Why use a forensic accountant for business interruption claims?
July 14, 2021
If your business has been disrupted by the Covid-19 pandemic, you’ll be all too aware of the concerns surrounding business interruption insurance claims, the policies and what they cover. With the Supreme Court decision in favour of the Financial Conduct Authority, this has opened the door for many businesses to make insurance claims for the losses suffered.
So, if you need to make a claim, how can you ensure you maximise your settlement? Loss adjustors work for the insurers, not your business, so they’ll want to reduce the amount they pay out to businesses like yours as much as possible. That’s where forensic accounting can help you.
How forensic accounting can help
If your accounts are already prepared, you could just send them to your insurer and trust them to settle in full. But as forensic accountants, we’ll be able to identify and reclassify certain items, so your business’s financials are presented in the best possible light.
For example, one of the key things we might look for are one-off costs that are listed as cost of sales when they should be classified as other expenditure. Revising expenses like this would improve gross profit and lead to an increase in the settlement your insurer offers.
This is precisely what happened with one of our small business clients recently.
- Their original financial statement showed revenues of £67k and a gross profit of £54k (80%)
- After we moved one-off costs from cost of sale to other expenses, we improved gross profit to £61k (91%)
- The result? A 26% increase in the settlement offer from their insurer.
- Our fees were mostly covered by the insurer and the increase in the settlement far exceeded the balance
Business interruption claims for a complex business
The above example shows a fairly straightforward case supporting a small business. But there are many more complex areas we can investigate to help your SME or large-scale business to gain the best settlement. For example, we’ll look at growth trends, revenue adjustments, or change of circumstances. There are also areas such as site expansions, changes in key members of staff and business acquisitions to take into account.
How can Opus help?
Our team is led by former PricewaterhouseCoopers forensic accountant, Nicholas Parton and is used to working closely with the major loss adjusters. In fact, we have excellent relationships with them and can get quick and reasonable responses to our clients’ needs. So, our knowledge and experience has helped around 85% of clients claiming for business interruption to increase the value of their claims.
‘I have instructed Opus Pear Tree for a number of years and their expertise has produced what I required every time. They provide me with technical advice and assistance in a timely and cost-effective way. As my main point of contact, I like that Nicholas places great emphasis on wanting to understand the client, their needs and expectations, as well as mine as instructing solicitor. His approachable manner makes him my “go-to” forensic accountant.’
Partner, Law firm, Birmingham