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The Online Advisor

November 2005

New Business

Be prepared: How to lessen the blow of a disaster


When recent hurricanes slammed into the Gulf Coast, many families and businesses found themselves woefully unprepared. Apart from the tragic loss of life, the hurricanes’ impact on individuals was also financial: lost personal and real property, lost records, lost funds. In addition, businesses couldn’t gain access to administrative offices and manufacturing facilities, inventories, computer files, or customer records.

How can you financially prepare your family or business for disaster? Here are some tips.

For businesses

* Establish an emergency plan. Use the plan to evaluate areas of risk and prioritize business operations. What are the key functions that must continue to take place for the business to operate without interruption? The plan should also describe recovery strategies that will allow the business to operate if disaster strikes. Such strategies should address loss of premises, software and hardware, communications, machinery, and vital information. Finally, the plan should be periodically tested and reviewed. This could involve simulating disaster situations and talking with employees about how the plan should be implemented.

* Backup your day-to-day operational data. This can be done via computer tapes that are taken offsite, nightly backups sent to an Internet company, real-time backups while employees work, or any combination of these. The goal is to make sure your vital business information is protected and secure.

* Maintain commercial insurance. Visit your insurance agent periodically to ensure that your business has adequate coverage and can get needed funds in the event of disaster.

For individuals

* Keep a small amount of cash on hand. If a disaster strikes, ATM machines may not be usable and businesses may not accept credit cards, so you’ll want to have enough currency to purchase necessities for a few days.

* Keep important documents in a safe and easily accessible place. Consider keeping important documents - including legal papers, insurance policies, birth certificates, and vehicle titles - in a small fireproof safe near your home’s most likely exit.

* Keep an up-to-date inventory of your household possessions. You can easily create such an inventory by walking through your house with a video camera and describing each item that comes into view. Such an inventory record will prove invaluable for insurance recovery.

* Keep backups of important documents and records. These could be paper copies or scanned electronic copies and should include financial data files. These records should be kept away from your home in a safety deposit box or other secure location.

As recent events have shown, advance preparation for disasters can make the difference between inconvenience and financial failure. If you need help preparing a disaster plan, give us a call.

Before you invest in any business, it's always a good idea to discuss the proposed venture with your advisors. If you would like assistance with evaluating a business opportunity or with legitimate tax planning, please call our office.

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