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“What are you going to do when the rent comes 'round?” expresses in realistic terms the question that all of us who study finances are asking ourselves today.
In the not too far distant future it is probable that we shall again face a "buyer's market." For seven years most of us have had a seller's market wherein we prospered-or at least we were fooled into thinking so. Very soon people are going to be very loath to let go of their money for anything. The threat of continued war and the actuality of taxes are upon us. If is a sad fact that the people of the great middle class (wherein has lain the great purchasing power of the United States) are rapidly running out of money.
The Three Great Lags-It would appear to the student of economics that the cemetery industry is soon to be hit with the greatest impact in our history¬ the three great economic "lags." These "three musketeers" of evil fame I call the "gross sales lag," the "profit lag," and the "cash lag.” If I do nothing else in this talk but to arouse you thoroughly and place you on guard" against the great danger of these three sly, insidious, treacherous, undermining termites I feel I shall have performed in part my duty to you.
The Gross Sales Lag-In terms of today's devalued dollar, your gross dollar sales should be twice your 1940 gross dollar sales and 60% more than your 1945 sales, if present day dollar sales are to be really equal to the old days. There are only a few, if any, who could accomplish that miracle-unless you possess a new property, in which case doubling a small amount of gross sales can be done very easily.
The sales resistance attitude of the public will grow stronger and stronger because of many things, such as growing taxes that will take from your cus¬tomers cash they might have spent with you, threat of an unknown war, govern¬ment propaganda against increased prices, the uncertainty generally prevalent because of a confused Washington. And yet, your prices must rise to keep step with your rising costs, which creates even more sales resistance. Money is changing hands, and it may be that in some degree we can overcome this "sales resistance lag," by giving particular attention to the so-called laboring classes. If we want money, we must go where the money is.
The Profit Lag- The "profit lag" has two phases. Economic history teaches that during an inflationary period, labor and material costs rise much faster than the public's willingness to accept higher prices, which means greatly reduced profits. The second phase of this "profit lag" is the higher cost of replacement of inventory. Most of us today are making a fictitious profit because we are selling inventory that was manufactured at a much lower cost than that of today. Men we begin to replace this inventory, be it crypts, niches, graves, vaults or what not, we shall find that the difference between what this new inventory costs, and the price at which we can sell it, is much less than before.
The Cash Lag- The last and perhaps most dangerous lag is the "cash lag." Contrary to public and government opinion, profits are not all in cash. The fact is if our bookkeeping was such that we could isolate this year's cash receipts from the payments on last year's business, we would find that the cash content in the total profit is much lower than we think. In fact, it is entirely possible that none of this year's profit is in cash but is in accounts receivable-trucks, maintenance equipment, inventories of salable products, operating supplies, new buildings or additions to the old, etc., etc.
We, however, are compelled to pay all cash or partially cash on many things¬ such as payrolls, city, county, state and federal taxes, operating supplies, sales¬men's commissions, contractual payments on buildings, etc. I do not need to emphasize to you where and how your cash slips away from you. Again your cash income will continue to dwindle because, in order to offset the "gross sales lag," you will endeavor to make it easier and easier for your purchasers by asking less and less cash for their monthly payments.
As expenses go up this cash lag becomes greater and greater until you may well find yourself borrowing money to pay your taxes and other items that have in themselves no hope of compensating return. As the outgo of cash exceeds the accumulation of cash year after year, you will soon find your cash supply always inadequate to take care of your cash necessities, and borrowings therefore steadily increase.
From the publication:
“1950-1951 Cemetery Yearbook”
NCA 21st Annual Meeting
Hotel Schroeder, Milwaukee, Wisconsin
October 18, 19, 20 and 21, 1950