An emergency incident in your tourism region or local area will inevitably have a financial impact on your business. Preparing your business financially – so it is ready to respond, recover, and continue operating when a business disruption occurs – is as critical as knowing what to do when disaster strikes.
There are several general business finance processes you can implement to prepare your finances for a crisis event.
Keep your financial records up to date and accessible
Make sure you have up-to-date and accurate financial records that are protected and easily attainable.
These records – such as receipts, invoices and cash register tapes – can provide valuable information to effectively manage your business through a crisis. By law, it's also mandatory to maintain certain records such as those required by the Australian Taxation Office (ATO).
Consider using EFTPOS or credit card rather than cash for business purchases. Online bank statements can provide proof of your purchases to insurance assessors and the ATO.
Back up your financial data
It's important to back-up your financial data regularly – either to an external hard drive or to a cloud application.
Using cloud applications to back-up data will ensure your financial records are always attainable. If a crisis occurs and your computer is destroyed, storing data in a cloud application ensures that your records won't be lost. As long as you have internet access, you'll be able to retrieve your information.
Scan rather than file receipts and important documents, and store these documents off-site in a secure place, such as a relatives' house or in a safe deposit box with a bank. This may seem an unnecessary step – but after a crisis event, simply proving your identity can be incredibly tough if you're left with nothing.
Regularly prepare financial statements and forecasts
Financial statements and forecasts that are produced regularly and correctly are valuable reference tools to help guide your business planning. They're also key documents for attracting funding.
Investors and creditors will use them to assess the health of your business's finances.
There are three major financial statements to understand:
- Profit and loss statement
- Cash flow statement
- Balance sheet
These financial statements should not be viewed as purely assisting you to meet your regulatory requirements, but as a necessary tool for you to manage the performance of your business and plan for the future.
Manage and forecast cash flow
Cash flow is the life blood of a business, so managing and forecasting your business's cash flow is essential for business growth and survival.
It's important to manage your cash flow on a daily, weekly and monthly basis by monitoring the flow of cash in and out of the business. This will assist to identify potential risks and ways that you could improve performance and, in the worst case scenario, survive.
Review this cash flow and create projections based on when money will come in and out – including your statutory obligations. By developing and documenting cash flow projections for several months in advance, you can estimate when the business will be short of money and take appropriate steps beforehand. This cash flow budget is the most useful operational budget for a crisis. It's also the most commonly requested budget when seeking finance from a bank or another financier.
Use the following templates to assist with managing and forecasting cash flow:
- Cash budget template (XLS 19.5 KB)
- Cash budget template - accessible version (DOC 99.5 KB)
- Estimates to assist with cash flow budget (PDF 23.21 KB)