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The review of critical documents

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Don't wait! Review your important documents now.

It is the dead of winter and the pandemic is not abating. As business owners and managers, a periodic review of critical documents is a best management practice that is often placed on the back burner. In a recent webcast, sponsored by the Royal Bank of Canada, 145 Canadian producers were surveyed about their critical documents. Let's see how you compare.

Eighty three percent of the participants responded that they had reviewed their insurance coverages in the past five years, while 17 percent had not. Whether it is health, disability, property, or life insurance, a review of the status and coverage amounts should take place annually. If you are carrying debt, the amount of life insurance should be equal or greater than the total debt. One also needs to consider life insurance on spouses. Disability insurance needs to be considered because producers deal with machinery and equipment, often in isolated areas, and occasionally run afoul with livestock.

About 30 percent of the group reported having no business shareholder agreement. For those that had an agreement, two-thirds had reviewed it in the past five years, while one-third had not visited the arrangements in over five years. Family needs change, responsibilities change, and ownership changes. Do not wait for a critical trigger event like death, discontinuing the business, or a change in business size to make alterations to this critical document. A proactive approach can result in communication and crucial conversations.

Questions regarding transition and estate plans, which everyone knows are needed, but also get placed on the back burner, had some interesting results. Approximately one-quarter of the participants had no plan. Thirty percent had a written plan which had been reviewed in the past five years. Like many in business, 47 percent had no written plan, but were in discussion with key business partners and family members. The key is to remain focused and get the transition plan done. A plan in people's head and not on paper, is no plan at all. Lack of clarity leads to confusion and disruption when adversity strikes, or changes are made in the business.

Wow, 54 percent of the participants had a written business plan for 2021 and beyond! This result was much higher than the normal 20 percent response observed when producers are polled here in the United States.

Hopefully, this article can trigger thoughts concerning management’s review of crucial documents. This process is often a secondary level task in many businesses that needs to occasionally be elevated to priority number one. It is also a best practice to have these documents filed in a safe, secure area!

Source: Dr. David Kohlwhich is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

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