As the 1st Quarter Comes to a Close get Your Insurance Agency Organized

As the 1st quarter of 2009 comes to a close and tax season is in full swing, it’s a great time to clean up your agency’s financial records. Forming a plan and getting started is the biggest challenge but once you dig in, you can add tons of value to your business and manage your agency more effectively. Insurance Agencies don’t have cash registers or invoices, we have commission statements and this is the first thing you should start organizing.

When you receive commission statements from your insurance carriers they should be printed and filed by carrier or General Agent in separate file folders. Since you’ve only received 3 months of statements this year, it’s a good idea to hunt down everything from the beginning of the year and file them as well. Have a separate folder for each carrier and keep a worksheet with the monthly and YTD total on the cover of the folder. We’re big proponents of a paperless agency, but commission statements should be printed and manually filed if received electronically.

In addition to maintaining the hard copy statement, check with your agency management system vendor and activate their accounting module. Make sure you don’t start entering incorrect information, once the data is inaccurate; it’s difficult to clean up. If you don’t have an agency management system or don’t like their accounting program, subscribe to Quickbooks or Quicken. If you have started with a program and the data is inaccurate, learn how to do journal entries and clean it up.

Now you’ll have a 2-step approach for every commission statement you receive. When it’s received you enter it in your accounting program and file in the appropriate file folder. In time, you’ll be able to generate revenue reports broken down by carrier, monthly, quarterly, annually, etc. If you ever need to apply for a loan, obtain a valuation or sell your agency; you’ll have accurate reports and the commission statements to confirm the information in the reports.

We’ve helped numerous agencies develop this method while increasing their value and providing them with the reporting every professional independent agency should expect. The number one reason 7 out of 10 businesses for sale in California DON’T sell, is because of the seller’s inability to prove their actual revenue and expenses.

You never know when the WalMart of Insurance Brokers is going to approach you about acquiring your agency. You never know when there might be a condition that forces you to sell your agency. By investing a little bit of time in your accounting every week, you’ll impact the value of your agency considerably over the long term.

Even if selling your agency or obtaining a loan against your book is the furthest thing from your mind; as an Owner or Executive, you need to see how your agency is performing in order to manage effectively. If you’re an S-Corp or LLC you’re bound to accurate record keeping. The reports you’ll be able to generate will give you information to help you make informative decisions in your agency.

If all of this accounting jargon is new to you, take an accounting course or hire someone to implement and train your agency on how to maintain the records and reports. You can’t possibly run your agency as effectively as possible without the tools we’re describing here. If you’re unable to run an Income and Expense Statement on your agency while reading this article, it’s a good idea to add “Focus on Accounting” to your goals for the 2nd Quarter of the year.

Leave A Comment