Many insurance agencies invest little or no time in maintaining accounting records. Commission statements aren’t filed, loss ratios are shredded and payroll reports are nowhere to be found. Believe it or not, the hardest part about selling your agency is proving your annual revenue. We’re constantly helping agency owners contact insurance carriers for past commission statements and loss ratios. Here are a few steps to help you organize this information so if and when you decide to sell, your agency is ready to show to suitors. If you don’t intend on selling, maintaining this information will help you make informative management decisions when it comes to spending money, hiring and determining which carriers are actually profitable to write from a commission stand point.
- When you receive your statements from a carrier, file them in a manila folder and label it “CARRIER 2010”. You should have a separate folder for each carrier. If you receive them electronically, PRINT and file them. Yes, we’re big proponents of a paperless environment, but this information will need to be printed eventually.
- Add a worksheet to the top of each folder with a graph of 12 months. Each month, write the commission received in the graph under the appropriate month.
- File them alphabetically by carrier in a bankers box. Maintain a separate bankers box for each year.
By following these few simple steps, you’ll increase the value of your agency dramatically. This information will be helpful if you ever want to sell, obtain a loan or are audited by the IRS. Organized accounting records make your agency desirable. You should also follow the steps above with your loss ratios. Since carriers don’t send loss ratios as often as commission statements, you can use a binder or insert 2-3 carriers in each file folder.
Finally, delegate these duties to someone in your agency. If you have a bookkeeper or Accounting Dept, they should organize the records. If you don’t have either, the next time you’re considering hiring a CSR or Salesperson, consider a full time Accounting Professional. They can do your daily deposits, write checks for trust and operating, payables, audits, downloads, supply ordering and many other special projects. By hiring an Accounting Professional for your agency the owner will be able to invest more time into the Sales and Service staff to increase production.
Lastly, use an automated accounting program such as Quickbooks or the accounting module in your agency management system to enter all of your income and expenses. Once the information is entered, you can view it in report form and make effective management decisions.