Business Owners Should Prepare for the Unexpected
Over the years, your business has likely grown and become more complex. Your income and expenses are larger now than they were 20 years ago. Today, it takes computer hardware, software, passwords and authorizations in order to transfer cash between accounts, order inventory, or just take care of the weekly payroll.
If a crisis occurs and you can’t run your company, either indefinitely or for a short period of time, do you have a succession plan in place? You may already have will and trust documents to take care of your personal assets. You and your spouse should have a durable power of attorney for healthcare decisions and a general durable power of attorney for financial decisions.
But, if you’re suddenly unable to manage your company for 60 or 90 days, below are some areas to consider, where someone’s name should already be designated or authorized to maintain business as usual. I recommend you really think about how you designate responsibilities and enable those individuals to continue those duties if you’re out of commission.
- Someone’s name should be on a bank signature card to continue signing checks for the company, ordering inventory and continuing the day-to-day running of the business.
- Does the person you already have on the corporate account have the ability to transfer cash from savings to checking? Hopefully you have a second person who has the authority and passwords to transfer cash to meet payroll and pay bills.
If you have a corporation, it’s a good idea to record the names of the individuals who will have the authority to run the business in the event of your extended absence in your corporate minutes. You might also mention in the corporate minutes that one person will have the title of general manager and another will have the title of bookkeeper, if they work in the office every day. Those individuals, based on their titles, would have the authority to fulfill their part of running the company in the case of your incapacity. And, if documented in the minutes, there would be no question about each person’s responsibility. It’s also advisable to alert your vendors, business attorney, accountant and banker to these roles.
Finally, if your family is involved, ensure they’re aware of who is responsible for what. Don’t put your company, employees, customers, and family in a bind if you’re suddenly not able to go to work for 60 days, 90 days or longer. Protect the value of your company by making sure the right people have the information they need to keep the doors open and the business both working and profitable.