Disaster preparation: don’t forget cash management issues

With a spring of violent weather and the start of hurricane season, US business owners should take precautions to mitigate the potential impact of a natural disaster, advises David Frady, executive vice president and manager of commercial services for Hibernia National Bank.

"When they hear a hurricane is coming, some business owners board up their windows, rush out of town and totally forget that their employees need to be paid," Frady said. "I would be pretty mad if I couldn't cover my rent or make a car payment because my employer forgot to take care of its payroll."

Paying employees, filing taxes and maintaining access to financial records are three areas sometimes overlooked by businesses in preparing for hurricanes, tornadoes, floods or other natural disasters, Frady states.

Many employers rely on banks to process their payroll, transmitting the records to the bank by computer and the Internet. Generally, a company must send the payroll file to the bank two days before payday in order to issue cheques [checks] or deposit funds directly into employees' accounts.

"If Friday is payday, the payroll file isn't received Wednesday and you've already evacuated your office, employees won't be paid on Friday," said Frady, who oversees Hibernia's treasury-management systems that serve thousands of businesses in Louisiana and Texas.

In a rush to evacuate, business owners also frequently forget tax payments.
"The government doesn't care if you had to evacuate," Frady said. "If you do your own payroll, you need to make sure that tax payments arrive on time."

If a natural disaster strikes, technology may be disrupted because of flooding, downed telephone lines and loss of power. However, businesses that rely on the Internet and electronic transfers for treasury management services can access their accounts regardless of their physical location. But business owners still need their records in order to know who needs to be paid and in what amount.

"Cash flow is the life blood of a company," Frady said. "Business owners need to do whatever they can to protect the inflow and outflow of this most valuable resource - before a disaster is pending."

If businesses do not have Internet banking services, they should check with their bank about getting them.

Frady's five-point evacuation checklist:

1. Ensure that you always have enough cash on hand to handle immediate needs.
2. Take your chequebook.
3. Have copies or originals of important contracts in a secure place.
4. If you have a computer with Internet access, take your payroll records and your account information with you.
5. Also take with you contact information for your employees, your
major trading partners and your bankers.

Frady advises business owners to maintain a portable file or box for these records so the records can be updated easily in case of evacuation.

Businesses also should consider an off-site backup system for their important records and other information maintained by computers.

"Off-site back-up is a good practice, no matter how big or small your business," said Frady. "It's like insurance. It's not something you like to do, and you hope you never have to use it, but if you need it, it's invaluable."

www.hibernia.com

•Date: 26th June 2003 •N.America •Type: Article •Topic: BC general
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