Disasters can take many forms and strike at anytime and anywhere. That's something no small business can do anything about but they can take steps to back up their data to ensure they're protected. Despite the harsh lessons dealt by Hurricane Katrina last September, a recent survey by Harris Interactive found that almost 80 percent of entrepreneurs still do not back up the financial records of their business.

"If something happen[ed] to your data, what would you do?" asked Hassan Beydoun, a managing director of the Small Business Technology Institute's services practice and a senior analyst in its market intelligence group in Silicon Valley, Calif.

Beydoun told fiducial.com that many business owners are complacent and not doing enough when it comes to backing up their data.

"If I store business information it's vital," Beydoun said. "Your business lives and dies by having the right information at the right time in the right place. In case of an interruption due to a hardware failure, it's extremely important as a business owner from a continuity perspective to back up your records. Storage is vital for survival."

SBTI data indicates that more than half of all small businesses in the U.S. experienced a security breach in the last year and nearly one-fifth of them don't use virus-scanning software for e-mail. Also, over 60 percent of these companies don't protect their wireless networks with encryption, and two-thirds don't have an information security plan.

Jim Layton, director of Fiducial's system support and development, noted that every business should have a disaster recovery plan because sooner or later, some form of disaster is going to hit them.

"If you're not sure if you're prepared, you should speak to your professional business advisor," said Layton.

Taking chances could be fatal

Businesses suffering a catastrophic data failure might as well take down their signs, according to Beydoun, who cited a University of Texas study that determined 43 percent of businesses experiencing a catastrophic data loss never recover and half of them go out of business within two years.

"This is a very expensive and risky proposition," he said. "We live in the information age and information technology is the bedrock of our business. The livelihood of business relies on this data." But without backups, he said "it's like playing Russian roulette."

Identifying some solutions, Beydoun said the first step for business owners is to sit down and prioritize their data. This includes employee, client and tax information. Next, the business should find an IT partner to work with them and create a blueprint for the company in case of a disaster so they can bring them aboard and get them up to speed.

He also recommended using some off the shelf technologies such as Maxtor and Segate, which offer automated back up systems that aren't expensive and simple to install.

"You don't have to be technologically savvy to be able to get up and running with these programs," he said. "Backing up data should not involve cutting corners because taking chances with data could be fatal."

It's the story of their business

Getting a grip on why small business owners do not back up important records isn't hard to fathom, according to Carol Chastang, a spokesperson with the U.S. Small Business Administration's Office of Disaster Assistance.

"Human beings have the tendency to think 'this is not going to happen to me,' " said Chastang. "Small business owners are so focused on turning a profit and keeping their customers happy that doing things like having an emergency preparedness plan is one more additional expense that they would rather not incur."

Failing to back up records, Chastang said, will also cost a company when it's trying to recover from a disaster.

"It's slowing down the recovery process for them when they file a disaster loan application and deal with the insurance company," she said. "If you don't have your list of contacts and your vendors—all of which you need to do business is gone—that's going to slow down your recovery if you ever do rebuild."

To date, the SBA has approved more than 18,000 business disaster loans totaling over $1.7 billion, both all-time records.

Many of the business casualties resulting from Katrina could have been saved if owners had backed up their records. Chastang indicated that taking basic protective measures such as making back up copies of your customers and storing it off-site at least 50 miles away can make all the difference.

As one expert pointed out, a company's financial records are the story of their business.

"If you lose your financial records you've lost a whole lot information that you need to keep using on an ongoing basis," said Marian Banker, president of New York-based Prime Strategies that offers business coaching for small business owners. "Your business will be in serious danger."

Christine Goodno, vice president of corporate relations for SCORE, a Washington, D.C.-based non-profit association that serves as counselors to U.S. small businesses, maintains that having a business plan in place is critical to small business success especially after being hit by a disaster.

"Part of that plan is keeping a portable lockbox with key files to take off-site in an emergency," said Goodno. "Every small business should back up their records with storage on-site or store data in a set of CDs at least 500 miles away. These are easy and inexpensive ways to protect data, records, bank account numbers and get a business up and running quickly."

'It's the little things that get you'

Alan Berman is a consultant with New York-based Whitcomb Business Consultants and has journeyed to Louisiana on several occasions to meet with small business owners in Katrina's aftermath. He said the main issue with small businesses there is that they are single site and the loss of that site means "they've lost everything."

"The problem is that they know it's a good practice [keeping records] and it's not that expensive but it just takes a little determination and being familiar with the federal regulation that covers keeping business records," said Berman who's also a member of the board of directors of the Disaster Recovery Institute International (DRII).

One of the areas that companies large and small often forget concerns paper documents such as beneficiary forms. In Louisiana, many of the companies' beneficiary forms were stored in one site and were never backed up.

Berman believes that businesses need to have a better understanding of what they do which will help them to put the pieces together after a disaster. For smaller companies, inventory controls and accounts receivables mean everything. When Katrina struck, thousands of smaller companies were not able to rebound because they could not reconstruct their records.

"Most of them came up short," he said. "Once you wipe out that site, there's nothing left."

What could have been a saving grace for these owners, Berman said, was taking care of the little things.

"It's the little things that get you—the inability to have thought of something that you could have emailed yourself," he said. "Email yourself a copy of your accounts receivables. If you email it, it's out there."

Rising from the ashes

Early in his accounting career, Fiducial's Dale Ellery received a phone call from a northern Michigan client in Rogers City who told him that his large lumber mill burned down to the ground and they lost everything including the business records. The mill owner wanted to know if Ellery, now a district manager for Fiducial in the Detroit region, could help him reconstruct his business.

As fate would have it, an insurance adjustor happened to be in the area and read about the fire that wiped out the mill. The adjustor specialized in the lumber industry and had all manner of statistics and profit mark ups for wood at his disposal which proved invaluable for the mill owner.

This was the first instance that Ellery would delve into the area of forensic accounting. Through bank records, additional data and the adjustor's help, the owner got back four times the amount needed to rebuild the mill that the insurance company had originally offered.

"The company was able to come back and his son runs it now," said Ellery who observed that no business owner pays attention to backing up records like they should.

"We all make the false assumption it's never going to happen to us," he said. "But it's a disaster. Even if it doesn't put you out of business it will take months to restore your records. It's like trying to do a tax return with boxes of different papers: If you do reconstruct it, it can be pretty painful."

In upstate New York, Fiducial franchisee Larry Recor has had a number of clients use QuickBooks accounting software to help store their financial records on back up disks at his offices in Boonville, Old Forge and Utica. Over the years he's had several clients that experienced computer failure due to a fire or other disaster and "they were delighted that we had the data on file for them."

For those clients who have not protected their systems, Recor said they would have to request copies of records from their bank. Some of the data will inevitably be lost because it wasn't backed up.

Owners don't think it through

Businesses simply cease to exist if they lose their records, said Gene Polley, a senior small business advisor in Fiducial's San Diego, Calif., office.

"We would be in a world of hurt if we lost our clients' records," said Polley who pointed out that businesses just don't think it through when it comes to backing up their records. "They don't have a risk management analysis and don't have back up computers," he said. "They never think about it until a disaster strikes."

Polley knows first hand about having his business in harm's way. Two years ago when a fire devastated his residential community, he said it was nip and tuck whether his office would survive the blaze. The fire came within a half-mile of his office where scores of hard copy records and paper copies were stored.

"Now it's possible to get the computerized versions of the files," he said. "We've had client situations where we've had to rely on backups."

Perhaps the worst scenario that Polley witnessed came years ago when he began working as a CFO for a company that had been embezzled out of $170,000. The embezzler wiped out the company's accounting system which was not backed up off-site and there wasn't an accountant who was reviewing things on a monthly basis.

"The owner lost an entire year's worth of accounting records," he said. "He did have his invoices in boxes, so he had to get microfiche copies of all checks for an entire year -- and there were thousands of checks."

There ought to be a law

Depending on the season, certain areas of the U.S. are prone to different types of storms such as tornadoes that are prevalent during April and May in Kentucky.

Rebecca Stovall, a senior business advisor in Fiducial's Louisville, KY, office said that businesses there have to deal with damage caused by thunderstorms and power surges almost every other day. Yet small business owners are not taking the necessary precautions.

"They don't realize how important it is [backing up records]," said Stovall. "It's like their day planner. If you lose it, you're lost."

Stovall likens the situation to losing your wallet that contains crucial personal data.

"They should have copied down their credit card numbers," she said. "It doesn't happen often but when it does 'woulda, shoulda and coulda' teaches that lesson."

Having experienced a tornado in Louisville that blew out all the windows and sent papers flying everywhere in her office, Stovall remarked that people protect their credit cards but safeguarding business records is another matter.

"It's not a seat belt law just yet for your business, but it ought to be," she said.

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STEPHEN PAREZO is the Media Manager for Fiducial.