How to prepare your business for an unexpected illness or injury
Your business is going well. Everything is running smoothly until you unexpectantly need to take time away from your business due to an illness or injury. With no time to prepare everything can fall to pieces quickly.
This is why having a business contingency plan, your Plan B, is essential. By taking time now to create this plan for your business, and your team, means that your absence will have minimal impact on your business.
This type of plan is also useful when you know that you have a surgery coming up that will require you to be away from work for a while.
I’ve listed six key areas to consider when putting your plan together.
1. "Sick leave" as a sole trader
I recommend that my clients who operate as sole traders put money aside for their own version of “sick leave”, so that their income is smooth even if they can’t work for a while.
As well as giving you a smoother cashflow, it also reduces stress in not being able to bring on clients during that time. Less stress when you’re healing is always a good thing.
Knowing you have that money in the bank means you’re more likely to take time off when you need it, instead of pushing through and taking longer to recover.
Even putting aside a small amount each week can make the world of difference if you become ill.
2. Prepare your team
If you have a team then it’s important to consider what they will need if you’re suddenly unavailable.
Do they have access to the information they need to run the business in your absence? Can they access your emails, your laptop or documents stored in the cloud?
Do they know what your tasks within the business are so they can manage them? Are your policies and procedures up to date so that a member of your team can step in and pick up your tasks?
While your team might not be able to do every task that you do within the business, they should know what those tasks are, what priority they have and what to do in the event you’re unavailable.
If you’re a sole trader without a team, then now is an opportunity to consider who could be part of your temporary team. Could you leave instructions with your accountant or lawyer on what needs to happen in an unexpected absence? Alternatively, do you have a life partner who could step into that role, or a trusted business owner that you know?
As an accountant I have certain obligations that only another chartered accountant can perform, so I have an arrangement with a trusted business colleague from my previous accounting firm days that we will stand in for each other if either of us is unable to run our businesses.
3. Extension on tax payment
In certain circumstances you can apply for an extension on your tax payments. If your illness or injury takes you out of your business for a while this can make all the difference to your businesses cashflow.
Speak to the ATO or your accountant about a possible extension.
4. Early access to superannuation
If your illness or injury is going to have a long recovery time it is possible to request early access to your super.
This is a lengthy process that must be justified so it’s not a quick way to access extra money. If you’re considering this option then do discuss it with your accountant so you’re clear on the process and the implications for your retirement funds.
5. Government support
Support from the Government may be available if you haven’t had time to put funds aside and your recovery is lengthy. This type of support will depend on the level of household income that you have and your level of assets you hold.
6. Insurance
There are three types of insurance to consider as part of your business contingency plan; health insurance, income protection insurance and business insurance.
Health insurance covers medical expenses that arise as a result of an illness or injury.
Income protection insurance covers the risk of you not being able to work due to illness or accident. The aim of this kind of cover is to meet your ongoing financial commitments, e.g. mortgage payments, until you’re able to return to work.
Business insurance can cover a broad range of areas including business interruption, e.g. where a key person in your business has to have an unexpected operation.
An insurance advisor will be able to guide you on the specific types of business insurance that will be relevant for your particular business.
While none of us like to think that we’ll need a contingency plan it’s well worth taking a few hours to map out the details of what would happen in your absence. With good luck you’ll never need to use it, yet if its ever required you’ll appreciate that you took the time to put one in place.
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