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Business Liability Audit

All directors and business owners should regularly audit the risks to their business.

Here are a few pointers and things you should think about when completing a risk audit.

Key Names – List the names of the people who are key to your business. This could include you, other business owners and people who have a major influence or impact on profit, for example individuals who have specialist skills or unique relationships with third parties. Basically anyone who would put the business at risk if they were to become ill unexpectedly or even die.

Liabilities to third parties – List here any loans and regularly used overdraft facilities. If you’re a sole trader, you should consider any personal debts you may have.

Liabilities to owners – If you’re a partner, member of a limited liability partnership, shareholder or director, you may have made loans to the business which it will need to repay if you die or become critically ill. This could be a credit balance on a loan account, capital or current account.

Loss of profits x term to recovery – To work this out, you should consider:

  • What’s the gross profit of the business?
  • How much of that can be attributed to the business owners?
  • How much profit can be attributed to another key person, for example, a top sales person or someone with specialist skills or knowledge?
  • How long would it take the business to recover on the loss of that particular key person?

One-off expenses – Even if it’s only on a short-term basis, you should consider any recruitment costs to replace a key person. These may include advertising, agency fees and training costs.

Total The need for cover will be apparent when you arrive at a total. This will help you understand how much cover you need for your business.

Finally - call us to discuss your findings and put suitable protection in place.

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