Four precautions to prepare your firm against natural disasters

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As Florence wreaks havoc in the Carolinas, it bears remembering that powerful storms and other extreme weather events can wipe out or severely hurt accounting firms unless they’re prepared.

According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after disaster strikes, and 90 percent of small businesses fail within a year unless they can resume operations within five days. Most often, the reasons relate to cash flow, involving inability to find a new location, destruction of inventory, or losing clients during a long period of closing.

Hurricanes cause millions of dollars of damage in the U.S. every year, and wildfires have become increasingly dangerous in Western states.

Firms hit by a hurricane — or by a wildfire, tornado, blizzard or ice storm — typically need to close their physical locations as they recover, clean up, and sometimes rebuild from scratch. It can be difficult or impossible to reopen if you aren’t properly prepared.

These four precautions can help you improve your business’s chances of surviving a hurricane or other extreme event:

1. Understand the damage potential. Recognize how much damage a disaster can cause. Even if your firm’s offices are outside of traditional hurricane and flood disaster areas, be aware of what’s happening. For instance, flooding from Hurricane Irene in 2011 surprisingly delivered the biggest wallop to New England instead of the Southeast.

2. Develop a business continuity plan. This plan, also called a disaster recovery plan, is a crucial part of your business operations. It should answer questions including: If a hurricane forced you out of your location today, what would happen? What parts of your business would still be able to operate? What would you use as a temporary location? How would you contact your employees? How would you notify your customers? If you can’t reach your customers, they may turn to a competitor to get their needs met.

Lay out operating guidelines, marketing statements, customer service strategies, and more. Your plan should include how to communicate with employees, customers, vendors and suppliers, as well as how to reopen as quickly as possible.

Prepare to keep your employees informed. In addition to providing operational instructions, if they will be out of work, whether for a short or long period of time, you’ll need to communicate that to them so they can plan appropriately. Also, full-time employees who are unable to work through no fault of their own may be eligible for unemployment pay; let them know whom they should call to find out if they are eligible, and what kind of benefits they may be able to claim.

3. Back up your data off-site. Keep your data safe. Even for a solo CPA practice, letting all firm data rest on a single local drive is a mistake. If you’re forced to evacuate, you may not be able to take the relevant computers or hard drives with you.

As cloud computing becomes more and more widespread, there’s less and less excuse for having the only copies of anything on-site. Files, including clients’ tax returns, W-2s, 1099s and other business documents, must be digitized. This can be as simple as using a cloud service to store or back up files on a daily basis, making your information available anywhere you have a Wi-Fi connection. Or if you need more storage or more complicated storage, you can contract with a company that manages regular backups to preserve data integrity.

With cloud computing, you can use almost any laptop to log into your online software and resume business operations. You don’t have to try to find software keys or recover information from damaged hard drives.

4. Reduce the physical risk factors. There are many things you can do to protect your offices from damage.

To alleviate hurricane damage, for instance, install hurricane shutters; remove dead and diseased trees and branches; identify any outdoor items to be brought inside; and clean rain gutters, outside stairwells, window wells, drain lines and downspouts.

While the worst wildfires won’t be stopped by any single property owner’s preparation, the National Fire Protection Association suggests simple tasks to keep fires at bay, such as clearing roofs of leaves and debris, pruning tree branches to six or 10 feet off the ground, removing brush or dry shrubs, and building with nonflammable materials.

Businesses can withstand disasters. After all, nearly two-thirds of companies come through them and continue to operate. However, recovering from losses can take time. Planning ahead will help you minimize that time and increase your firm’s chances of weathering extreme events.

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Disaster planning Crisis Management Disaster recovery Insurance