WHERE DO I START?

Much has been written about the ‘Black Swan’ event for businesses as a result of the GFC, but now our business community must attempt to manage a direct event that has a deeper local impact. The following are a few tips (not exhaustive) for business owners to consider:

• Talk to your suppliers, renegotiate terms if necessary. Remember they need you as much as you need them.
• Talk to your customers and understand their circumstances but agree terms that suit all parties. Do you need to reach out to customers/clients who have suffered due to the floods? What terms can you agree to without hurting your own business?
• Talk to your bankers, financiers, investors – avoid surprises.
• Keep everyone informed. Make sure you know the particulars of your loans, including covenants. Negotiate early if you think you will not meet covenants as a result of the flood.
• If you will require additional funding to re-build or for working capital, revise forecasts and business plans.
• Employees will be concerned about the impact on the business and of course their own job security – establish clear lines of communication. Ensure matters such as the treatment of lost time is understood. Trade s are important partners as well. Consider the requirements under the Fair Work Australia Act and any other relevant instruments such as Enterprise Bargaining Agreements (EBA), when considering employee entitlements.
• Crunch the numbers - establish a clear path for your cash flow under varying scenarios to ensure you can meet your business objectives. Basically do you have a cash flow forecast which reflects the impact of recent events?
• Support each other, commiserate, share a teary moment and find a reason to celebrate.

MANAGING INSURANCE CLAIMS

We have witnessed many of our clients initiate disaster recovery plans that have enabled essential aspects of their business operations to continue, but the reality of the devastating physical damage to buildings, plant and equipment and loss of stock have forced some businesses to cease operating temporarily. These physical assets are difficult to replace immediately, particularly as the impact has affected thousands of business operators across Queensland. On top of this, business owners now face serious loss of profits and extreme working capital (cash flow) pressures. It is important that businesses quickly put in place steps to ensure their operation can continue and prosper into the future. 

The first step is to obtain a clear understanding of the insurance policies you hold, both for physical assets and also any loss of profits or business interruption cover that may be in place. A claim under a Business Interruption Insurance, or similar policy, is a very involved exercise. Policies will contain a myriad of complexities that can lead to conflicting interpretations, inadequate cover, under-insurance and invariably a failure to meet the needs of the business.

You should contact your insurance broker or insurer as early as possible to put them on notice of a possible claim. Given the number of businesses and individuals affected by the floods, personal service from your insurer may not be available, therefore you should start to collate all information necessary to support your claim including photographic or video evidence of your own circumstances. It is also vital to collate particulars of items lost in the floods such as serial numbers or other distinctive identifiers of plant or stock. Representatives of your insurer, such as their loss adjuster, will be working for the insurance company and their job is to ensure the business owner has complied with all the necessary aspects of your policy - they will adjust the claim accordingly based on their findings.

In considering loss of profits, your policy will contain specific provisions to define your entitlements and how they will be calculated. You should consider seeking assistance in calculating these claims, but ensure you distinguish between advisers acting for the insurance company and those acting for you. For many of our clients we hold substantial financial information that can assist with claims.

ASSISTING EMPLOYEES

Many employers will seek to assist staff impacted by the floods. A Fringe Benefit Tax (FBT) exemption exists for certain emergency assistance provided to employees. Emergency assistance for FBT purposes includes provision of support for the immediate relief of a victim of an emergency by way of:

• first aid or other emergency health care
• emergency meals, food supplies, clothing, accommodation, transport, or use of household goods
• temporary repairs
• any similar matter.

If the amounts you are considering providing to employees are substantial we suggest you contact us to ensure they are covered by the FBT exemption.