Preparing Your Small Business for Any Interruption

Small businesses have access to many state and federal options for aid in the event of a severe disaster. But did you know these are just small elements of a complete disaster plan?

The businesses that are most prepared for disaster are also prepared for minor business interruptions – ones that are more common throughout the year. While their planning incorporates aid – from government entities or commercial insurance – it also puts processes and resources in place for events where government aid isn’t warranted or for those in which aid is not forthcoming.

Owners and executives should assess: What’s my plan if I were alone and without aid? What resources and preparations should I then undertake to ensure continuity? In this article, we cover three key banking elements that help answer these questions: Payments, Capital Reserves, and Credit.

Payment Resiliency

Alternative payment options are valuable for businesses, even when there isn’t a major disaster that’s down internet services or electricity. Payment hardware, such as card terminals, can malfunction at any time. Getting set up to process payments via the internet, cell network, or even through a satellite service, can provide resiliency to revenues during day-to-day disruption and even during significant storms or earthquakes.

How likely is a significant disaster in Washington? The state has more than 1,000 earthquakes each year, according to the Emergency Management Division. While few are felt, they occasionally cause damage. Preparedness to access a satellite network may only be necessary during a once-in-100-year earthquake. If that seems unlikely, keep in mind that the southeast just experienced a once-in-a-thousand-year flood with Hurricane Helene.

A place to start is with your payment terminal itself. Ensure your terminal can take payments offline using a queue system that allows you to accept and complete the transactions. The system gathers the payment information and sends the transactions for approval once it regains internet access. In this case, payment processors say you can apply per-transaction dollar limits to mitigate the risk that funds will not be available once the transaction is processed. Check with your provider directly to learn how this system would work for your business.

Merchant service providers sometimes offer a mobile app that can be used during an internet outage. Satellite internet services, such as Starlink, cost $120 per month. It can provide additional resilience in connecting to the internet during a disaster. While a business in Washington is unlikely to carry that monthly cost for low-frequency emergencies, it may be wise to purchase the hardware now – a one-time cost of $349 – so that you are not scrambling to obtain one during an outage.

Pro Tip:

Include steps in your planning for after the disaster, such as requesting a credit for unused internet or cell service or from any other provider that did not provide services tied to a subscription or membership.

Create Credit Access

Most business disruptions are not large-scale natural disasters in the state of Washington.

Applying for credit is “extra,” even for a business owner’s typical day. You won’t want to be trying to apply for credit when dealing with an unexpected event in the business.

According to Bankrate, 94 percent of employer firms experienced a financial challenge within the previous 12 months. Of those, 81 percent cited the rising cost of goods, services, or wages as their primary financial concern. Behind these more common challenges are break-ins, theft, damage to commercial equipment or property, or other disruptive events where quick access to capital can defend against lost revenues.

Gather credit options to deal with unexpected events quickly, for example:

• Ownership: Some businesses have broad ownership groups or have a few financially capable shareholders. Have you discussed the need for capital during a disaster where government aid or commercial insurance does not meet all the business’s needs?
• The Small Business Administration also offers numerous low-interest loans for businesses impacted by disasters. It also offers low-interest loans to businesses that haven’t been affected by a disaster.
• A line of credit can also be a tremendous benefit. You may never need to use it, but it will be available should a disaster strike.

Pro Tip:

Individuals and businesses in a federally-declared disaster area can qualify for a casualty loss tax deduction. The deduction is available for damaged or destroyed property not covered by insurance or other reimbursement and can result in a larger refund, according to the IRS. Taxpayers whose address of record is in a disaster-area locality also receive more time to file returns and pay taxes.

Maintaining Cash Reserves for Emergencies

The word “disaster” sounds like a large-scale catastrophe that happens infrequently. But most business owners feel it would be a disaster if they were sick for one day. Translation: Disasters come in all shapes and sizes, and their significance depends on the business.

While there are many ways for businesses to mitigate and prepare for a disaster, they control few elements of their disaster plan more than their capital reserves – otherwise known as a business rainy-day fund.

The challenge, often, is not choosing how much you want in your capital reserves. It’s amassing the actual cash in the account. So, where can you start?

“Even if you can only put away $50 a month to start, do so. While there may never be an optimum time to put money away for emergencies, saving even a little bit can help down the road,” writes the Motley Fool.

Another way is to look for accessible opportunities to cut business expenses, as observed by Motley Fool. “Get rid of those expensive subscriptions, drop your deluxe internet plan for the basic plan, and look around for new suppliers if prices keep jumping,” it says. “If you’re renting, you may want to look at a less expensive space, or if you provide services, consider working out of your home. These money-saving measures can quickly translate into savings, which you can put in the bank for when needed.”

In the long term, savings are the most likely to grow when automated and scheduled to coincide with revenue. For example, when a business is on a monthly billing cycle, consider creating an automated transfer in your digital banking just after the bulk of your monthly revenue arrives. That way, even small savings will happen regularly and ensure your balance is headed in the right direction.

Pro Tip:

Businesses often have small software subscriptions billed through the company credit card. It is easy for them to accumulate without owners or executives noticing. They can be easily canceled to create room for automated savings.