Storms, fires, and other disasters can exact a significant financial toll. A recent Federal Reserve System study found that over one-third of small businesses impacted by a disaster had revenue losses of over $25,000. That figure doesn’t account for asset losses.
Consider these tips to protect company finances:
- Understand your financial coverage. When disaster strikes, revenue often stops, so consider whether you want to invest in insurance to cover lost income post-disaster. For example, business income insurance (also called business interruption insurance) can help replace income that’s lost while you’re recovering. It may cover payroll and other operating expenses and pay for relocation to a temporary site. Talk with your broker about the cost of this type of plan.
- Check your emergency funds. Even with business income coverage, there may be additional expenses that need to be paid, particularly while you’re waiting for funds from your insurance provider. Evaluate your cash reserves to gauge what they might cover and how far they might stretch. If your reserves are weak, devise a plan for shoring them up by adding small amounts at a time.
- Consider a line of credit. Another option for covering immediate cash outlays following a disaster is through a business line of credit. This allows you to use the funds you need and repay them as your financial situation stabilizes. Keep in mind that the best time to apply for a line of credit is when your cash flow and financials are strong.
- Invest in remote banking tools. The ability to manage funds and pay bills from anywhere may help to lessen a disaster’s impact on financial operations. Consider online or mobile banking so you can monitor balances, pay bills, and deposit checks from any internet-connected location. Also, consider using cloud-based money management and accounting software so you can handle these functions remotely.
- Understand tax rules. Special tax law provisions may help accelerate your recovery after a disaster, particularly if your location is declared a major disaster area. You may be able to deduct the loss or partial loss of business-use property in the tax year the disaster occurred or amend your return for the previous tax year to deduct the loss. This IRS guide provides details.
At Citizens Bank, we are committed to helping you overcome whatever business challenge you may face. Our business banking professionals can help you evaluate financial products and services to strengthen your firm and its financial resilience. To learn more, please call 1-800-428-7463, visit us online, or visit your nearest Citizens Bank branch.