By David Jenkins*
Businesses may be affected by disasters directly and indirectly.
For instance, businesses may not be caught in a disaster directly, but the collateral decline in trade will affect the business.
This is the third in our series.
Following a disaster, it is anything but ‘business as usual’ for you, your employees and customers.
The faster you can return your business to some level of normal operations, the quicker you can restore your income, jobs and the goods and services you supply to your customers.
Checklist of potential sources of information to assist with reconstructing financial records after a disaster
One of the first business steps you should take after a disaster is to attempt to reconstruct your financial accounts.
These reconstructed financial records will give you much of the information you need to make decisions on the future of your business.
If you have not been able to salvage your financial records, your first step to reconstructing them is to seek evidence of past financial transactions. Such evidence will provide the base upon which you or your accountant can begin reconstructing your financial records.
The main source of such evidence will be from the business’s own records. This is a good place to point out that offsite backups of all records, especially computer records is an essential step you can take now to avoid all this reconstruction work.
Where such records no longer exist or are incomplete, examples of other sources of such evidence include:
| Source | Potential information |
|---|---|
| IRD | Prior income tax returns, GST returns, Fringe Benefit Tax returns, PAYE/DED returns, Employer Declarations, etc. |
|
Accountant and financial adviser |
Your accountant and financial adviser may have copies of financial statements and tax returns for your business. |
| Banks | Past bank statements provide a great resource. For example, businesses may remember or take a good guess at many of the transactions on a bank statement, even though the primary record of the transactions are gone. Banks can charge for replacement statements, however they may waive such fees. |
| Surviving files | See if any files, including electronic files can be recovered from the disaster. For electronic files, even though the hard drive may look bad, experts may be able to recover the data. Whether this is undertaken is dependant on how valuable the data is and whether the data can be sourced elsewhere. |
| Off site sources | Are any files kept off site, for example, where activities are outsourced e.g. IT, payroll, etc. In such a situation, the service provider may have information still on file. |
| Staff | Ask staff whether they have records off site, for example, emails and other documents in their computer, memory sticks and other electronic storage devices etc. |
| Lender | Where a business has borrowed money from a bank or other lending institution, speak to that institution. Banks may undertake an annual review of the business. At such annual reviews, the business will be asked to provide financial information to their bank, thus the bank should have on file your financial statements and forecasts. |
| Customers and suppliers | Customers and suppliers may have invoices, remittance advices, purchase orders, receipts etc that they may share. |
| Companies Office | If you file returns here, some of these may assist in reconstructing records. |
| Auditors | If the accounts are audited, the auditors may be able to provide copies of work papers and other records obtained during the audit. |
| Insurer | Speak to your insurer, as your insurer may have a list of the assets owned by the business. |
| Other government agencies | If the business has received government funding/grants, the awarding government agency may have records. |
|
Accreditation or certification bodies |
If the business is subject to any other form of audit, certification or accreditation of their activities those bodies may have records that could be used. |
| Lawyers | They may have copies of contracts that the business has entered in to (including hire purchase agreements). |
| Email correspondence | The business, the business’s ISP or staff may have copies emails and documents forwarded to clients, suppliers and other relevant parties. This will also have the additional benefit of assisting with the reconstruction of contact list if not backed up. If a Blackberry / PDA was in use, significant data may be available from the carrier if hand set lost. |
| Share registrar | Where the business has publicly traded securities. |
| LINZ or your local authorty | Where the company owns real estate. |
Where it is not possible to fully reconstruct financial records, the information you have been able to find plus your knowledge of the business should give you a fairly comprehensive approximation of the financial position of your business.
If that is not successful, a potential solution may be to apply industry benchmarks to the information you have been able to reconstruct. Such benchmarks may be available from the IRD, Statistics NZ or trade associations you belong to.
As well as reconstruction of records, and if not already considered, you should first put in place temporary measures for the recovery phase such as recording of current activities and
transactions, managing cash flows and working with key clients, suppliers and government.
Following the reconstruction of financial records, the business will be in a position to evaluate their financial position and from there, consider how to re-establish their business and what may
be their financing requirements.
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David Jenkins is the New Zealand-based manager of the global professional accounting body, CPA Australia. You can contact him directly here »
This is the third of a series on disaster recovery.
The first one builds a recovery template and is here »
The second one has a checklist for reopening and is here »
Next week is the final in this series and will look at a checklist for managing in times of difficulty.
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