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9-point checklist for flood-affected firms

An Australian accounting body has developed a financial checklist aimed at small businesses across the east coast, including boutique law firms, suffering significant damage and revenue loss off the back of the recent floods.

user iconEmma Musgrave • 01 April 2021 • SME Law
9-point checklist for flood-affected firms
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The new checklist released by Chartered Accountants Australia and New Zealand (CA ANZ) comes as the Insurance Council of Australia reports more than 17,000 insurance claims have already been lodged as a result of the flooding and severe weather in NSW and Queensland.

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The accounting body said it developed the financial checklist so small businesses can minimise financial hardship and get back on their feet as soon as possible when natural disaster strikes.

In developing the checklist, CA ANZ tax leader Michael Croker said small businesses are vital to Australia’s economy, and when natural disasters strike, the effects are felt quickly by the business owner and right throughout the communities where they operate.

 
 

“Many small businesses are still battling the impacts of COVID-19, the end of JobKeeper, and to be hit with flood damage is devastating,” Mr Croker said.

The CA ANZ checklist for flood-affected businesses

  1. Look after yourself, your family and your staff
“This is a stressful time and many business owners will feel the pressure of so many people who rely on them. It is vital to get enough sleep, eat well and take care of yourself during these trying times,” Mr Croker said.

“Many chartered accountants have been trained in providing mental health support to our clients, but also ensure you reach out to family, friends, advisers and local support groups as well.”

Mental health training is going to be boosted even further in 2021, with up to 5,000 accountants to receive further mental health training this year.

  1. Secure business records
Mr Croker said one of the losses that a business can experience after a natural disaster is damage to its physical or electronic documents.

“By taking a proactive approach, you can prevent the loss of important business records and avoid the need for natural disaster document recovery,” he said.

“Making digital copies is a key way of securing business records. Businesses should consider scanning their vital documents with an online secure cloud storage solution.

“Furthermore, businesses should regularly back up electronic documents.”

  1. Don’t get scammed
Following the devastating bushfires in 2020, scammers only took days to start targeting victims, including an SMS scam posing as a link to government assistance. Mr Croker said that, sadly, the same could occur with these floods.

“Scammers take advantage of natural disasters, targeting victims of the disaster and those in the community who want to help them,” he said.

“Many people also want to donate quickly to help out, so be careful of scammers impersonating reputable organisations seeking donations.

“There are many resources designed to help Australians avoid being scammed, including Scamwatch where you can also report a suspected scam.”

  1. Check your insurance
“Business owners should be reviewing their existing insurance policies to check coverage and entitlements and work collaboratively with insurance companies,” Mr Croker said.

“Where insurance cover is provided by the policy, business owners will need to collate details of losses. Photographic evidence will help with this.

“Natural disasters often prompt a review of future insurance needs. Before entering into a new insurance policy, get advice on the costs and benefits.”

  1. Government emergency grants
“Check your entitlements: Small businesses which have suffered a significant loss of income as a result of a declared disaster may be able to access low interest government loans and other disaster recovery assistance. The federal government has announced it will extend the SME Recovery Loan Scheme to provide further support to flood-affected businesses,” Mr Croker said.

“Eligibility criteria and an application process apply, so [a] business may need to get help from their accountant.”

  1. Speak with suppliers
Mr Croker said all business owners need to keep up strong communication with their customers and suppliers during times of crisis.

“Review any purchase and supply agreements to determine the rights and obligations of both parties,” he said.

“Find out if suppliers will accept delayed payment terms and how quickly they can resupply what’s needed to restart business operations.”

  1. Repairs, clean-up costs, temporary storage costs etc
According to Mr Croker, for insurance, government assistance and tax deduction purposes, keep records, as tax deductions apply to repairs, not improvements (there’s a difference).

  1. Revise business cash flow
Following any disaster, Mr Croker said businesses should discuss their financial forecasts with their accountant for the current financial year and subsequent years.

“Be realistic and conservative in your estimates. It might also be a good investment to seek specialist business recovery advice,” he said.

“Business financiers will be keen to know how the flood impacts their loans and repayments. Be prepared with well-thought-out revised budget forecasts for the 2021 financial year and beyond.”

  1. Tax
Mr Croker said business owners should work with their accountant to see if any favourable tax adjustments can be made in the next tax return. 

“If there is cash available, a business could be eligible for a 100 per cent tax write-off for equipment to replace depreciating assets lost or damaged in the flood,” he said.

“Your accountant can also liaise with the ATO should extra time be needed for tax lodgements and payment of tax debts.”

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