Financial Preparedness: Is Your Business’s Finance Function Ready for a Disruption?

The worst time to discover that only one person can authorize a payment, access a critical financial system, or find your insurance paperwork is when that person — or that system — is unavailable.

September is National Preparedness Month, and it’s a natural time to check whether your organization can keep its financial operations running through a natural disaster, cyberattack, prolonged outage, system failure, or sudden loss of a key employee.

So, what does it mean to be financially prepared? Financial preparedness isn’t just about recovering after a disruption. It’s about preserving the ability to make sound business decisions while the disruption is still happening.

A financially prepared organization can always answer three questions:

1. What cash do we have?
2. What must we pay?
3. What can we afford to do next?

Answering those questions requires enough access, visibility, and control to keep critical transactions moving and give leaders reliable information — even in a crisis.

Identify the Financial Processes That Can’t Stop

Start by asking a deceptively simple question: Which financial processes can’t stop, even for a day?

For most organizations, that list starts with:

• Receiving and disbursing payments
• Purchasing
• Payroll

Your priorities may differ, but the exercise is the same. For each critical process:

• What people and system does it depend on?
• What’s the backup plan if the normal one becomes unavailable?

This exercise often reveals hidden dependencies. A process may be backed up technologically but still depend on one employee’s knowledge, access, or authority.

Protect Access to Financial Records and Systems

Good decisions depend on ready access to reliable financial information. When that access is disrupted, leaders lose visibility right when they need it most.

Start with your records. Back up important financial documents and data regularly so information stays current and recoverable.

Then plan for access. A backup isn’t enough on its own. Decide who will need access to financial information if normal systems or facilities go down, and whether they can get to it securely, wherever they are. Loop in IT to review firewalls, security systems, and remote access. Make sure anyone handling sensitive data understands the security steps expected of them when working remotely.

Keep Financial Controls in Place During a Disruption

A disruption may force you to change procedures quickly, but speed shouldn’t mean abandoning controls. In fact, sudden process changes are exactly when controls tend to break down.

To keep things tight:

• Track and document any changes to approval levels, access rights, procedures, and responsibilities so that temporary workarounds don’t create new vulnerabilities.
• Keep up bank, accounts payable, and accounts receivable reconciliations.
• Maintain normal invoice and purchase-order approvals.
• Verify vendors and stay alert for duplicate or fraudulent invoices.

Prepare for Short-Term Cash Flow Pressure

During a disruption, yesterday’s cash flow assumptions may become obsolete quickly. Customers may pay slower just as vendors ask to be paid faster, and unexpected costs start piling up.

That makes cash flow forecasting a decision-making tool, not just a financial exercise. Update your revenue forecast as conditions change, identify expenses you can delay or cut, and figure out how much liquidity — cash you can access quickly, such as a line of credit — you might need under different scenarios.

This analysis can help leaders determine which expenses must be paid now, which may be delayed, and when additional funding may be necessary. Identify sources of liquidity before they are needed, including existing lines of credit and applicable business interruption insurance.

The goal is to know not only how much cash you have today, but how long your available liquidity can cover the obligations you can’t put off.

Protect Against Key-Person Risk

Critical financial processes shouldn’t depend entirely on one person’s availability or know-how. For each essential function, identify:

• Who performs it
• What information and authority it requires
• What the backup procedure is
• Whether the backup person actually understands that procedure

Then ask a practical question: If the person who normally handles this function were unavailable tomorrow, could someone else keep it moving?

Review Insurance and Recovery Documentation

Don’t wait until you’ve suffered a loss to figure out what records you’ll need to document it.

Consider keeping:

• Current inventories of business property and equipment, including model and serial numbers
• Photos or video for additional documentation
• Copies stored away from the geographic area at risk, so they stay accessible after a disaster

Also understand what your business interruption coverage requires you to document: normal business activity, lost income, damage, repair or replacement costs, and any extra expenses from the disruption. Thorough documentation makes it easier to support an insurance claim.

Test the Plan Before You Need It

A written plan isn’t proof that your finance function is prepared.

Test whether the people responsible for critical functions can actually access the records and systems they need, follow backup procedures, and maintain proper controls. Review emergency plans annually, update them as employees and operations change, and have staff periodically practice the plan.

After any real disruption, take stock: What worked, what didn’t, and what should change before the next one?

Protect Your Ability to Make Good Decisions

Put together, these steps help leaders answer the three questions that matter most in a crisis. Reliable records and systems give you visibility into available cash. Clear processes and controls help you determine which obligations must continue. Cash flow projections and access to liquidity help you decide what you can afford to do next.

Financial preparedness isn’t about simply getting your finance function back online after a crisis. It’s about preserving enough visibility, liquidity, and control to keep making sound business decisions the whole way through.

Contact your CRI advisor to discuss steps you can take to strengthen the resilience of your finance function.