Many business owners agonize over developing a sound business plan when they first start their business, then in the following years fail to update it or assess whether they are on the right path or not. Instead, these individuals assume that if they are making it work month after month, their business will continue.
Operational business continuity planning can help you assess risk, develop strategies for events that could disrupt business, and provide peace of mind that your business can handle any bumps along the way. A key element in business continuity assessment and planning is understanding the story that the financial data can tell.
Business continuity that last decades is difficult to achieve. Not only do you have to have a sound business plan and a product that the market wants, but your business must also be able to weather all of the unforeseen circumstances that might arise. While it is impossible to foresee the future, it is possible to derive critical business insights from financial facts that may help you make better, more strategic decisions. The end result is often an improved ability to continue operating no matter what might arise.
The recent COVID-19 pandemic illustrated how crucial it is to be adaptable. Although major events such as a global pandemic are rare, it is common to encounter unanticipated changes, whether it’s the ever-changing consumer preferences, the emergence of additional competitors, or a technological disruption within your industry.
Data,especially financial data, can help take some of the uncertainty out of the future by identifying important trends that can help you adopt new strategies and give your business an advantage that may increase its longevity. When you combine your company’s unique financial facts with big data trends, you can:
- Identify top risks and develop strategies to mitigate them and reduce the overall impact on your bottom line and employees.
- Predict critical events that may occur in the near future and prepare your business for them.
- Enhance efficiency across departments and areas of operation to improve profit margins.
- Develop more effective and efficient ways to deliver the product or service, market your brand, and obtain materials.
- Analyze the effectiveness of the recovery process and identify areas where it can be enhanced.
- Schedule maintenance, downtime, and the implementation of new systems during low- or no-production periods to reduce the financial impact.
While these factors may drastically improve your business’s ability to thrive for many years, it is often a headache for small businesses to get to a point where they have the correct financial facts available and know how to interpret them.
It’s easy to see that incorporating financial facts into the planning process and long-term operations is essential when you consider the following facts related to business continuity:
- Over half of businesses have experienced a break in business continuity that lasted at least five hours.
- Approximately 90% of businesses will fail within a year if they cannot resume operations within five days of a disaster.
- Over half of companies do not have a business continuity plan;this is part of the reason that over 100,000 companies were put out of business by the COVID-19 pandemic.
- Three-quarters (possibly 100% in the current environment) of companies have experienced a supply chain disruption.
- A break in continuity can cost small businesses approximately $10,000 an hour at a minimum and up to $5 million for larger companies.
Most small business owners recognize that events will occur that they cannot foresee when they open their doors for business. After recognizing the presence of risk, businesses may begin actively identifying, prioritizing, and planning for potential risks. Financial data can often impact how broad your business continuity plan may be, prevention measures you can take, and inform you about how long you can sustain a prolonged disruption. Financial data can also tell you the scope of certain events and what it would mean for your employees, resources, and bottom line.
Identifying which key performance indicators can enhance continuity and inform the development of a sound business continuity plan is an essential step in preparing your organization to survive and thrive despite external and uncontrollable factors. While this sounds like an easy first step, it can be intimidating. Interpreting financial facts in light of industry and global trends is even more daunting, which is why companies benefit from expert insight during this process.
To find out more about financial facts and business continuity, contact Shuster & Company today. Our skilled team of forensic accounting professionals is proud to help businesses increase their probabilities of success and continuity.
A full-service Certified Public Accounting Firm located in Denver,Shuster &Company,PC provides quality, personalized financial advice and guidance to individuals, businesses, and the legal community. We offer an extensive range of services, with emphasis in forensic accounting, business valuation, and litigation support.