Business Interruption The CPA’s Perspective November 12, 2009
Background Charles S. Amodio, CPA, CFF, MBA Partner Bollam, Sheedy & Torani, CPA ’ s (BST) 26 Computer Drive West Albany, NY (800) Specializing in Economic Damage Claims Business Interruption Lost Profits No-Fault Automobile Claims
What do you know about Business Interruption? Business Interruption Insurance What impact will a business interruption have on your business? Do you have a plan in place to deal with a business interruption? Will you be able to successfully document a business interruption loss? Business Income Loss Calculations
Business Interruption Insurance Coverage Do you have business income coverage? What are you covered for? Limitations to coverage Do you have sufficient coverage? Is the coverage right for your business?
Impact of a Business Interruption Loss of sales Loss of customers/clients long-term Loss of production Employees and staff Loss of inventory Loss of records Facility and equipment loss Bankruptcy Stress
Business Interruption Plan What is your first reaction? Temporary facilities Mitigating the loss Outsourcing Lease agreement Recordkeeping Backup financial information Up to date with tax filings Review insurance coverage annually
Documenting a loss Annual income tax records and/or financial statements Monthly Profit & Loss statements Sales records Payroll records Extra expense Inventory records Asset listings Segregating business income loss by divisions Accounting Software
Understanding how losses are calculated Losses are not based solely on lost sales or net income Economic Loss Net Income plus continued expenses Gross Profit less discontinued expenses Seasonality Make-Up sales/Deferred Sales Unrecorded sales Rental properties Equipment losses based on replacement cost