Creating a Business Disaster Recovery Plan: Best Practices from a Los Angeles Accounting Services Firm - AccountingX

8391 Beverly Blvd #456, Los Angeles, CA 90048

April 20 2017

Best Practices from a Los Angeles Accounting Services Firm: What you need to do when disaster strikes

Los Angeles, our city of angels, is unfortunately on some massive fault lines that create a large risk for businesses of being hit with a major earthquake. Business continuity is critical so that operations, and revenues, don’t come to a screeching halt should a natural disaster hit. There are many pieces to creating a disaster recovery plan for your business, but one of the most critical steps is covering the financial management in advance.

Did you know that 40% of all businesses never reopen following a disaster? And another 25% fail within one year following. So your business has a 65% chance of failing if you do not have a business continuity plan in place!

Don’t be a statistic! As a Los Angeles accounting services firm, we know the risks and have considered them for ourselves as well. The words accounting and disaster don’t line up. So we have prepared some of the main components of your financial management to consider and prepare should a disaster hit. If all of this just seems like too much and the liability is too great, consider outsourcing your bookkeeping to a firm that specializes in the region.

Inventory loss

Having up to date inventory counts is critical for any insurance claims as well as tax write-offs for losses that may arise from a disaster.

Property damage

If you have any building damage or damage to equipment you will want a record of it. If the damage is substantial and causes a decrease in the asset’s value you can also be required to take what’s called an impairment loss. Back when the big earthquake hit and during the L.A. riots many Los Angeles accounting services took an impairment loss for their clients while reducing the value on the balance sheet.

Payroll Rules

FLSA (Fair Labor Standards Act) says you may be liable to pay exempt, salaried staff members. The nonexempt staff does not fall under this Act as they are paid hourly and the rule does not apply during the close of a business. It’s important to thoroughly review federal law when it comes to payroll to help determine if you’re legally obligated to pay staff when a business is closed due to a natural disaster. If the staff is required to stay on-site during such a time, then you must pay them for their time and any overtime they may be entitled too. If the disaster delays the process of payroll, you will want to make sure this is the first thing you take care of as it is a direct violation of the FLSA.


Tax Deadlines

The IRS will usually extend tax deadlines for businesses or individuals in the areas that were affected by the disaster. Extensions are usually based on the type of disaster and the severity of it. You can find this information on the IRS website in the event a disaster happens in your area.

Understanding the rules when it comes to accounting and natural disasters help you to account for the losses and obtain financial reimbursements through tax deductions, insurance, and any government relief programs available to businesses at the time.

Data Loss and Backups

When a disaster strikes one of the worst things to try and recover is your data. Often times your backups tend to be onsite so not only do you lose your data you lose your backups as well. The best way to avoid this is through virtual accounting services. Your data and your backups are in the cloud, which means no matter what happens your data is still intact and can be accessed from any location on any device as long as you have an internet connection or a mobile data plan.


Los Angeles accounting services like AccountingX know that you can never be too prepared for a disaster to strike, as the wildfires and earthquakes can be unpredictable in this area; the more prepared you are, the less you have to deal with if a disaster does hit in Southern California. For more information on how you can prepare for a disaster or hire an experienced accountant to deal with it all for you, contact us for a free consultation.


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