Jr.,J.D.,CFSP—DonisanattorneywhoisaprincipalwiththelawfirmofSnell&Ferfolia,LLC,locatedinSagamoreHills,Ohio.Inadditiontobeinganattorney,heisalsoafourthgenerationfuneraldirectorinvolvedwithhisfamily’sfuneralfirmintheSoutheastClevelandarea.Thecombinationoflaw,funeralservice,andfamilybusinessexperienceshaveprovidedDonwithauniqueskillsetthatenableshimtoassistclientsinsolvingmanydifferenttypesofproblems.Heloveshelpingfirmsdealwiththedailychallengesofrunningacloselyheldbusinessincludingproactivelymanagingaccountsreceivableissuesandsuccessionplanning.Don@FerfoliaLaw.net
About the Publisher
•4
ABOUT POUL LEMASTERS, ESQ.PoulLemastersisthepublisherofParliament,alicensedattorneyandafuneraldirector.PoulisanadjunctprofessorattheCincinnatiCollegeofMortuaryScience.HeisanactivememberoftheInternationalCemeteryCremationFuneralAssociationandvariousstatefuneralandcemeteryassociations.
ABOUT LEMASTERS CONSULTINGLemastersConsultingisacompanyformedexclusivelytoservetheneedsofthedeathcareprofession,includingfuneralhomes,funeraldirectors,cemeteries,cemeterians,crematories,andthoseworkingintheindustry.LemastersConsultingprovidesvariousservicesin:GovernmentCompliance,PolicyandProcedures,RiskManagement,Litigation,Valuation,MarketAnalysis,Buy/Sell,FormsManagement,andNextofKinDisputes.www.lemastersconsulting.com
Contributing Author
PhotoPage14bybobj03054PhotoPage17byLadyDragonflyCCPhotoPage18byPerOlaWiberg~PowiPhotoPage21byNanagyeiPhotoPage22byvl8189PhotoPage25byShandi-lee
Volume2,Issue
2 PhotoPage2byCThompson
PhotoPage5byCThompsonPhotoPage6bycartersePhotoPage9byandi.vs.zfPhotoPage10byShandi-leePhotoPage13byShandi-lee
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Consultantsandlawyersoftenremindtheirclientsthat,assmartbusinesspeople,itis
importanttohaveasignedcontractinplaceintheeventthatsomethingcausesadisputebetweenparties.Funeralserviceproviderstypicallyplaceeverythinginwritingasmostfuneralhomesandcrematoriesandmanycemeteriesareregulatedbystateboardsthatdictatetheinformationthatisgiventoconsumerswhenapurchaseismade.
Sowhathappenswhenthecontractisproperlywrittenandsignedbytheserviceproviderandthefamily,servicesarerendered,butpaymentisnotmadeasagreed?Typically,aserviceproviderwouldbeginaprocessofattemptingtocollectthedebtthatatsomepointmayincludeatriptocourtthatconcludeswithajudgmentagainstacontractsigner.Thisjudgmentmay,intheend,beuncollectablebecausethesignerdoesnothavethefundstopaytheprovider.Arethesefundscompletelyuncollectable?Thesimpleanswerismaybenot.Althoughtheymaynotbecollectibleusingthetypicalcourt,theymaybecollectableusingtheprobatecourtandtheprobateprocess.
Forexample,afamilycallsonafuneralserviceprovidertoprovideservicesfortheirfather.Rememberingtheadviceofherconsultants,theproviderhasthedeceasedman’schildrensignacontracteventhoughthefamilyhasindicatedthat“Dadstatedinhiswillthathisestateistopayfuneralexpenses.”Afternotreceivingpaymentfor60days,theproviderresortstothecollectionsprocess.Itturnsoutthatnoneofthechildrenareableto
paythebillthattheycreated,buttheproviderremembersthatthedeceasedownstwopiecesofpropertyinthetownwherehelived.Theprovidercallsherattorneyandasksifanythingcanbedonetorecoverthispastduebillwhenthepropertyissoldbythedeceased’sestate.Theattorneybeginstoexplainaprocessknowninmanystatesasaclaimagainstanestate.
WHAT IS A CLAIM AGAINST AN ESTATE?Aclaimagainstanestateisverysimilartoalienthatisplacedonapieceofrealproperty.Itisusedtorecoverfundsthatarepartofsomeone’sestateandthesefundscanbeusedtopaytheremainingdebtsofadecedent.Toensuresuccesswithaclaim,thefuneralserviceprovidermustbeawareofstate-specificproceduresanddeadlines.
HOW IS A CLAIM MADE?Theclaimistobegiveninwritingtothepersonalrepresentative(sometimescalledexecutororadministrator)oftheestate.Mostbusinessesthatmakeclaimsagainstanestatewillsendaletterthatgivesnoticeoftheclaimandalsosendacurrentstatementand/oracopyoftheoriginalcontractthatwassignedatthetimethatserviceswererenderedtothefamily.Manystatesallow(andsomemayrequire)theprovidertofilethisclaimwiththeprobatecourtinthecountywherethedeceasedlastresided.
Itisimportanttoknowthedeadlineforfilinganinitialclaim.Moststatessetthisdeadlineat4to6monthsfromthedateofdeathofthedeceased.Somestatesmaystartthisclock
Making the Seemingly Uncollectible, Collectible
•7
continued on page 8
by Donald B. Ferfolia, Jr., JD, CFSP
Winter 2011
Lemasters Consulting Parliament
continued on page 11•8
runningatthetimeadeathnoticeisplacedinapublication.
Aftertheinitialletteriswrittentothepersonalrepresentativeorfiledwiththeprobatecourt,therepresentativemustthendecidewhethertoacceptorrejecttheclaim.Somedecisionbytherepresentativemustbemadebecausetheprobatecourtwillnotallowanestatetobecloseduntilallclaimshavebeenactedonbyhim.
WHAT HAPPENS AFTER A DECISION IS MADE?Iftherepresentativeacceptstheclaim,andpaysit,theprovidermustnotifythecourtthateverythinghasbeenpaidandtheclaimisthenreleasedallowinganestatetobeclosed.Ontheotherhand,ifaclaimisrejectedbytherepresentative,theprovidermustdecideonthenextstep.Iftheinitialclaimwasmadebytheproviderafterthetimedeadline,itispermanentlyrejectedandcannotbecontested.Inmoststates,ifaclaimisrejectedforreasonsotherthanthetimingdeadline,thefuneralserviceprovidercanrequestahearingbeforetheprobatecourt.Thishearingprovidestheopportunityforthefuneralserviceprovidertodemonstratetothecourtwhytheclaimshouldbepaid.Thoughtheprocesssoundssimple,occasionally,aproblemmayarise.
WHAT IF THERE ISN’T ENOUGH MONEY IN THE ESTATE?Somestateslimitthetypesoffundsthatcanbeusedtopayaclaimagainstanestate.Thecourtmayonlyhavejurisdictionovertheassetsthatpassbywayofadeceased’swill,knownasprobateassets.Otherassetsthatpassbywayofcontractorother
Continued...Uncollectible Collectibleinstrument,knownasnon-probateassets,canbeexcludedfromtheclaimsprocess.Manyfamiliespassassetstoyoungergenerationsthroughacombinationoftheseprobateandnon-probateassets.Ifarepresentativeorthecourtdeterminesthatvalidclaimexists,butthereisnotenoughtopaytheentireclaim,manyaskwhethertheentireclaimgetsrejected.Unlessanestateiscompletelybroke,aprovidermayreceivesomeportionoftheclaimthatisdue.Whenanestatereportsthatitisinsolvent(billsaregreaterthantheassetsavailabletopaythem),theprobatecourtholdsahearingtodeterminehowtheassetsaredividedamongtheremainingcreditors.Moststateshavecreatedsomesortofprioritylistforpayingtheseremainingbills.InOhio,forexample,thecostsarepaidinthefollowingorder:
1. Costs of Administration2. The first $4,000.00 of funeral and
$3,000.00 of burial costs3. Spousal Support Allowance4. Debts that are preferred under
federal law5. Expenses of the last illness6. An additional $2,000 for the
funeral director7. Expenses of the last stay in a
nursing home8. Taxes and Estate Recovery claims9. Debts to individuals performing
manual labor for the deceased not exceeding $300.00
10. Any other debts for which claims have been allowed
IntheOhioexample,ifafuneralserviceproviderstillhasanoutstandingbalanceandshemakesittoitem10onthislistandthereisnot
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
•11
enoughtopaytheprovider’sinvoicealongwiththeothercreditorsinthisfinalclass,thecourtwillintervenetodeterminepayment.Thecourtwilltotaltheoutstandingdebts,compareitwiththeassetsthatremainintheestate,andthenproratepayment.Iftheproviderhasaclaimthatrepresents20%ofthetotalremainingdebt,shewouldlikelyreceive20%ofthefundsthatremain.
Although,theprocessisverytechnicalandcantakesometimeandefforttocomplete,itcanbeaneffectivetooltohelpreduceaportionofafuneralserviceprovider’saccountsreceivableportfolioandpotentialbaddebtexpense.
SOME NOTES OF CAUTIONInsomecourts,claimantsthatareorganizedascorporationsorlimitedliabilitycompaniesarerequiredtohavecounselrepresenttheorganizationbeforethecourt.Pleaseknowtherulesofthecourtbeforemakingaclaim!
Becauseprobatelawisverystatespecific,thepreviousdiscussionoftheclaimsprocessisverygeneralandisnottobeconsideredlegaladvice.
Continued...Collectible Uncollectible
Winter 2011
Lemasters Consulting Parliament
•12
Case Study | How Not to Collect Money
continued on page 15
Everybusinesswantstogetthemoneytheyareowed.However,therearelimitsastowhatsteps
abusinesscantakeandhowfaritcangoinitscollectionefforts.
TheFederalTradeCommission(FTC)iscurrentlyinvolvedinacaseagainstForensicCaseManagement,d/b/aRumson,Bolling&Associates(Bolling)regardingviolationofvariouscollectionlaws.Bollingisacollectioncompanythatrepresentsvariousbusinesses.Similartomostcollectionagencies,Bollingcontractswithabusinessbyofferingtocollectbaddebtsforasetfee,typicallyacontingencyagreementintherangeof15%to50%ofthecollecteddebt.Bollingmarketsitselfasa“norecovery,nofee”company,andonlychargesifitcollects.
TheFTCfiledaComplaintagainstBollingonSeptember12,2011alleging,amongotherthings,thatBollingengagedindeceptive,unfair,andabusivepracticeswithbothitsClientsandthedebtorsfromwhichtheyweretryingtocollect.InsupportoftheFTC’sargument,itcitedseveralexamplesofimproperactivities,someofwhichinvolvedfuneralhomes.
OneexampleincludedBollingtryingtocollectfromadebtor,whowasunabletopayforherdaughter’sfuneral.Bollingthreatenedthemotherandtoldhertheyweregoingtodigupherdaughterandhangherfromatreeifshedidnotpaythedebt.OnanotheroccasionBollingcalledthemotherandthreatenedthattheywouldhaveher“dogarrested...shoothimup...eathim”andthensendtheSherifftoherhometoarresther.Bollingcalledthemothervariousnamessuchas
“deadbeatpieceofcrapcracker-head”and“whitetrash.”Bollingwentasfarasthreateningtokillher,stating“areyougoingtopaythisbillrightnow...oramIgoingtohavetokillyou?”
Inaseparatecollectionmatter,Bollingusedsimilarmethodswhendealingwithamotherwhostillowedafuneralhomethathadburiedbothofhersonsafterthetwodiedwithinoneweekofeachother.Inthatscenario,Bollingagaincalledthedebtorvariousnames,including“deadbeat”andaskedhowshewouldfeel“ifherson’sbodywasdugupanddroppedoutsideherdoor.”
Inadditiontotheseunbelievableandhorrificactions,theFTCalsocitednumerousexamplesofotherimproperactivitiessuchas:makingrepeatedcallstodebtorsdespiteBollingbeingtoldtheywerenottheproperparty,harassingdebtorsbycallingrepeatedlywithinminutesofthedebtorhangingup,anddisclosingdebtorinformationtootherpartiessuchascoworkers,employers,andneighbors.
AlloftheaboveexamplesallegedbytheFTCareviolationsofSection5(a)oftheFTCActandalsoaviolationoftheFairDebtCollectionPracticesAct.Generally,boththeselawsrelatetothepracticesofdebtcollectionandcommerce,andprohibitusingthreatsofviolenceorothercriminalmeans,usingobsceneorprofanelanguage,orcausingatelephonetoringorengageapersonintelephoneconversationrepeatedlywiththeintenttoannoy,abuseorharass.
TheFTC,initsComplaintaskedforatemporaryrestrainingorderagainstBollingtoimmediatelystopallofthe
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
•15
Continued...Case Studyallegedconduct.OnSeptember13,2001theFTC’srequestwasgrantedandadditionallytheCourtfrozealltheassetsofBollingandappointedatemporaryreceiver.Thecaseiscurrentlypendingandwillnodoubtraiseadditionalquestionsandissuesthroughthediscoveryprocess.
Obviouslytheallegationsinthiscaseareextremeandarenottypicalforthedeathcareprofessionoranyprofession,buttheseinstancesdooccur.Asadeathcareprovideryoumustbeawareofwhatyoucanandcannotdowhenitcomestocollections.Therearemanywaystopursueyourdebtsandusingacollectionagencycanbeaverysuccessfulmethod.Infact,therearesomecollectioncompaniesspecificallytailoredto,andcreatedforthedeathcareprofessionthatreceivemanyaccoladesontheirprocess.
Keepinmindthatyourbusinesswill,insomeway,beultimatelyresponsiblefortheactionsyoutakeinyourcollectionprocess.Whilethefinaloutcomeinthiscaseisstillpending,youcanbesurethatthefuneralhomesinvolvedwillsufferfromnegativeimpactandpossiblyotheractionsagainstthem.Alsorealizethatwhilethisisafederalcase,andyourbusinessmaynotfallundertheFTCActortheFDCPA,manystateshavesimilarfairdebtcollectionlawsthatapplytoallbusinessesthatattempttocollectdebts.Abusinessisaccountableforitsactions.ThisincludescreatingtheARandhowitchoosestocollectit.Usethiscaseastheextremeexampleofwhatnottodo—andcommunicatethistoanyonewhorepresentsyouinyourcollectionefforts.
Winter 2011
Lemasters Consulting Parliament
•16
continued on page 19
Onewaytomeasurethesuccessofanybusinessistomeasureitsprofitability.Inordertobe
profitableyouhavetomakemoney.However,makingmoneyisreallyjustthefirststep—youhavetocollectthemoneytoo.
Manybusinessesdon’tconsiderthedevastationthataccountsreceivable(AR)cancauseitsoperation.TherearemanywaystocalculatethetruecostofAR,whichincludelossofworktimeincollections,lossoffuturebusinessfromclientswhooweyoumoney,andeventhecosttoyourbusinessinitsattitudebetweenemployeesandmanagement.
Inapurelyfinancialaspectconsiderthefollowingformula:Total Debt/Net Profit = Sales To Offset
Whatdoesitmean?Considerthisexample.Let’ssayyouhaveonebad,butsomewhatlarge,accountof$10,000.ThisisyourTotalDebt.Next,considerthenetprofitofyourbusiness.Inaperfectworldyourbusinessshouldbearound5%to20%.(Manyreadingthiswillbelieve5%isanextremelyhighnumberand20%iscrazy,butthosenumbersexist.)Forourpurposeslet’suse5%foryourNetProfit.Thisequationis$10,000/5%,whichequals$200,000!Letmerepeatthat—$200,000.
So,foryourbusinessto“writeoff”thebaddebtyourbusinesswillhavetohave$200,000insales.Initssimplestform,thismeansthatoperatingat5%netprofit,foreverydollaryourbusinessbringsin,twentycentsgotowardsbaddebt.SoweknowthatARismorethanthedollarsonthe
books—buthowdoyoupreventit?
TherearethreemainwaystopreventAR.Rather,therearethreepointsoftimewhereyoucanpreventAR:priortomeetingafamily,whenyoumeetafamilyandafteryoumeetafamily.Understandthatthemoreyoudoearlier,themorelikelyyoupreventAR.ThisisaverybroadviewofhowtopreventARandthefollowingarejustafewthingstoconsider.
PRIOR TO MEETING A FAMILYYourcontractcanbethemostimportanttoolyouhaveinregardstopreventingAR.However,thisisonlytrueifyourcontractsarewrittenwell,andyouremployeesusethemcorrectly.Contractsyouuseshouldhaveimportanttermsandconditionsthatnotonlyexplainwhatyourclient’sresponsibilitiesare—butalsoprotectyourrights.
Thefirsttermthatshouldbeineverycontractis‘jointandseveral’language.Jointandseveralsimplymeansthatthecontractisenforceablebothjointlyandseverally.Itmeansthebusinesscancollectagainstanyoneandeveryonethatsigns.However,ifyourcontractdoesnotspecificallystatethatitisenforceablejointlyandseverally,thenthelawpresumesitisjointlyenforceable.Thismeansthatyoucanonlycollectaportionfromeachpartythatsigns.Soiftherearetwoparties,andtheinvoiceis$1000,youcanonlycollect$500fromeach.
Anotheroverlookeditemistheapplicablelawandvenueofanydisputes.Manycontractseitherhavenolanguageregardingthisissueorhavethewronglanguage.Thewrong
How to Collect Money | Ways to Avoid Accounts Receivable
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
•19
languagetypicallyfollowsas,“Thiscontractshallbeenforceablewheretheservicesareheld.”Thiscouldmeanthatiftheservices,oranypartoftheservices,areheldsomewhereotherthanwhereyourbusinessislocated,thenthatiswhereyoumayhavetogotocollect.Ifyouhaveafuneralatyourbusinessandthenthebodyisshippedtoanotherstateforthegravesideservice,thenyoumayhavetogotothatstatetotryandcollectifyoudonotgetpaid.Inthistransientworld,youneedtotieeverythingtoyourlocation,atleastasmuchaspossible.
WHEN YOU MEET A FAMILYDuringthemeetingisquitepossiblythemostcriticalpointwhenitcomestopreventingAR.Obviously,everybusinesswouldliketostandbehindthepolicythat‘Wedonotprovideservicesormerchandiseuntilwearepaidinfull.’Tothosewhofollowthat,praiseshouldbegivenandyoumaywanttoskipaheadtothenextarticle!Butforthosebusinessesthatworkintherealworldwheresometimesitjustdoesn’twork,herearetwoitemstoconsider.
First,giveyouremployeesthetoolstomaketheirjobeasier.Inthefuneralprofessionwearetypicallydealingwithfamiliesatoneofthemostdifficulttimes.Asprofessionals,thereisacompassionhatthatmustbewornattimes,butyoumustremembertoswitchbetweenyourcompassionhatandyourbusinesshatwhennecessary.Sometoolswillhelpmakethatswitcheasier.
OnetoolthatcanhelpisaFuneralPaymentOptionsForm.(Visitlemastersconsulting.com/formsto
downloadone.)Thisformhelpsthefuneralprovidercollectfunds,whileallowingthefuneralprovidertoremaincompassionate.Thebusinesssideshowsfamiliesnotonlythatthemoneyisduenow,butalsoeducatesthemonhowtopay,howtoavoidissuesinthefuture,andwhyitisimportanttoeveryone.
Asimportantastheform’scontent,ishowtouseit.Simplyhandingoveraformandsayingreadandsignisnotavaluableresource.Yourbusinessmustknowhowtousetheformandwhattheultimategoalorgoalsmaybe.Forexample,inthecaseoffinalpaymentyourgoalsmayincludedetermininghowthistransactionwillbehandled.Byputtingalinebyeachoption,thefamilywillhavetoinitialtheirchoiceandthereforebeaccountabletoit.
Asatoolforyourbusiness,theprovidercansetthisforminfrontofafamilyandsaysomethingalongthelinesof,“Onethingweneedtodoisdiscussthefinancialpaymentsfortheservicesandmerchandiseyouselected.Iamgoingtoleavethispaymentoptionformwithyou,andIwouldlikeforyoualltoreadit,initialhowyouwanttoproceed,andthensigntheform.Whileyoudothis,Iwillbegettingsomeotheritemsprepared.”Theprovidercanthenleaveandletthetool,yourform,dothework.Silenceisapowerfultool,andallowingthefamilytodecideontheirowncanbemucheasierfortheprovider.
Theseconditemtoconsideriscompletingthecontract.Itisamazinghowmanytimesbusinessesdonotgetanythingsigned!Itiscriticaltomakesurethattheproperparty—oreven
Continued...How to Collect Money
continued on page 20
Winter 2011
Lemasters Consulting Parliament
better,parties—signeverycontract.Ataminimumyourbusinessshouldhavetwopeoplesigneverycontractandthosetwopeopleshouldbefinanciallyresponsible.Ifthenextofkinarenotfinanciallyresponsible,orareunabletopay,youcanhavethemsigntoauthorizetheservices,butmakesurethatyouhavetwomorepeoplesignthecontractwhoareacceptingpayment.
AFTER YOU MEET A FAMILYThereisnodoubtthatifyouhavenotcollectedyourmoneybythetimeservicesormerchandisehavebeendelivered,thenyourlikelihoodofhavinguncollectableARincreaseseveryday.ThatiswhyitissocriticaltohaveagoodplanfordealingwithARimmediately.
First,establishaccountabilitywithinyourbusiness.Ifthereisanuncollectedinvoice,yourbusinessmustidentifywhoisresponsibleforthenextstep.AlackofdefinitiverolescausesdelaysandinconsistentcollectionsthatleadtouncollectedAR.Establishapolicyofwhowillberesponsibletocontactthefamily.Makethisareportableitemsoemployeestakeitseriouslyandknowtheyhavetohandlethisissue.Asasidenote—somebusinesseshaveusedARasabasisforyearlybonuses,byallowingaportionofanybonustobebasedupontheamountofoutstandingAR.
Second,createproceduresthatidentifythetimingandprocessofhandlingAR.Itemstoconsiderwouldbethetimingofphonecalls,thetimingofletters,thecontentofanycommunication,andtherequirementofkeepingnotesoneverystep.Phone
callsshouldstartsoon,andshouldbecommunicateddirectlyandtothepoint.Neverharass,butdon’tbeafraidtomaketheinquiry.Lettersshouldbestructuredtoincludeaseriesofatleastthreeletters.Thefirstshouldbeyourusualinvoicing,whichshouldbedonewithintwoweeksofservicesormerchandisedelivery.Thesecondlettershouldbewithin30daysandserveasareminder.Thethirdlettershouldbeaninquiryletterthatasksthefamilytopaytheirinvoice,inordertoavoidanyfurthercollectionefforts.Atthispoint,thebusinessneedstoevaluatethisARandifneeded,sendaFinalNotice,whichshouldcoincidewithyourcollectionmethodofeitheranattorneyoracollectionagency.
Overall,theprecedingareajustafewitemstoconsiderwhentryingtoavoidAR.AnybusinessrunstheriskofARifitcollectsmoney.Evenbusinessesthatcollecteverythingup-frontcanfaceproblemssuchasabadinsurancepolicyorabouncedcheck.Itiscriticaltomakesureyourbusinesshasallitsformsinorderbeforeyouevermeetafamily.Thisincludeseducatingandprovidingresourcestoyouremployeesonhowtousetheforms,andsettingupprocedurestomakeeveryoneaccountable—includingtheproviderandthefamily.ByidentifyingallthetimesyoucanpreventARandwhatstepswillhelpyouateachtime,yourbusinesscancreateaplanthatwillhelpcollectthemoneyyouareowed.
Continued...How to Collect Money
•20
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
continued on page 24
Theftofpre-paidfuneralscanquicklyescalateintohundredsofthousandsofdollars.Inquireaboutincludingafidelitybondoranemployeedishonestybondinyourpolicy;theseprovisionscoverthesetypesofbig-losses. PREVENTIONTherearecountlessthingsabusinesscandotopreventtheft.Thefollowingtwoitemsareeffectiveandaffordable.Theyincludepre-numberingcontractsandseparatingduties.
1. Pre-print sequential numbers on all contracts that are tied to money.Ifacontractcanbetiedtomoney,itisatypeofblankcheck.Considerapre-needcontract.Ifitwasnotnumbered,anyonecouldusetheformandsellpre-needswithoutturninganythingintothebusiness.Withnorecordofthecontract,therewouldbenoimmediatewaytodiscoverwhatcontractsareoutstanding.Muchlikeacheckbook,allpre-numberedcontractscanbetracked.Anyunusedormistakenlywrittencontractscanbevoided,andmostimportantlyalogofallcontractscanbekept.
2. Separate financial duties between multiple employees.Noonepersonshouldhandlethemoneythroughtheentireprocess.Instead,definetherolesofeveryonewhohandlesmoneywithinyourbusiness.Forexample,thepersonwhoopensthemailshouldnotbethesamepersonwhoinputsthepaymentandmakesthedeposit.Forsmallprovidersthiscanbemoredifficult,butthereisusuallyawaytomakethispolicyeffective.
DISCOVERYNoonewantstoeverdiscoverthatanemployeeisstealingmoneyfromthe
Funeralbusinessestrusttheiremployeestohandleafamily’sneedsatanincrediblydifficulttime,
andalsotohandlethefamily’sandthebusiness’smoney.Whilemostbusinesseswillsurviveonthistrust,therearemanythatwilllosebecauseofit.
Manybusinessesturnablindeyetotheproblembyeitherignoringthataproblemexists,orevenworse,ignoringwaystopreventtheprobleminthefirstplace.Thefollowingislistofstepsandprocedureswillhelpguardagainstlosingmoneytoembezzlementortheft.
PROACTIVE MEASURES1. Add steps to your preliminary procedures on how to prevent and resolve any potential problems. Oneexampleisrequiringacriminalbackgroundcheckforallnewemployees.Manybusinessesdonottakethisone,easysteptoflushoutpotentialfutureharm.Itisamazinghowmanytheftcasesinvolvesomeonewithsometypeofundiscoveredcriminalbackground.Businesseshavearighttoconductcriminalbackgroundchecks,sotakeadvantage.Furthermore,ifanewhirewillbehandlingfunds,youmayalsobeabletoconductacreditcheck.
2.Make sure your business has insurance coverage for embezzlement or theft. Mostinsurancepolicieshaveprovisionsforcoverageoftheseitems,howeverthestandardcoverageamountcanbequitelow,around$5,000.Thisisbecausemostbusinessesandinsurancecompaniesdonotconsiderthepossibilityofanextremecaseoccurring,andinsteadfocustheircoverageonthingslikepettycash,orminimalcashpayments.Unfortunately,largeamountscanbetakenfromrelativelysmallbusinesses.
How to Keep Money | Steps to Take to Avoid Theft
•23
Winter 2011
Lemasters Consulting Parliament
business,butthisdoesn’tmeanthatabusinessshouldnotbeonthelookout.Lettingyouremployeesknowthatyoutakethethreatofembezzlementseriouslyandthatthebusinesshasdiscoverymethodsinplace,actsasapreventivemethodaswell.Forspecificdiscoverymethods,considerthefollowing.
1. Review your accounts payable for phantom vendors. Phantomvendorsarefakebusinessesthatoftenresembleothervendorsorevenvendorsthatusedtoexist.Byusingthesefakenames,someonewithinyourbusinesscanwritechecksapprovedbymanagementtopaythesefakevendors.AcarefulreviewofAPcanhelpidentifythisscam.
2. Make your employees take vacation. Manytimestheftisaloneproject.Byforcingvacation,itallowsotheremployeestostepinandreviewtherecords.
PROSECUTIONTheultimategoalofanyprogramisprevention.However,ifyourbusinessisthevictimofemployeethefttherearesomedecisionstomake.Thedecisionmayseemsimple—punishthem—butchoosinghowcanbeachallenge.
Overalltherearetwooptions:restitutionandprosecution.Sometimesyoucansuccessfullypursueone,butrarelycanyougetboth.Andmanytimes,unfortunately,neitherpursuitisasuccess.Thereareprosandconstobothoptionsandeachcaseisdifferent.Inordertodeterminehowtoproceed,considerthefollowing.
Beforeanything,youshouldinvestigatethematter.Makesureyouunderstand
thefactsandhaveproofoftheoccurrence.Whilehavingproofmaymakeyoubelievethatyouhaveacase,youshouldknowthatmanycasesaresettledorthrownoutforlackofevidence.Additionally,evenifyouremployeeisconvictedoftheft,theirsentencingmaynotincluderestitution.Ifitdoes,youshouldknowthattherewilllikelybenofundsforrestitutionaftertheyarereleased.Oncecriminalactionsarestarted,itislikelythatanyfundsandpropertywillbeseizeduntilacourtdetermineswhoownswhat.So,althoughyoumayhaveastrongdesiretomaketheemployeepayfortheiractions,animmediatecalltothepolicecouldaffectavailabilityofrestitution.
Youshouldneverthreatentofurtherprosecuteyouremployeeunlessrestitutionismade.Courtscanlookatthisasextortionandthiscancreateotherissuessuchaschargesagainstyou!Anyrestitutionmustbevoluntary,butitisalwaysanoption.Ifyoudecideyouwanttotrytogetrestitution,besuretogettheemployeetolisttheitemsandacknowledgethatitisafullaccounting.Also,itisappropriatetohavetheemployeesignapromissorynoteforanyamountstolen/owedtothebusiness.Thepromissorynoteisanenforceablecontractandallowsthebusinesstoseekajudgmentifpaymentisnotmade.
Employeetheftisagreatunknownamongbusinesses.Manybusinessesdonotthinkatheftwillhappentothemandothersdonotevenlooktoseeifitalreadyhashappened.Theftisapainfulrealizationforanybusiness;itnotonlycancauseeconomicharm,itcanalsocreatehardshipsinthedailyoperationofthebusinessthroughdoubtinmanagementandotheremployees.The
Continued...How to Keep Money
•24
continued on page 27
listaboveisabroadviewofjustafewwaystohelplimittheopportunitiesforemployeetheftinyourbusiness.Usethislistasastartingpointforyourbusinesstomakesureyouhaveaprograminplacethatacknowledgesemployeetheftandidentifiesyourpracticesandprocedures.
Winter 2011
Lemasters Consulting Parliament
Winter 2011
Lemasters Consulting Parliament
Winter 2011