Top 10 Financial & Accounting Tips for Insurance Agencies

Like any other business enterprise, insurance agencies are also looking for new ways to optimize their business efficiency. The efficiency in handling accounting for insurance agencies plays an important part in this process.

The various advantages of accounting & financial services are:

1. Helpful in creating data which is useful for future business planning.

2. Helpful to the taxation procedure.

3. Helpful in maintaining proper record of accounts payable and receivables.

4. Eliminating corrupt practices within the organization.

Financials have always been an integral part of the business. To ensure the segregation of financials, specific regulations are prescribed by the NAIC, the National Association of Insurance commissioners. These well-segmented accounting principles in the Insurance sector are called Statutory Accounting Principles SAP (Statutory Accounting Principles).

The implementation of SAP is taken care of by the state law, and they ensure the financial competence and security of the policyholders. The immediate plan is to evaluate the companies’ ability to pay out the policyholders. This principle believes in 3 core values: Conservatism, recognition, and consistency.

Conservatism: The principle stands firm on the value of Conservatism. The objective is to ensure the protection of policyholders. The approach is valid under severe conditions where the insurance firm may need to dissolve the venture. In the liquidation phase, the company’s financial status should be able to regulate the financial security of the policyholders.

Recognition: The liquid assets on the papers are valuable resources at liquidation. The remaining assets, which are most likely to be labilities, are considered surplus goods at liquidation.

Consistency: As the name suggests, the SAP principle shall be applied across the companies to ensure a fair comparison of financial statements across the board significantly.

The principle is enforced to ensure all the Insurance companies are regularised based on a standard theory. This is practiced to ensure the security of policyholders and maintain clean financial records of the company.

Below mentioned are some tips which can help the Insurance Agencies in making their Accounting and Financial Services more effective:

1. Track the Income & Expenses Correctly 

An insurance agency must be able to keep a proper track of the expenditure and income. This will help in evaluating the profitability of the business.

2. Plan a Budget

Every business venture has certain operational expenses like payroll, rent, transportation etc. An insurance accounting company must plan a budget and implement it, in order to ensure that the financial processes.

3. Don’t Mix the Personal & Business Expenses

Many business owners make the mistake of mixing business expenses with personal expenses. This creates a complication while calculating the profitability of the business.

4. Look at the Outsourcing Option

For business organizations with limited staff aiming to focus on core activities like production and marketing, outsourcing is a strategic move. Outsourcing insurance agency accounting is a smart move to grow, providing efficiency and cost-effectiveness by eliminating the need to hire staff and invest in infrastructure. This approach allows companies to redirect resources for optimal growth and operational excellence.

5. Make Sure that you Avail all the Tax Deductions

In a business scenario, every penny saved is a penny earned. So you must make sure that all the tax deductions available to you must be availed. The services of specialized accountants can be utilized for this purpose.

6. Keep the Taxation Deadlines in Notice

In order to ensure that you don’t have to face any tax-related penalties, you must remember the deadlines properly.

7. Hire your Family Members for Accounting Operations

Assigning the accounting tasks to family members like children could be a good idea as they can rely upon more than outsiders. Moreover, it will help in preparing your children for their future role as managers.

8. Utilize the Services of a Professional Accountant

If you (business owner) are managing your accounts on your own, but still not satisfied with the output then, hiring a professional accountant will be a better option. Moreover, this will also offer the opportunity for an owner to participate in tasks which he is more interested in.

9. Gain Access to the Latest Technology

Nowadays, various accounting software like NetSuite, QuickBooks etc., have emerged which have made accounting tasks extremely simple. Investing in these software, an insurance agency or Broker can maintain financial records in an efficient manner.

10. Make Future Plans

Every business requires future financial planning. So anticipating the future business environment and makes plans accordingly is essential for gaining an edge over competitors.

Running a cross-checking theory on all financial statements has always been a blessing for all insurance companies. However, to implement these theories, one must practice a particular set of rules and regulations. To practice it flawlessly, there are some valuable reminders you should keep handy.

• Validate and verify all the records and financial statements for the calculation part.
• The transaction history should maintained in the chronological order.
• In case of any discrepancy or unclear entry, do not hesitate to refer to professional assistance.
• Work with highly trained and skilled professionals who have hands-on knowledge of SAP.
• In case of audits, be it annual/ half-yearly or even quarterly, keep your records approachable.

Following these practices to the core are top techniques to prevent you from spending wasteful time, money, and energy running a successful business. Perhaps this might seem a little complicated to look at the time an individual can devote to a task. So now this the time to change the pattern and make it a lifestyle, not just an exercise to maintain your business in desired shape and health.

Final thoughts

Regardless of the industry, the accounting sector has a vital role in adhering to. Similarly, the same stands true for the insurance business as well. The insurance accounting services help you keep all the big and small transactions in place. Additionally, it can gradually help you analyze the budget allocation and profit margins.

The icebreaker here is the industry itself. The insurance industry will always be a boom; hence the top-notch quality service providers are the need of their hour.

Cogneesol is a leading back-end service provider catering to businesses all over the globe. The top priority is insurance accounting services and effective and efficient turnaround time.

All insurance businesses transitioning toward a cost-effective business model can turn this service into a dream come true, ultimately optimizing profits. To get more information, dial +1 646-688-2821 or send an email to [email protected]