When it comes to having a hurricane preparedness plan for your business, you’ve probably seen all the lists of supplies to stock and ways to prepare your property to minimize damage. But most people don’t think about the implications for their business and finances until after the storm has passed.
As we navigate an unpredictable hurricane season, businesses need to think beyond preparations for their physical property—you need to safeguard your financial well-being. A timely email newsletter from Vicky M. Zelen, President of Zelen Risk Solutions, Inc., reminded us that hurricane season is upon us, and we need to have business and financial protections in place.
Whether it is a hurricane, flood, lightning, or simply aging equipment and outdated processes, businesses should assess their hurricane and contingency planning strategies, and how they can preserve their documents and records in the case of a catastrophe.
We have put together some ideas to help you with hurricane contingency planning for your business.
Know your business risk tolerance
When assessing disaster readiness, there’s always one question that experts ask: how much is too much? Is it worth having backup equipment in a secure offsite location if a total disaster would also significantly affect your business’s customer base? Is there a disaster that would put you completely out of business? Depending on your business and customers, there will come a point where it is imprudent to prepare for a disaster from which your business cannot recover.
Keep important documents safe and handy
Remember that you may be without power and/or internet access for an extended period after the storm passes. Keep hard copies of all your insurance information (policy numbers and contact numbers) accessible. If you need to make a claim, you won’t want to wait until you can use your computer.
It’s also a good idea to compile anything you would need if you must evacuate—business licenses and permits, ownership and registration documents, financial information, legal documents, tax source documents, etc.
Maintain evidence of high-value items
Take photos and/or videos of your property before the storm so you have a record in the event of a claim. Keeping records of photographs and videotapes can help you verify the market value of items covered by insurance and casualty loss claims. After taking photos/videos, the second step is to store them in a safe place. Nowadays, that safe space is accessible from anywhere, at any time, on any connected device.
Create a backup of your records electronically
Computer hardware can easily be damaged in a hurricane. Don’t lose your data—set up a cloud-based backup that will allow you to retrieve everything. You can shift everything on your hard drive to cloud storage or use a service that automatically backs up everything you save. From photos to documents to important records, it’s all worth your peace of mind to back it up.
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While you’re at it, switch to cloud accounting
One of the greatest challenges businesses face post-hurricane is getting back online, but there is something you can do to avoid becoming the victim of the next disastrous weather event: join the cloud. Cloud-based accounting software is independent of your hardware. That means all the customer information you have, including receipts, invoices, contact information etc., doesn’t suffer the negative effects of flooding or weather damage. It exists online and is backed by powerful systems that prevent crashes.
Our team’s preferred accounting software is Xero, which is completely cloud-based with no need for desktops or backup systems at your physical office. Let us help you switch to the cloud!
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P.S. Consider storing all your business data and using applications on the cloud so that even when the disaster is over and (worst-case scenario) your office building has been swept away, your team can continue working from home with access to all the tools they need.
Update emergency procedures
Do your employees know what to do in the case of a catastrophic business event or change? Make sure your employees know the hurricane business continuity plan if something happens to your building or other crucial property. You should also create and maintain an emergency contact list (a hard copy and in the cloud, of course), including local emergency services, insurance contacts, and key personnel.
Be aware of upcoming due dates and deadlines
Although it can feel like your world has stopped when a disaster strikes, bills and deadlines continue to apply. Wherever possible, schedule payments in advance to avoid late charges and interest. Sometimes companies will waive late fees after the fact of a disaster. If you find yourself in this situation, it’s worth contacting the creditor to ask.
If your business suffers property damage, investigate tax deductions
If your business property is damaged due to a natural disaster, and your area has been declared a disaster zone by the President of the United States, you may qualify for tax deductions related to your losses. Here’s how to proceed:
- First, you should file a claim with your business insurance provider to cover the damages
- If your insurance settlement doesn’t cover the full extent of the damage, you may be eligible for a disaster loss deduction on your tax return
For example, imagine your business owns a warehouse located in a coastal city. After a hurricane hits, the warehouse suffers significant damage due to flooding, and the President declares the area a federal disaster zone. You file a claim with your insurance company, but they only cover a portion of the repair costs because your policy has a limit on flood damage.
In this case, the unreimbursed portion of the repair costs may be deductible as a casualty loss on your tax return. However, it’s essential to consult a tax professional to ensure you’re eligible for this deduction and that it’s applied correctly.
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A quick hurricane contingency plan checklist for businesses:
1. Risk assessment
- Evaluate your business’s risk tolerance and potential impact of a hurricane
- Assess whether backup equipment and facilities are necessary
2. Document and data protection
- Secure important documents
- Take photos/videos of property and equipment
- Store images in a secure, cloud-based location
- Set up cloud-based backups for all critical data
- Consider switching to cloud accounting software
- Keep a list of critical contacts and resources
3. Emergency procedures
- Ensure employees are familiar with the hurricane business continuity plan
- Develop a communication plan for staff and stakeholders
4. Financial preparations
- Schedule payments in advance where possible
5. Post-disaster actions
- Submit claims for damages and losses promptly
- Consult with a tax professional about potential disaster loss deductions
- Contact creditors about potential delays and request fee waivers if needed
- Have a plan for remote work if the office is inaccessible
Reminder: Regularly review and update your contingency plan to address new risks and changes in your business environment. Let us know if you need help putting your financial safeguards in place. As a Jacksonville-based CPA firm, we’re here to help you weather any storm.