Baton Rouge LA CPA | Can Your Business Weather a Financial Storm?

One of the core financial planning tenets is the need to establish an emergency fund. Having a financial safety net is essential, especially today when the economy and the world is facing so much uncertainty. Should an unexpected natural disaster, staffing upset, or other unplanned event interrupt your flow of business, are you prepared to ride out the difficulty?

Defining a financial emergency

The criteria for what constitutes a financial storm or emergency will be defined differently based on each practitioner’s unique circumstances. A large, financially stable business may barely notice if several staff members suddenly quit. That same scenario could wreak havoc on a small business. Of course, a fire, flood or other damaging event is likely to be disastrous for any business if you are unable to see patients and generate revenue for an extended period of time. This is why having a business emergency fund in place is so vital: to help you carry on, make payroll and pay bills until things return to normalcy.

How much should you set aside?

Most financial advisors recommend saving between 3 and 6 months salary in individual emergency funds. However, these amounts will likely be insufficient for even a small business. There are a number of variables, but here are some questions to consider as you calculate what makes sense for you:

·         What are your insurance limits?

·         How much time will you wait for insurance claims to be processed?

·         What risks are not covered by insurance?

·         How long can your business survive if you are unable to generate revenue?

·         What would it cost to arrange coverage for staff members who quit unexpectedly?

·         How much are replacement costs for essential equipment that is damaged and inoperable?

Knowing where to start

Many people don’t save for a rainy day because they don’t anticipate financial emergencies until it’s too late to prepare. If you have not begun shoring up your business against financial storms, now is the time to begin putting a plan in place. An excellent place to start is by scheduling a consultation with Apple Guerin Company LLC. We can assess your assets and your risk, and identify vital next steps to ensure your business is financially secure, no matter what the future holds.