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Back in Business: a simpler way to support small business

By  Theo Pitsikas

If you have a small business, balancing the books and managing your cash flow can be a constant challenge, even during the good times. But how long could you keep paying the bills if you couldn't open your doors? ASIC found that up to 40% of Australian businesses fail due to cash flow issues*. Luckily, there is a way to better protect your business.

AAMI has tailored Back in Business to better suit the needs of small business. It's a type of 'business interruption insurance' – basically, it can cover a reduction in business revenue due to certain unexpected events. This financial support helps to keep your business going when your revenue may have stopped. As Pamela from the AAMI Business call centre in Adelaide puts it, "You're not in business, but if your revenue is insured you can keep your business ticking over".

Back in Business can offer financial support in 2 main ways:

  • By covering a reduction in revenue due to an insured event, like the examples listed below
  • By providing funds to cover increased costs of working. This could include advertising to promote the new temporary location, mail redirection costs, and increased telecommunication costs.

Note that any reduced costs to your business will be deducted from your claim.

You might think only natural disasters would stop you opening your doors, but there are plenty of situations that stop businesses from operating:

  • Burst pipes from the tenant above causes water damage to your cafe
  • A break-in damages the entrance and flooring of your hairdressing salon
  • A storm damages the roof of the office you rent, causing extensive water damage to your computers, furniture and fittings
  • A car drives into the front of your building, causing extensive damage
  • A fire in one store in a shopping centre blocks access to all stores in that area

In the meantime, the bills keep piling up, and you'll likely have additional things to worry about. Your business might be out of action for just a few weeks, but for many businesses that is long enough to lose a lot of revenue, and put a serious dent in future plans. Of course, if something big does happen and your premises need to be re-built, that can take several months. Pamela also points out that "being able to pay employees in the meantime means you don't have to worry about rehiring and re-training when you're ready to open again."

Keep in mind that Back in Business doesn't just cover lost revenue while your business is closed. It can also cover the difference in revenue if you have to relocate permanently after an insured event. As Pamela explains, "that can be just like opening a whole new business and starting from scratch. Depending on your business, customers might not travel to your new location. If your revenue dropped from $2000/ week to $1000/week, Back in Business can cover the difference for 12, 18 or 24 months, depending on the indemnity period you choose." Keep in mind that any savings to the business will be deducted. Other events, such as key holiday periods, trends and alternative trading could also increase or decrease the final amount.

To make the process as easy as possible, AAMI primarily uses the revenue shown on your Business Activity Statement to calculate your Back in Business cover. (Typically, business interruption insurance is based on gross profit, and calculating that involves a fair amount of paperwork.) This saves you time when you really have more important things to think about. It also helps to make sure you're covered for the right amount, as long as you keep us up to date if your revenue suddenly changes.

So, while you might have your physical assets covered, don't forget to protect the revenue of your business. It's quick to find out how much Back in Business would cost for your business – simply start a quote online, and choose Back in Business; it's an optional cover when you insure your property for loss and damage with AAMI Business Insurance.

*ASIC Report 412 Insolvency statistics, FY2010-11, published 29/09/14

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