Your Finance Team

How to Protect Your Business Against Natural Disaster

There’s no easy way to pick up the pieces after a natural disaster, but there are ways to be prepared. A little bit of foresight can go a long way in the the painful process of getting your business back up and running, or at least to a state that you can sustain for an extended period.

The primary concerns during a natural disaster, of course, are the safety of your people and the preservation of your property. But once the event passes, the hard work of reconstructing your operation begins. Here is a five-point checklist to help you think about contingencies in the event of an emergency.

Back up your data

This is a business best practice regardless of natural disaster, but it always bears mentioning: data redundancy is essential to continuing operations when your primary place of business is compromised. Make an effort to move all your records off paper and, ideally, to the cloud; there’s no advantage in “backing up” to a hard drive sitting next to the computer you’re trying to preserve.

Document your assets

Know what kind of insurance you have. If you have business interruption insurance, for example, it may specify the kind of calamity for which it will trigger into effect. (Maybe earthquakes are covered, but not floods.) No matter what insurance you have, make sure you know what documentation you’ll need when you present for a claim. You probably don’t have receipts for everything in your office, but even just taking photos of your business assets will help you assert their cost basis and get the right deduction.

Identify your company’s bare necessities

So your company has become one of the thousands of businesses brought to a standstill by a disaster. Your people are safe, you’ve taken a relief loan from the government… what now? That’s when it’ll be handy to have pre-arranged a plan for operating your business on an emergency basis, without your normal headquarters or staff. Plan your skeleton crew now, along with where you’ll set up, how you’ll communicate with one another, and how logistics will reroute.

Budget for payroll without revenue

After a disaster, it might be a while before your company can get back to making income. Instead of improvising a revenue-free operating budget, set aside a cash reserve for a (very) rainy day. If you work somewhere with a seasonal risk of disaster such as a hurricane-prone area, consider making this budget item a once-annual line item. The faster you can get back to making payroll, the faster you can get back to generating revenue.

Look for risk in your supply chain

It’s not just you who could fall victim to a natural disaster. It might be a business partner across the country who gets caught in a bad situation, suddenly finding themselves unable to supply a good or service on which your business relies. Prevent this type of disruption by making your supply chain as redundant as your data. Always have an emergency backup for any partner located in an area at risk of natural disaster.

Accountants need to take the lead

There’s a case to be made that accounting and finance is the most appropriate function to spearhead disaster planning. “The accountant has training in objectivity and the ability to quantify diverse elements of information,” said CPA Stan Weiner in an AccountingWEB.com panel on the subject of disaster preparedness. “Their background provides the ability to formulate a fundamental plan utilizing the unique talents of the company.”

The same unique position that makes this function a natural analyst at the organization, in other words, also means that accounting and finance should lead the preparations for the unthinkable.

For more information, see the IRS’s statement on preparing your business for natural disasters.

 

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