The Business Exchange Swindon & Wiltshire Edition 25: June/July 2016 | Page 11

FINANCE Why you need a watertight contingency plan for your business By Roger Bourlet, Bourlet Consulting 16-20 May marked Business Continuity Awareness Week. However, despite efforts to promote the importance of having contingency plans in place, a recent survey found that just 27% of small businesses have a continuity plan compared to 75% of large companies. Few business owners give much thought to what would happen if they were to die suddenly or become seriously ill, or if this happened to a co-owner or key partner. While buildings or computer systems can be replaced or rebuilt, human capital is often overlooked as an asset. And yet, only four in ten small or medium sized businesses in the UK believe they would survive if their founder were to suddenly leave the business. A third of SMEs claim their business would not even survive for a month. The death or critical illness of a business figurehead or one of its partners can have a devastating impact on the business, its surviving partners and employees. It can lead to: falls in sales, delays in the completion of contracts, financial penalties, loss of major contracts, loss of business loan facilities and difficulty in repaying existing loans. That’s why it’s important to have suitable business protection. The benefit will be paid directly to the business and the proceeds of the claim can be used to meet the financial needs of the business while it undergoes a restructure or recruits a new director. If a critical illness claim is paid and the key person subsequently returns to work, the funds can be used to cover any revenue shortfalls or to pay for a temporary replacement. All too often, business owners that do have a business protection insurance policy, have inappropriate levels or types of cover. And they’ve paid over the odds and the cost of cover is too expensive for what they need. Sometimes when you look at the small Roger Bourlet, Bourlet Consulting print, they even have the wrong individuals insured. We typically encounter five common pitfalls businesses find themselves in when it comes to making a claim, when unfortunately, it’s already too late. They are: 1. The money does not end up where the business owner or partners thought it would. 2. The tax position isn’t what they predicted it would be. 3. The business doesn’t have the first claim on the insurance pay-out. 4. The legal documentation (e.g. Articles of Association and Shareholders’/Partnership Agreement) don’t deal with the policy proceeds correctly. 5. The pay-out has no legal mechanism to ensure that it ends up in the right hands. That’s why it’s vital to consult an independent financial planner with additional expertise from your lawyer and your accountant or tax advisor to ensure your contingency plan and business protection provisions are absolutely watertight and above board. For more information or advice contact Bourlet Consulting on: 01249 700 460 or email: [email protected] www.bourletconsulting.com 01793 839977 www.banksbhg.com Accounts & Audits | Academies | Auto Enrolment & Payroll | Bookkeeping Insolvency | Tax Planning | Wealth Management Banks BHG are a long-established firm of chartered accountants, auditors and tax advisers, providing specialist accountancy and taxation services to small and medium-sized businesses. With years of ex