As most employers know, business continuity and succession plans are key to preparing for the future. But the COVID-19 crisis has greatly emphasized this point and especially the need for temporary succession planning at a critical time. Here, Chris Salandra, CPA, a partner at McGill, Power, Bell & Associates, LLP, discusses some of the most valuable information that employers should know to keep their businesses thriving.
The potential effect of the pandemic on executives’ health has made organizations more cognizant of the importance of business continuity and succession plans. What are some key lessons that have been learned?
There really is a distinction between the business continuity and succession plans. The business continuity plan shows your customers and employees that you will be prepared to meet their needs in any event, while the succession plan helps to ensure that your family and loved ones will be taken care of financially.
I’d have to say the major lesson that everyone should have learned is that businesses of all types need to develop and maintain contingency plans in the event that any of their key employees or the owner(s) become unable to perform their job and need to be replaced. In many instances, the small business owner may be the only key employee.
The second key takeaway is that the business continuity plan needs to be constantly reviewed, at least annually, though more frequently is preferred. The same can be said with succession plans; these need to be reviewed and updated for changes that may occur either from internal or external factors.
What is the first step a company should take with their business continuity/ succession plan — whether it is temporary or for the long term?
The first step really depends upon if a company already has plans in place. Assuming they do, the company needs to dust them off, review them and get them updated accordingly if they have not been doing so. However, if they do not have a business continuity or succession plan, they need to begin developing those immediately.
Preparing these plans takes time and won’t be completed over night. One of the first steps, if no plans are in place, is to identify your key employees. During this process, a company may find a person that is essential that they didn’t realize. A key employee is really anyone whose sudden departure may disrupt the business operations, productivity or morale.
What are some vital questions that employers or business owners need to ask about their continuity plan?
There are several questions you need to address in your continuity plan, not limited to the following:What are your company’s critical functions?
- Who are your critical customers and major products or services?
- What risks are you likely to encounter in the short term and long term?
- Is there a backup in place for crucial job functions?
- Can your workers work remotely if needed?
- Are you certain there are no vulnerabilities in your plan?
What documentation should be in place before a time of crisis arises?
A company needs to have a business continuity plan drafted, reviewed and have all team members familiar with the procedures outlined in the plan. Also, the company needs to constantly review their business insurance and make sure they have adequate coverage for any potential losses.
In light of the COVID-19 crisis, employers have spearheaded efforts to preserve cash and revise financial planning and make difficult decisions about layoffs and loans. What are some key issues that companies should consider when it comes to these topics, and continuity and succession planning?
Companies need to stay in contact with their trusted advisers during these trying times. Guidance on many topics is still evolving and can be confusing to say the least. For instance, companies need to be vigilant in properly accounting for costs during their eight-week covered period for calculating loan forgiveness under the Paycheck Protection Plan loan program — this is something that a trusted adviser can help to navigate in an efficient manner.
There are also tax credits available under the Coronavirus Aid, Relief, and Economic Security Act and the Families First Coronavirus Response Act that can help to offset some of the financial impact that the pandemic has had. One important thing to consider — if your company is going through a period where layoffs occur — are your continuity and succession plans strong enough to address this circumstance, or are there key functions that are impacted which now need addressed? The pandemic has been an experience that none of us will ever forget. We need to use this event as an opportunity in planning for the future.
For more information about McGill, Power, Bell & Associates, LLP, visit www..mpbcpa.com.