Can Your Business Handle a Financial Crisis? | Baton Rouge Accountant

A main principle of financial planning would be to establish an emergency fund. It is important to have extra money saved up, especially in today’s society when the economy is changing constantly. You should be prepared for things you can’t control like a natural disaster, staffing upset, or an unplanned event. These things can all interrupt your business flow, and we are here to help. 

Defining a Financial Emergency

According to each practitioner’s unique circumstance, the criteria that constitutes a financial crisis may differ. If several team members were to quit at a larger, financially stable business, it would likely go unnoticed. However, for a small business this could be a big problem.

If there was a fire, flood, or other damaging event, it would be disastrous for any business, big or small. All of these scenarios are prime reasons for setting up a business emergency fund because you truly never know what could happen.

How Much Should You Set Aside?

The majority of financial advisors recommend saving between 3-6 months of salary in individual emergency funds. Nevertheless, these amounts probably won’t be enough for even a small business. There are several variables, but here are some questions you should ask yourself to find out what would be the best decision for you:

• What risks are not covered by insurance?
• How much are replacement costs for essential equipment that is damaged?
• What are your limits on insurance?
• How long can your business stay afloat if you are unable to generate revenue?
• What would it cost to arrange coverage for staff members who quit on short notice?
• How long can you wait for insurance claims to be processed?

Knowing Where to Start

A lot of people don’t anticipate financial crises, which means they won’t think to save money for a rainy day. If you have not started an emergency fund for your business, now is the time to start setting money aside and creating a plan. Don’t know where to start? A great place to start is by scheduling a consultation with our accounting team in 70808. We can assess your assets and figure out the next steps to make sure your business is financially secure for any crises that may occur. Call our accounting office in Baton Rouge, LA today.