General business issues:  Essential flood recovery guide

Updated 21 January 2011.

Insurance matters
Locate your insurance policy and review its terms. If your policy document cannot be found or has been destroyed, contact your Broker or Insurer to request a full copy. It is important to review the document and discuss with your Insurer or Broker:

• the terms of your policy and your eligibility to make a claim (all insurers are urging their clients to notify them of any potential claims even if you think you may not be covered)
• the information required to support your claim, i.e. photographic or video recordings of your premises and damage to property, plant and equipment, stock and any other business items being disposed of (it is recommended that your keep records of serial numbers and identification labels where possible)

A claim for any loss should be submitted to the insurer for their consideration, regardless of whether you believe your policy does or does not cover you for the loss you have sustained. Your insurance broker will be able to assist you wiht this process and lodge the claim on your behalf.

Many business policies may include a provision for claims for loss of trading profits in addition to the general claims for property, equipment, stock and fixtures.  If this applies to you there should be a specific section within the policy which deals with a right to claim following an "insurable event". 

The policy will contain specific wording as to what your business is entitled to claim and how the claim is to be calculated.  Policies will often limit the types of expenses that can be claimed in calculating net operating profit and how the policy requires you to quantify “profit” might not be the same as how you routinely calculate your business’ profit. 

Note that a business interruption claim under a business’ policy could potentially extend for a period of months or years.  Policies generally limit the period over which your business’ claim can be made so it is important to pay particular attention to this information. 

You should document the loss as much as possible by listing details of each item, approximate purchase dates and replacement values. If you have also documented the loss by either video or photo and/or where you have mitigated the loss, details of this should also be provided. As with any insurable event, you need to mitigate your loss.  That is, you need to do all positive and possible actions to get your business operating as it was before.

As each loss may be quite different in circumstances and cause, the claim should be submitted as a "water damage claim" as hydrological and loss adjuster reports may be required to ascertain the real cause of loss. You should also add notes about any special circumstances which occurred prior to or during the event which resulted in the loss, e.g. "the whole premises was sandbagged to 1 metre high but water came into my commercial unit from a blocked drain".

If an insurer declines a claim there will be the opportunity to submit the claim to an insurer's Internal Dispute Resolution Panel. You should be provided with instructions of how to do so. If you utilise an insurance broker, your broker will be able to guide you through this process. If you are still unsuccessful and you are adamant that you have a fair claim and should be indemnified, you may also present your claim (once again a broker will assist) to the External Dispute Resolution Scheme of which the insurer is a member as required by law. However this opportunity is usually restricted to domestic and small business policies.

You should speak to your Insurer or Broker as soon as possible to get specific advice from them on any steps or information they need from you.  If you believe that you have lost copies of financial and operating information and no back ups or copies are held offsite you should inform your Broker or Insurer immediately. 

Cash flow planning
Cash is the oxygen of your business and therefore it is important that you take time to consider the impact that the Queensland flood crisis will have on your cash flow.
In reviewing your cash flow requirements you will need to consider:

• customers and their ability to honour your debt and/or trade terms
• your ability to honour creditors
• bank convenants
• financial arrangements

It is important to establish a sustainable cash generation strategy that aligns with your business needs by revisiting your cash flow forecast and ensuring you take into account the potential for reduced sales and/or higher costs of supplies/services. We strongly recommend that any businesses without cash flow forecasts should consider preparing one as soon as possible and your Grant Thornton advisor can help.

Clients/customers
Many of your clients and customers will be facing the same issues as you.  At this time we would recommend that you contact them to discuss:

• the fact that you are open for business and any special conditions they should be aware of in dealing with you
• how the floods have affected their business
• their ability to pay amounts owing to you
• a review of existing credit terms and/or negotiate new terms
• their future requirements, i.e. what items or services will they be requiring over the next couple of months

Suppliers
Your suppliers may also be affected by the Queensland floods.  We would recommend that you contact your suppliers and discuss with them:

• your ability to pay amounts owing to them
• a review of existing credit terms and/or negotiate new ones
• their ability to supply you with goods/services
• any change in pricing that may impact your business

This information is general in nature and we urge you to contact your usual Grant Thornton advisor or email our office at flood.assistance@au.gt.com should you have any questions.