Knowing how to keep the bookkeeping for funeral homes is possibly one of the most important elements of the company, because it allows us to know the economic and financial reality of the business and its evolution, so that we can anticipate future events or, at least, be prepared to face them.
For correct bookkeeping for funeral home expenses, it is best to follow a number of international standards set by the International Accounting Standards (IAS), with special attention to IAS 18, which establishes how to record income.
How to manage the bookkeeping for funeral homes
Are you wondering how to keep the bookkeeping for funeral homes and don’t know where to start? The first step to properly account for your funeral home expenses is to collect and classify all the accounting documents: invoices (both issued and received), payslips, expense tickets… The best thing to do is to have all this documentation digitalised: it is much easier to classify, you won’t have to accumulate filing cabinets in the office and you will improve the order of your bookkeeping. In addition, you can create a backup copy to avoid any possible unpleasantness.
Once you have collected all the accounting documents, you should include them in an account book, differentiating between expenses and income. Although it would be perfectly valid to use a simple Excel spreadsheet, the truth is that nowadays there are countless bookkeeping programmes, many of them with a free licence, which make the financial management of funeral homes easier and even help with inventory management.
As a business, you have to be up to date with your taxes and know what returns you have to file with the tax authorities.
In this life there are two inescapable things, death and the tax authorities. This phrase attributed to Thomas Jefferson is absolutely true. As a business, you need to be up to date with your taxes and know what returns to file with the tax authorities. If you feel lost on this subject or are afraid of the bureaucracy, the best thing to do is to hire an accountant to take care of your taxes. You will sleep easier and avoid fines and penalties if you do not comply with the tax formalities.
Try to be methodical and tidy with the bookkeeping for your funeral home. There’s no worse nightmare than searching for a particular invoice in a huge pile of paperwork just before an inspection or finding yourself with a whole box of messy documentation the day before the tax deadline. Ideally, you should keep your bookkeeping up to date so that you can quickly spot any errors, oversights or non-payments.
We have given you some guidelines to get you started with the bookkeeping for funeral expenses, but knowing how to keep the bookkeeping for funeral homes goes beyond that, as it requires familiarity with some rules that will help you to adapt your activity to a standardised framework.
What IAS 18 is and why you should know about it
IAS 18 is an international bookkeeping standard that regulates which items should be considered as revenue from ordinary activities. These standards were created by the IASC (International Accounting Standards Committee) and basically serve to ensure that all companies use the same system when reporting their income. In this way, IAS 18 promotes greater transparency. In the United States, listed companies have the option of presenting their financial statements under the national standard (US GAAP) or under IAS, which are also being adopted in most Asian and American countries.
What to include in the income line item according to IAS 18
The IASC defines “revenue” as: increases in economic benefits, occurring during the accounting period, in the form of inflows or increases in the value of assets, or decreases in liabilities, which result in increases in equity and are not related to contributions from owners of the entity. The concept of revenue includes both revenue from ordinary activities per se and gains. Revenue from ordinary activities proper arises in the ordinary course of an entity’s business and goes by a variety of names, such as sales, commissions, interest, dividends and royalties.
What IAS 18 means, in a very summarised way, is that revenue from ordinary activities should include economic benefits from the sale of goods (coffins, urns, niches, etc.), the provision of services (funeral service, thanatoaesthetic service, a transfer, a ceremony, etc.), and the use by others of assets of the entity that produce interest, royalties and dividends.
Funeral home accounting: good practice
1. Bookkeeping with rigour and accuracy
Learning how to manage the bookkeeping for funeral homes helps us, first and foremost, to understand the economic and financial reality of our company and how it is evolving. There is therefore no point in trying to cheat yourself. The bookkeeping must be completed accurately, rigorously accounting for all expenses that are recorded and not adding profits until they are realised.
2. Apply accounting standards
It is best to follow the International Accounting Standards (IAS), because they provide the most accurate picture of a company’s financial position. Each country has adopted these international standards into its own legislation. In Spain it is the General Accounting Plan (approved by Royal Decree 1514/2007), in the United States it is the US GAAP (Generally Accepted Accounting Principles) and in Mexico, the Mexican Institute of Public Accountants is the one that sets the guidelines to follow with regard to bookkeeping and auditing procedures.
3. Use a two-account system
These standards allow companies some flexibility in adapting the charts of accounts according to their needs, but they do share the same criterion: for proper bookkeeping, transactions must be recorded clearly and transparently according to a two-account system, one for outgoing goods or services and one for incoming ones, because economic events do not come out of nowhere: if one asset increases, another one has to decrease. If we have more coffins in stock, it means that a payment for them has been recorded.
4. Get external advice
You can always opt to take a specialised course that will enable you to master the accounting concepts we have explained, but all the experts recommend companies to have external or internal advice to manage the bookkeeping for funeral homes. It is not easy to know how to keep the bookkeeping for funeral homes in detail and requires an almost exclusive dedication that increases at the time of facing tax payments on a quarterly basis, or the annual closing of the fiscal year. Of course, it must be a professional and reliable accountant who specialises in these matters.