Developing a plan for your death or disability
Nobody wants to believe their business could be the target of an arson attack, vandalism, theft or even a fraudulent staff member. Even more alarming is considering how your business would survive in the event of your own injury, disability or even death. You must remember anything is possible and the longer a business is left unprotected, the greater the potential for financial problems.
Your contingency plan will be individual to your business needs. It should be developed to cater for your specific circumstances. The contingency plan will also serve to help you take loss prevention action. Business owners who understand loss prevention needs are able to implement measures to better protect their businesses and in turn, reduce the need for a contingency plan to be put into action.
When developing your contingency plan it is also important to consider specific scenarios. Below are contingency plan guidelines to consider in the event of your death, illness, accident or disability:
Have a solicitor draw up a will that best reflects your wishes for the business and bestow the executor with the power to manage the business until will-related matters are adequately settled.
If a will does not exist, the business will fall under the rigid intestacy laws which can result in the sale of the business and dispersal of proceeds to beneficiaries prescribed by law – not by you!
Clarify your wishes for the business with family and employees, testing that all share a common understanding of your goals and their potential involvement – even consider allocating responsibilities to selected individuals.
Maintain a register of essential business information including: ABNs, ACN, tax numbers, contact details of business trustees, directors, shareholders and respective agreements, business plan, financials, trademarks, funding and insurance arrangements etc, suppliers, service providers (solicitors, accountants etc) and customer details (contacts, trading terms etc).
Leave clear instructions with relatives and/or employees of where to find the business register and pertinent personal information (such as Will and Estate Plan – if any).
Share your knowledge of key business activities with employees and/or relatives, and if necessary train them in the skills required for running the business.
Consider organising the services of an independent party like a mediator, arbitrator, valuer, financial planner or other adviser to either provide input into your estate, succession or contingency plan or to help manage these often emotionally charged situations. Many advisers are trained in dispute resolution methods.
Maintain ample cash reserves to cover short-term business activities otherwise a forced sale may be required to settle business obligations. Supplement these reserves with life and business interruption insurance or other financial arrangements that infuse money at this critical time.
Make arrangements with a partner or competitor to acquire the business upon your departure, or alternatively leave directions that facilitate the smooth hand-over of the business to a chosen successor.
And finally review and update your contingency plan on a regular basis.
In short, foresight and planning here may significantly reduce the ambiguity, stress and cost inherent with dealing with these risks and business matters.
Daily Contingency Plans
When creating your contingency plan, you should also consider the following general day-to-day contingency measures:
Carry out an end-of-day inspection to ensure that all visitors and customers have left, that all electrical appliances are switched off, no smouldering cigarettes remain, all doors and windows are locked, etc.
Make a list of all key contacts’ telephone numbers for use in the event of emergency and keep it handy
In addition, make a list of all employees’ phone numbers for use in the event of emergency
Keep vital information held on computer on ‘back-up’ disks held off the premises
Familiarise yourself and your staff with the location of the mains service isolation switches and valves (electricity, gas and water) and label them clearly
Clean out gutters, downpipes and drains annually as part of fire prevention activities
Check that all vulnerable water pipes are lagged against frost damage.
There are a number of other issues to consider when creating your contingency plan, especially when it comes to recording property and asset control.
Property marking is an excellent way to protect your equipment by making it easily identifiable in the event of a theft. It is also recommended business equipment be subject to the following asset control procedures:
Maintain an inventory of all equipment including make, model, serial number, any distinguishing features and date of purchase. The record should be kept in a secure facility away from the equipment and preferably, the premises.
Register equipment ownership with the manufacturer or a database approved by your insurance provider.
Regularly review your property identification procedures to ensure that records are up-to-date.
Contingency Planning For “Scam” Protection
Protecting your business means more than just putting in place “physical” loss prevention methods. It can also mean “wising-up” to behaviours which pose a threat to your business, in particular con artists and scams.
As part of your contingency planning you should have measures in place to identify scams and an action plan if you are caught out. However, if you are aware of what to look for then you should be able to avoid becoming embroiled in what can be a costly scam situation.
According to the Australian Competition and Consumer Commission (www.accc.gov.au), small businesses are the prime target of scams with con artists costing them not only valuable time, but a lot of money.
There are various ways con artists try to trick small business owners. The two most common scenarios are outlined below:
1. Trying to convince you to pay for something you have not asked for. This is often known as “fake billing” and usually involves advertising bills.
2. Misleading you into thinking they are someone or something they are not. More commonly known as “passing off”. For instance, the con artist may say they are a government or charity representative.
The ACCC has produced tips on how to protect yourself from con artists. They recommend small business owners keep them in mind when dealing with any correspondence or phone calls. When approached, ask the following questions:
Who are they? If they claim to be from the government ask which department they are from and why they have contacted you. Find the department’s telephone number and ring them to verify who they say they are. If they are claiming to represent another body or organisation, establish whether that organisation actually exists. Ask them why they have contacted you.
Why do you need the service? If they say they are from an advertising business ask them:
1. What you are getting for your money
2. Who will see the advertising
3. To show you copies of previous work they have done.
If they claim to be from a charity find the charity’s telephone number in the phone book and ring them. Verify they are who they say they are. Also ask for evidence of registration as a charity.
How much will it cost? If the claim is the service/product on offer is free, ask if there is any way the service can cost you money and if you will be automatically charged for anything in the future. If there is a cost involved ask them what “all” the costs will be, when you will be required to pay and whether they have a money back guarantee.
Do you have enough information to make a decision? If you do not, make sure you ask for more or contact your small business association, local office of Fair Trading or the nearest ACCC. If you feel you have enough information, make a business decision on whether you want to use the service or you need the product on offer.
Are they trying to tell you that they already have a contract with you? If this is the case ask them to show you evidence of the contract. Check to see if it shows what you receive, how much it cost and that you accepted both the previous conditions.
The following are ACCC tips to avoid being conned.
- Ask for the name of the person you are speaking to and who they represent
- Take notes of conversations including date, time, name and important points
- Ask for an explanation for anything you do not understand
- Read letters carefully. Ask the right questions
- Seek professional help if money, time or responsibilities are involved.
- Give out or clarify any information about your business unless you know what that information is being used for
- Agree to anything on the phone. Ask for an offer in writing
- Use birth dates for order numbers. Con artists will use them for other scams or pass them on to others
- Have a number of people authorised to pay cheques. Keep the number to a minimum and keep a tight control on them.