7 Accounting Best Practices for Insurance Businesses

This is not to say an adequately talented person couldn’t set up QuickBooks to work, but almost no people in agencies are that talented/educated in accounting. QuickBooks is a great system for most businesses but not insurance agencies. Never use QuickBooks unless you have a high degree in accounting and possess significant insurance agency specific accounting knowledge so you can address agency bill business correctly. By not analyzing these statements on a monthly and annual basis, the agency owner will have a more difficult time understanding the true operation of the business. Most P&C agencies receive monthly commission statements in the mail each month or they can access the commission data online from the insurance company’s website.

Leading Tax Services to Ensure Compliance and Maximize Returns for Insurance Companies

Unfortunately, some trainers forget to discuss the options in detail with agencies, or because when instituting a new system agency personnel are overwhelmed with so much information they don’t hear the trainer’s message. It’s possible the agency people do not have enough knowledge to understand the implications and complications of choosing the right or wrong settings, or maybe what happens is some combination of these factors. Examples of activities provided are towing cars from an accident location or changing a flat tire, which both help mitigate the risk of a further accident or damage to the car. The City Council is the governing body of the city with authority to adopt and enforce municipal laws and regulations. The Mayor and City Council appoint members of the community to sit on unearned revenue the city’s various boards and commissions, ensuring that a broad cross-section of the town is represented in the city government. We handle the bookkeeping for you but sometimes we’ll need your input, especially at year-end.

Accounting and Payroll Best Practices for Insurance Agents

We serve clients from office locations including Birmingham (AL), Atlanta (GA), Tampa (FL), Montgomery (AL), Huntsville (AL), Pensacola (FL), Fort Walton Beach (FL), Destin (FL), Panama City (FL), Cullman (AL), Anniston (AL), Mobile (AL), and Daphne (AL). Other costs – costs that are not costs to obtain or fulfill are expensed as incurred. Examples include other operating costs such as rent, utilities, management costs, overhead costs, legal and other professional fees, technology costs, insurance related costs, communication and advertising and travel and entertainment. Depreciation, amortization and change in estimated acquisition earnout payable are expensed as incurred.

How Often Do Small Businesses Get Audited? Types & Triggers

• Bench simplifies your small business accounting by combining intuitive software that automates the busywork with real, professional human support.
• Continuous professional development and regular training sessions can help ensure your team remains compliant with the latest regulations.
• These amounts are in excess of the commission or fee revenues, and not all business with participating underwriting enterprises is eligible for contingent revenues.
• In certain cases, it is impractical to assess a very large number of smaller contingent revenue contracts, so companies can utilize a historical portfolio estimate in aggregate (a practical expedient as defined in ASC 606).
• We understand how critical it is to stay compliant with industry-specific laws and regulations, such as client trust accounting rules and commission-based tax calculations.

The timing of revenue recognition for brokers and agencies will be materially impacted as these entities previously recognized revenue when received (contingent commissions) or at the later of the billing date or policy effective date. Under ASC 606, the policy effective date will now be the predominant date used for the recognition of revenue related to brokerage services based on the premise that the revenue has been earned in the placement of the policy. It will be critical for the broker or agency to identify all promises made in the contract, as revenues allocated to other performance obligations may be recognized at different times. However, it is essential the entity look to the performance obligations and not the revenue type or cash flow streams in determining the timing of revenue recognition. Navigating through the complex world of insurance brokerage can be challenging, especially where it concerns the detailed financial aspects.

• Learn how to build, read, and use financial statements for your business so you can make more informed decisions.
• If they require any further information from you, they’ll reach out promptly.
• Our Insurance Tax Services Team is widely known for our superior services, having earned a reputation for providing sophisticated federal, state, local and international tax services.
• While insurance companies have been facing abounding uncertainty, regulators have been continuing to focus on improving the transparency of insurance companies’ operations to help stakeholders make informed investment choices.
• BDO USA, P.C., a Virginia professional corporation, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
• Almost all of costs to obtain are incurred prior to, or on, the effective date of the contract and may consist of incentive compensation paid to production employees.

That may be, and often an agency can continue to run just fine while their balance sheet is a mess or the agency is upside down per their balance sheet. But when an agency is sold, goes to secure a loan, a gift/estate event occurs, or other usually unusual situations happen, the balance sheet becomes extremely important. Make life easier on yourself by always managing your balance sheet correctly because sooner or later, someone important is going to question you about your balance sheet. The COVID-19 pandemic has presented insurance companies with several challenges, such as swiftly transitioning to a remote workforce and reassessing their financial goals and market strategies in a contracting economy. In addition, insurers should not overlook the need to manage their potential reputational risks in the midst of this pandemic. Our team of experts is well-acquainted with insurance brokerage tax protocols and will tailor their approach to your brokerage’s specific requirements.

Among these regulatory changes, the adoption of IFRS 17 brings the most profound changes to the industry. This white paper provides you with a comprehensive guide to ensure a smooth implementation of IFRS 17 in your insurance business. These measures will help safeguard your organisation’s assets and maintain the integrity of financial statements. Collaboration between accounting and actuarial teams is essential to ensure that assumptions remain relevant and reflect the current risk landscape.

• The knowledge and expertise we’ve gained over 30+ years supporting insurance agencies with our world-class accounting platform is one of our many assets that saves our customers valuable time and money.
• If your CPA encourages taking chances on your tax returns, make sure you get a certificate of E&O insurance from him/her.
• If the agency is entitled to a 15% commission from the account, then $850 will be paid from the trust account to the company and $150 will be paid from the trust account to the agency’s operating account.
• We have actually had clients that paid income taxes on their own funds due to this type of error.
• The responsibility is memorialized in your carrier contracts and all 50 states, plus the federal government, require agencies to treat these fiduciary funds appropriately.

With us, you can concentrate more on what you do best – connecting your clients with the right policies. The companies typically do not receive these revenues from the underwriting enterprises until the following calendar year, generally in the first and second quarters, after verification of the performance indicators outlined in the contracts. https://www.bookstime.com/ An insurance entity, such as a health insurer, may enter into an administrative services-only contract and an insurance contract at the same time with the same party. If either contract’s price was discounted from the insurance entity’s normal pricing practices, this may suggest a pricing interdependency under which these contracts may need to be treated as one arrangement. Bench Accounting offers specialized bookkeeping services tailored to the unique needs of insurance brokers. We understand that the insurance brokerage sector has specific tracking and transactional requirements in relation to commissions, client invoices, and policy management.

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Our comprehensive services encompass financial statement audits, accounting, advisory, compliance, annual statement preparation, internal outsourcing and co-sourcing, and more. We understand the intricacies of statutory and insurance GAAP standards, ensuring your organization’s financial integrity while avoiding unnecessary red tape and adding value to your business. Accounting practices for independent insurance agencies differ greatly from those traditionally used by other small businesses. Under Assets on the balance sheet, the accountant should include both the operating account balance and the trust account balance, and these should be kept separate bank accounts. Under Liabilities on the balance sheet, a separate entry should be made for the amounts due to the Insurance Companies from the trust account.

Audit, Tax and Advisory Solutions to Navigate the Evolving Insurance Industry Landscape

Cherry Bekaert has extensive experience serving clients in the insurance industry, whether navigating compliance matters and issues, lessening tax burdens or evaluating and executing transactions. Based on our knowledge and experience of this accounting for insurance brokers highly regulated and complex industry, we are committed to meeting the specialized financial, accounting, tax, compliance and advisory needs of insurance companies, agencies and brokers, among others. Our national base of clients includes insurers, agencies, re-insurers, third-party administrators, captives, self-insured entities and regulators. Many accountants and bookkeepers use the deposits from the monthly bank statements to determine the sales revenue entries for the accounting program. The revenues for an insurance agency can vary significantly from month to month due to irregular cyclicality of the renewals and new sales. For example, it is not uncommon for an agency to have a three or four month period of very good revenues followed by a period of significantly lower revenues.