Cash is king. This is always true and never more so than when a company is losing production and sales due to a disruption. As a general rule, the smaller the business, the more critical the need for cash following a disaster.
So how is a business supposed to operate and replace assets while its cash flow is severly restricted? By requesting regular advance payments from the insurance adjuster.
There are two main bases to seek advance payments. The first is related to physical property lost in the disaster. Ask the adjuster to provide a payment of the actual cash value (ACV) of all assets until the assets are replaced. (ACV represents the depreciated value of the asset if it were to be sold on the open market at the date of loss.) Second, if the adjuster is absolutely certain that a significant amount of lost sales cannot be made up at a later date, he or she may approve a very conservative advance related to the estimated lost business income. This is usually not a huge percentage of the estimated loss, but it should be enough to significantly help with your continuing (or fixed) expenses during the down time.
John Hutson is fiercely committed to guiding clients through the process of quantifying a business interruption for litigation or an insurance claim. Please feel welcome to contact John to discuss your project.