Has your business suffered a natural disaster? Whether it's a community-wide disaster such as a hurricane or wildfire or one specific to your site, like a burst pipe, accounting for its effects on your books is key to recovery. While you may have many things on your mind right now, don't overlook the gathering of necessary information for your accountant. Here are five of these key things to determine.
1. Changes in Inventory. Was some of your inventory rendered unsellable or unusable due to the disaster? Do a complete inventory of everything from top to bottom so you can find the real value of inventory left and the state of what was lost. You must adjust inventory or your cost of goods sold will be wrong on financial statements.
2. Damage to Assets. Capital assets are usually a big part of your business's value. Their current value is also tracked monthly or annually for tax purposes and for accurate reporting on financial statements. If any assets were destroyed, these will need to be written off and any losses noted. If they were damaged, this could change their market value and therefore their depreciation.
3. Payroll and Taxes. A business that has suffered a disaster — especially a federally-declared natural disaster — does get leeway for many types of obligations. But two of the most important to get back on track are payroll and taxes. You may need to reconstruct payroll and labor records and get employees paid if any checks were delayed. Apply for extensions when possible. And reconcile all tax obligations, including payroll and sales taxes.
4. Insurance Payments. Accounting for insurance payments makes your post-disaster accounting complicated. Keep track of all claims submitted and any reimbursements or payout received. Identify payments for specific expenses or assets so you can account for differences between value and reimbursement.
5. Unusual Money Sources. After a natural disaster, you may receive help rebuilding in the form of grants, donations, or volunteer help. This can be a big help, but it should all be recorded in case it needs to be noted on annual financial statements. One-time influxes of money, such as a community grant or low-cost loan, can skew the appearance of your financial status if not reported correctly.
Clearly, making your books correct after any sort of disaster can be complex. And while it will take some time and effort, it's not only valuable to ensure accuracy but also to help you understand your company's true financial state as you recover. Need help with accounting services? Start by meeting with an accountant in your state today.Share