This last week during a storm one of the homes in my neighborhood was struck by lightning and caught fire. The fire left skeletal remains of the structure’s second story. In the end, the entire home was a total loss. Luckily the family and their pets were all able to get out safely. But in less than eight minutes, their entire lives were turned upside down.
This reminds me that these kinds of disasters are not limited to homes, but to small businesses as well. When a flood, fire, tornado, lightning or some other disasters strikes your small business, you may suffer just as much of
a devastating loss as though it were your home.
It is during a time like this that having a bookkeeper and your accounting in order can truly save your sanity.
While you might be most concerned about assessing the damage and getting your business back on its feet, there are a lot of accounting steps to worry about, too. Let’s take a look at what you should know that will help you get through the disaster with the least amount of financial and economic harm to your business:
Accounting for your losses
As soon as possible, document your losses. This could be inventory of raw materials and products, damage to assets including equipment, buildings, machinery, vehicles, office supplies and materials, as well as computers. Knowing exactly and specifically the losses you incurred will make the insurance claims proceed quicker and more efficiently as well as your accounting records. Some losses not reimbursed may be recorded as expenses and the decline of asset value may be claimed as deductions. Keeping records will be critical.
Payroll and employee issues
Depending on your situation and the state you are in, there are differing rules regarding paying employees during a disaster and temporary closure. Teresa Ray of The Payroll Department will be able to help you determine what the rules are in your immediate area. For instance, you may be required to pay any exempt, salaried employees during a temporary closure, but not non-exempt employees. Also, if there is a payroll pending, you need to take care of it immediately. Willfully failing to pay employees in a timely manner is a violation of the FLSA and may also violate state laws. (If you have already outsourced your payroll to an off-site payroll service like The Payroll Department, your decision will save you the problems of trying to recreate employee records from a disaster zone.)
Tax filing and payment deadlines
You need to be aware that although the IRS might automatically extend deadlines for individuals and businesses after a major disaster, the length of the extension depends on the severity of the loss and the type of tax. Also be aware that even though an extension to file may be granted, that does not always mean there is an extension in paying taxes. You can find out more at the IRS website, but it would be best to have a conversation with your accountant about this and how to apply for an extension as soon as possible after a loss.
Insurance claims and records
There are so many variables when it comes to insurance coverage and claims that you will want to work closely with your agent or broker – as well as your bookkeeper. Making sure that claims and insurance proceeds are documented and accounted for in your books will prevent a second disaster happening at the end of the year.
The insurance proceeds have to be documented through appropriate accounting practices that you, your accountant, and your bookkeeper should be aware of during the process. In fact, having a bookkeeper like our Grace Walker at your side might be the one thing that keeps you from going over the edge when the accountant begins to talk about contingency reporting, offsets and gains and expenses.
A fire, a flood, tornadoes – they are all the things of frightening nightmares, but sometimes become our realities. Surrounding yourself with knowledgeable and capable people who can help you through those sorts of times before they happen can give you peace of mind that you are prepared for whatever might come. Contact The Payroll Department and lets gets your bookkeeping and payroll in order now. You’ll sleep better at night, I promise.
-Elaine of the Payroll Department Blog Team