June/July 2004

In the immediate aftermath of a major natural disaster, the first order of business is to ensure the safety of family, friends and colleagues.

But once the security of loved ones has been established, it’s only natural for business owners to begin a mental accounting of potential losses.

Property and inventory damage, revenue losses due to business interruption and damage to financial data can set a company back months, especially in the absence of a detailed recovery plan.

To substantiate any business-loss claims to an insurance company, a business owner must be able to produce detailed financial records—inventory spreadsheets and asset listings, tax returns, etc.

Using these tools, the forensic accountant working with an insurance company can accurately calculate both the physical losses of a company and its business interruption losses.

Financial documentation is so essential, in fact, that backing up this data is absolutely critical to any disaster recovery plan. Act on these recommendations in order to prepare against business loss during a catastrophe and to adequately equip a forensic accountant in the wake of a catastrophe:

• Capture data early and often. Rotate the back-up media frequently enough to ensure the most current data is completely captured.
• Segment relevant data during back up. Create an electronic data file that specifically contains financial information essential to disaster recovery.
• Don’t forget software programs. Create copies of all the software programs your company uses in the course of running the business, and store them off-site.
• Convert hard copies. If your business has a disproportionate volume of historic financial data in paper format, consider converting it to electronic means, which can be accomplished using a scanner.
• Test, test, and then test again. All the effort you put into backing up your data can be for naught if you are not capturing the information properly.