Losing your financial records in a disaster is distressing. The damage wrought by events such as floods, fires, and high winds can wreak havoc on your business and life. If your company has recently experienced the loss of financial records due to a disaster, we've put together this guide to help you navigate this challenging time.
Even though it's emotionally challenging work during such a trying experience, reconstructing financial records as quickly as possible after a disaster is vital for several reasons.
You will need your financial records reconstructed so you can get back to business as usual. Financial information is required to file insurance claims and your taxes. If you apply for recovery assistance in the form of grants and loans, you'll also need up-to-date financial records.
There’s a variety of steps to reconstruct your financial records. As you work to retrieve lost data, have patience with the process. You've been through a trying experience, and it'll take time to regain your footing.
While you're retrieving your financial data in the wake of a disaster, consider using a digital, cloud-based bookkeeping system if you aren't already. This system helps you gather and store financial data efficiently and ensure your records are secure and accessible moving forward.
Here are the primary steps to financial retrieval and reconstruction following a disaster:
As soon as possible after the disaster, document what occurred. One of the best ways to do this is by filing an insurance claim. This will entail filling out a proof of loss form or a visit from an insurance adjuster. This specialist will inspect your business and guide you through the claims process. It's also advised to take photos of the disaster area and damaged financial documents.
After documentation of the disaster and the damage is complete, you can file for disaster relief assistance with FEMA (Federal Emergency Disaster Assistance Agency) or with the Small Business Administration.
The IRS makes it relatively easy to gather tax information from prior years' tax returns. Do this online by using their Get a Transcript tool. A transcript provides a summary of your federal tax return information, including your adjusted gross income.
If you need complete copies of your tax returns, request them using IRS Form 4506. Write your disaster designation in red letters across the top of the form to expedite the processing and possibly waive the fee. For example, you would write California Wildfire and the incident date.
To get copies of your state and local tax returns and other documents like sales tax reports, contact your state's tax agency, which may be referred to as the department of revenue or franchise tax board. This entity collects and enforces state income tax assessment and collection and will be able to give you copies of tax documents lost in a disaster. If you use a payroll company, contact them for payroll tax returns.
Whether your company is product-based or simply uses inventory supplies for running the business, it's necessary to reconstruct your lost inventory. To do this, get invoice copies from all your suppliers dating back at least a year. The invoices will help you piece together a complete inventory list. Your banking records and checking inventory photos from before the disaster can also help if you have them.
With online banking, it's easy to get copies of bank statements. Most banks allow you to access at least the last 12-18 months online, while some national banks enable access to the previous seven years of statements. If you need additional statements, you may need to request copies by contacting the bank directly.
If you own the building in which you conduct business and it was damaged or lost, you'll need to piece together property records to determine the property's value. To do this, contact the bank or company that handled your purchase of the building. The broker should have a copy of the purchase agreement, which will contain all the property details. Your county's assessor's office should also have records regarding the property.
During the assessment of the property, include any improvements you made to the building and surrounding land. This will require contacting the contractors who made the improvements for records of the work performed and the cost of necessary materials. Your mortgage company can also help verify property value and provide copies of any appraisals that have been completed.
If your business relies on company vehicles or you use your car for business purposes, and the financial paperwork for your vehicle was lost during the disaster, you can recover the information. Contact the finance company for copies of lost statements if you're still making payments.
If you're making an insurance claim for damage or loss of your vehicle, you'll need to determine the current fair market value. Some sources of this information include the National Automobile Dealers Association, Kelley Blue Book, and Edmunds. You can also try contacting the dealer where you purchased the vehicle. The dealership should be able to give you information on the worth of your vehicle.
Reconstructing your financial records when they're lost during a disaster can take time. Fortunately, agencies such as the IRS realize this. You'll often be given a reprieve to reconstruct your records. There may be extensions for filing reports such as estimated and quarterly taxes. Keep in mind that though filing deadlines are sometimes postponed, you may still need to make payments on time. Additionally, not every area hit by a disaster will be designated an official disaster area.
The best way to protect your business finances from future disasters is to be prepared ahead of time.
If you use a digital, cloud-based bookkeeping system such as Swyft Books, you'll have immediate access to all your financial records moving forward. Investing in such a system can go a long way toward ensuring your financial records’ safety, security, and accessibility, no matter what's happening in the world.