Cash is King. This is always true and never more so than when a company is losing production and/or 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 short? Request regular advance payments from the insurance adjuster.
There are two main sources 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 – depreciated value if the asset were to be sold on the open market at the date of loss) of all assets until the assets are actually replaced. Second, if the adjuster is absolutely certain that a significant amount of lost sales cannot be made up at a later date, they may give a very conservative advance related to the estimated lost business income. This is usually not a huge percentage of the estimated loss, but should be enough to significantly help with continuing (fixed) expenses during the down time.
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