September is National Preparedness Month and lots of blogs are reminding you to take action to prepare for the types of emergencies that could affect you. Honestly, we all need to hear this to really think about all the different ways that disaster could strike. Other sites have handy checklists for emergency supplies, but I thought I’d focus on just one piece of your emergency plan … protecting your bookkeeping against disaster.
Identify The Risks
The first step in developing an Emergency Preparedness Plan is to identify the risks that you could be exposed to. Here in western Pennsylvania, I’m pretty safe against tsunamis and hurricanes, but winter storms are a real threat on a regular basis. What about your area? Following is just a short list of scenarios to consider:
- You can’t work: One client of mine took a tumble and broke her wrist. No big deal, right? Well, actually, it was a very big deal because she couldn’t write or type with her dominant hand for three months while the cast was on! What would you do if you were in a car accident and could not work for a week or more?
- Family emergency: Another client received a call that his mother had suffered a stroke. He walked away from work and was unable to return for a week while he dealt with her care. He ran his business from his phone in the parking lot, because they didn’t allow phones in the ICU and he only had time to sleep when he was able to make it home. What would you do if you were called away to the side of a loved one for several days?
- Theft/Cyberattack: One of my clients was very diligent about backing up his QuickBooks every single night on an external hard drive. Imagine his shock when we came to work one day to discover that his office had been broken into, the computers had been stolen, and the external hard drive had been stolen, too! What would you do if your data was stolen?
- Outages: I have personally experienced days of internet outages and power outages during some of the “Snowmageddon” storms of the past few years. What would you do if the power was out for several days?
- Natural Disaster: Another client came in to work after some unusually heavy rains to discover their entire office under a foot of water. All of the paper files in the bottom drawers of the file cabinets were soaked and the computers on the floors were ruined. What would you do if your paper files were ruined?
Looking at this from a bookkeeping standpoint, what can you do to protect your financial information, financial documents, and important business information?
Make A Plan
The first step is always to document a plan for each possible emergency. What would you do in each of the scenarios above? More importantly, what would you wish you had done before a disaster had struck? Imagine each possible situation and write down what you would want to have in place beforehand and what you will do if that situation comes to pass. Write it down and have it in a safe place!
Get A Buddy
Find someone who you trust who can step into your shoes in an emergency. Make sure they know where your passwords are stored, where those emergency plans are kept, and who to call first. This person may need to pay bills or send out invoices while you are unavailable, so make sure they know how to get into your accounting system, what bills are on autopay, and so forth. Make sure they have access to your client list so they can contact your current clients to let them know you are out.
If your buddy doesn’t work with you each day, be sure to leave detailed checklists of everything that might need to be done: bills paid online, invoices sent to clients, tax filings that need to be made. Document it all as if you were talking them through it step-by-step.
Scan, Baby, Scan
If you had to leave your home office with a moment’s notice, would you have all of your important business documents? Not if they are on paper, probably. Between fires, floods and break-ins, there are too many ways to lose those important documents. Scan that paperwork, encrypt the files with a strong password, and save them in an offsite location. Bonus points if you save them in a cloud storage service that you can access with your smartphone! What to scan? Federal documents such as your EIN letter and state documents such as your LLC Operating Agreement or Incorporation papers would top the list. Copies of your insurance policies, sales tax licenses and your most recent three tax returns would also be crucial
Make A Backup
If you are using QuickBooks or another desktop-based accounting system, be sure that you are making a secure backup at least once a day. This backup needs to be kept offsite and should be password-protected. Ideally, you should use a cloud storage solution like Carbonite to automate these backups. In the event that you need to replace your computer, keep a secure list of your QuickBooks installation key and other installation codes needed to get you back up and running.
If you are using QuickBooks Online then your backups are being taken care of and your data is already being hosted off-site. Instead, focus on having a complex password that your buddy can access.
Keep A Nest Egg
In a perfect world, you should keep an emergency savings account with enough to keep your business running for six months. This may not be realistic, but working towards this goal is better than ignoring it. To supplement your savings, you can also obtain a line of credit with your bank. If you are in the hospital for two months, your revenue for those two months will be dismal at best. Having a savings account or line of credit may mean the difference between having a business to come back to .. or not.
Bottom line, think about all of these disaster scenarios before they happen and prepare now! Your future self will thank you!
Do you have any questions I haven’t’ covered? Leave a comment below to let me know what you think!
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.