DISASTER RECOVERY FOR FARMERS
There are many ways in which farming businesses can be affected by natural disasters. The most obvious is where the business experiences physical damage to premises, equipment or stock.
A common mistake is to think that no physical damage means there is no effect on the business, however, there can be many other effects besides the physical. Your business can be indirectly affected where, for example, your client base is severely affected and as a result your level of sales is reduced.
Following a natural disaster, there are a number of issues that will affect the time it takes to get your business back to usual operations, including:-
- The assessment of damage and the processing of insurance claims.
- The ability to communicate with employees, customers, and suppliers.
- Accessing Government assistance where available.
- Assessing your businesses financial position and developing your recovery plan.
Your Disaster Recovery Plan
The assessment of your business's financial position is an important first step in your Disaster Recovery Plan. There may be a long period before your business can begin trading again, and there may be substantial outgoings incurred during this time. These issues need to be determined as the first step in your Recovery Plan. Your Plan should outline what actions need to be taken to re-open your business, and who will be responsible for each action. Your Plan should also include detailed cashflow forecasts to enable you to put together a timetable based on affordability.
It is often difficult to make assumptions after a disaster, as factors that have affected your business on a day to day basis in the past, may no longer be relevant, and the market in which you operate may have experienced significant changes. Having offices located throughout regional Queensland, many of the staff at Moore Stephens Queensland have been through major disasters in the past and can assist by drawing on their own personal experiences, as well as those of their clients.
- Initial Assessment
Often, a natural disaster will be a turning point for many businesses. It is a time for business owners to take stock of what they have been doing in the past, and make some decisions on how to change things for the better. In these cases, a Disaster Recovery Plan can mean the evolution of a more robust and profitable business.
In some cases however, the question is not "How do I re-open my business", but a more fundamental one of "Should I re-open my business?" If this is the case, your initial assessment should consider the following questions:
- Were you happy running the business before the disaster, and were you achieving the profits you wanted?
- What other opportunities might be available to you given your experience and qualifications?
- Are you prepared for the extra demand, both financially, physically, and emotionally that will be placed on you if you intend to re-open?
- What has been the effect on your premises, equipment, stock, and staff?
- Has the marketplace changed? Demand for your product; effect of disaster on clients, customers, and competitors.
- Financial Assessment
Following your initial assessment, the next step you should take is a review of your business's financial position. In order to do this you will need to access your financial statements from the beginning of the current financial year until the time of the disaster. In some cases, you may have prepared interim financial statements prior to the disaster, if not, you should contact your Moore Stephens accountant to organise this. If your financial records have been destroyed, you may have to reconstruct them from other sources. Such sources may include:-
- Australian Taxation Office - copies of previous BAS etc
- Banks and finance companies - copies of statements/agreements
- Accountant and Solicitor - may hold copies of documents
- ASIC / Auditor - where your accounts are audited
- Insurer / Insurance Representative - lists of assets held
Once you have prepared and / or reconstructed your financial statements, your Moore Stephens advisor can apply financial ratio analysis and industry benchmarking to assess the financial health of your business and provide advice on whether it is financially viable for you to re-open. (Please note: in some circumstances, due to possible changed factors, such analysis may not be able to predict future trends.)
- Operational Assessment
The next step in your Recovery Plan is to identify exactly what needs to be done to get your business back on track and fully operational. Relevant questions at this point include:
- Have you incorporated previous experiences (good and bad) into the way your business will operate in the future?
- Are there any changes required to your products and services?
- Can you finance the rebuilding process from existing sources or will you require finance?
- Can you obtain finance if required based on your financial position?
- Do you need to change the location of your business?
- Do you need to replace equipment, and how will you finance this or are these covered under an insurance claim?
- Have you undertaken break even analysis to determine whether you need to adjust your price structure?
- Are there any improvements you can make to your record keeping systems?
- What ongoing business and property insurances do you need to review with your Moore Stephens Insurance Advisor, in light of the recent disaster and how the business fared?
- Personal Assessment
It is important to also consider the effects of the natural disaster and your Recovery Plan on your personal situation. Much of this can be discussed with your Moore Stephens Financial Advisor:
- Review how the disaster impacted on your personal financial plans, and the effect that the rebuilding process may have on your long term wealth goals.
- Are you personally insured for illness, accident, disability or death? How would the business recover if you or a key employee could not work? Have your needs been reviewed in light of increased debt levels?
- Can your personal assets be utilised to assist with the recovery, for example through the ability to access funds or consideration of owning business real property through a superannuation fund? Are your superannuation investments sufficiently liquid that they could be called upon in such an emergency?
- Obligations and Assistance
In closing, it is vitally important to remember that even though your business is out of action, your statutory obligations do not stop. There will still be business activity statements and income tax returns to lodge, as well as other financial and legal requirements. Your Moore Stephens advisor will be able to advise if you are eligible for any deferrals / extensions for any of these lodgements.
There may also be government assistance available to you during these times. Again, your Moore Stephens advisor can help you identify what assistance is available and how you can apply for it. We also have a summary document on the Government's latest drought assistance initiatives that will assist here.
It is also important to document your recovery process. Documenting what you have done, what worked, and what didn't will greatly assist you should you ever have to go through a similar disaster in the future.
How Moore Stephens can help you
Climatic and economic conditions and Government regulations continue to present primary producers and suppliers with ongoing challenges. Whilst there is little we can do about climatic conditions, Moore Stephens understands the range of issues that impact on a farming business and we can help you understand the financial ramifications of a multitude of decisions that may need to be made.
We also have Financial Advisors and Insurance Advisors who have specialist experience in the agricultural industry, and can provide vital advice on how to protect and grow your wealth so that you can reap the maximum rewards for years to come.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2014 Moore Stephens Australia Pty Limited. All rights reserved.