Last night, Seattle had an enormous windstorm. We get it pretty easy compared to the rest of the country. A few houses got beatup by trees, a casino caught on fire, a few fences were blown down. Nothing compared to the rest of the country. Which brings us today’s topic; what do you do if your business records are destroyed in a natural disaster?
One: Taxes – If you are in a nationally declared disaster area; it’s possible the IRS has also extended your filing dates. Check with them a few weeks after the disaster. They don’t do that for every disaster; so be sure to double check. Some examples; Katrina, Tornados, and Wildfires have been events.
Two: You did keep the computer backup off site? Right? One of the most common issues with backups is that people keep the backup copy next to the device. So if you business burns down; both the backup and the original are destroyed. May not be the best option.
One possible solution is to use automatic off site backup services. Some people swear by them; other people think they take too long and have other security issues. Whatever media that you use to back up the system; make sure you don’t store it in the same location as the business computer.
Three: Relax! Don’t you send a QuickBooks Copy to your CPA or Tax Preparer each year? Perhaps they have historical information.
Four: Paper records are destroyed. Save what you can. Document what was destroyed. Consult your insurance company. Perhaps you have coverage for that.
Five: Store old paper records offsite. Storage facilities burn down too; but hopefully not at the same time. Bonus! You will have more room at the business location.
Six: Scan all paper records. This is probably what your CPA or Tax Prep expert does. This makes it easy to do a computer backup and saves on filing space/money. Why buy all those file folders; if you don’t have too?
Seven: Reconstruct the dinosaur. Ouch.
A. Find copies of prior years of tax returns. Reconstruct balance sheet and income statement information from the tax return. If you aren’t an accountant; this might be a good time to hire one.
B. Order copies of old bank statements. This is what any tax audits will be based on; with some adjustments for cash transactions and the like. Some banks even keep copies of bank deposits for 5 years. You will need to pay for that service. In addition, it will have a transaction list for checks/debits as well. Remember that a bank statement is not proof that you actually paid for a business expense. But it’s better than nothing. 🙂
C. Charge Sales tax? Then chances are that you have monthly or quarterly state sales reports.
D. Do you have old cash register receipts that were stored off site? They might contain valuable information to reconstruct data.
E. Contact large vendors and see if they can provide account detail for you.
F. For insurance purposes; you probably gave your insurance agent an office furniture inventory. This might be useful.
G. Payroll Services. Ask the payroll services for copies of all reports. Payroll is a significant chunk of business expense.
Try to think of any third party vendor who has access to your business data; there is a pretty good chance that you will get a few breadcrumbs. It might take some creative thinking to reconstruct everything. Be realistic about what you can or can’t do. It can be pricey to hire people to do the reconstruction work. However, it can be well worth the money.