Press Room

Disaster preparation can save your business

Money Management

Monthly financial advice
from the MACPA

For release: July 2006

There is no way to prevent your business from suffering losses that result from a sudden and unexpected disaster, but there are steps you can take now to plan for the worst.

According to the Maryland Association of CPAs, you don't need a large company budget to protect your company from financial ruin in the event of a disaster. Here are several steps you should take now to make sure your company remains in the black.

Assess your risks

There are some threats that all businesses face, such as fire, theft, fraud or vandalism. Other threats are more specific to an industry, such as equipment failures, or to a location, as in the case of flooding. Assess what could potentially go wrong, the impact it would have on your business and how likely it is to occur.

Once you have identified and prioritized your business' vulnerabilities, you can take steps to address those threats.

Key safeguards

Be sure the building in which your businesss located conforms to local building codes and that the electrical system is up-to-date. Train your employees in fire safety and consider installing a sprinkler system. If you have a security system, check it frequently to ensure it is in good working order.

Plan, plan, plan

You know what your business needs to operate. If a physical location is critical, search for alternative sites now that you could use in an emergency. Could you operate out of your home or a nearby storefront? Businesses that rely on equipment — heavy or office — should keep an inventory of brand and model information and identify backup sources. Food-related businesses dependent on refrigeration should consider purchasing an emergency generator. A generator can also provide a supply of electrical power to maintain operations for a time.

Don't overlook preparing for disasters that may impact your suppliers. Having alternative sources for any business-critical supplies you need to operate your business is important. It's a good idea to place occasional orders with those vendors as well.

Protect business information

For most companies, business records are essential. Any business owner with extensive computer applications and files should, on a regular basis, back them up to a tape system or CDs stored offsite. If it's warranted, look into computer services that automatically back up your data and electronically transmit it to an offsite data storage facility. Be sure to store paper copies of important contracts and financial information, as well as employee, vendor and customer records offsite as well.

Maintain proper insurance

One of the key ways you can protect your business is with proper insurance. You should meet with your insurance provider to determine if your business insurance policy covers the areas where your business is most vulnerable. If you have a home business, you may need to buy extra policies or riders.

Business owners should look into purchasing business interruption insurance, in addition to a liability policy. Business interruption insurance works like disability insurance in that it compensates you for lost income related to a disaster. The income it provides could help you meet payrolls, pay vendors and purchase inventory until you are back in business again.

Consult with a CPA

There's a great deal you can do — both before disaster strikes and afterwards — to get your business back on its feet quickly. A CPA skilled in risk assessment can help you create a comprehensive plan. Once you have a plan in place, be sure to review it regularly.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.

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