The business of insurance brokerage is classified as a serviced based business which implies that the procedures we followed when implementing QuickBooks for consulting firms are exactly what we are adopting here. As simple and straightforward this is, why then are we doing a review of QuickBooks for insurance brokerage companies when we had already posted several tips on how serviced based companies can use the accounting software? Here is the reason – unlike a consulting firm, the money received, otherwise known as premium, from the clients is not recognised as revenue; only a percentage of that amount should be treated as “brokerage” while the rest is payable to the insurance service provider, hence we need to understand how this is implemented in QuickBooks.
In this guide, we will be sharing practical tips on how insurance agents can deploy QuickBooks for effective cash flow and financial management:
The customer centre in QuickBooks lets you manage your customers, see their outstanding balances and track recent transactions. As an insurance agent, this window will help you add all the clients who are currently subscribed to insurance covers and if there are premium receivable from these clients, you can also enter the value as at the beginning balance date. Although the payable is not suppose to be treated as an income, you will learn the simple trick to map them to your liability account.
Request For Our Accounting Software ServiceFor over 5 years, we have implemented QuickBooks for several companies under Retail, Manufacturing, Oil & Gas, Real Estate & Construction, Travels, Hospitality,Legal, Co-operatives, NGOs, Financial & Service Sectors.
- Mbaire Services Nigeria Ltd(Construction)
- Aristokrat 360 Limited(Creative & Media Agency)
- Hawkes Legal(Legal)
- Lilygate Hotel(Hospitality)
- Josien Holdings Limited(Distribution)
- Aisha Buhari Foundation (Futured Assured)(NGO)
- Doheney HR Services(HR)
- Biddel Oil & Gas Limited (Oil & Gas)
- System Intelligenz Limited(Contractor)
- MagTech Information Security (IT)
- Infusion Cakes Nigeria (Bakery)
- Landmark Centre (Event Centre)
- Mountain Ice Travel & Tour (Travels)
- BTS System (Service)
- Logos Travel Support & Solutions Ltd (Travels)
- Germaine Auto Centre (Autos)
- BD Consult (PR)
- Starlight Nigeria (Retail)
- Temple Private School (Education)
- C. Charles Resources Limited (IT consulting)
- Adeniyi Coker Consultants Limited (Real estate and construction)
- The Nigerian Economic Summit Group (NGO)
- Value Mart Supermarket (Retail)
- Transweb Bureau De Change (Financial Service)
- Wakanow Travels (Travels)
- Vektro Food Limited (Manufacturing & Retails)
- Orient Petroleum PLC (Oil & Gas)
- Plus More
Note that deleting a client on the system is not easily processed until all pending balances are cleared.
These are the real service providers and as such should be treated as vendors under the “vendor centre”. When adding the insurance service providers, you should take proper note of all premium payables in your books to avoid misrepresentation on premium payable reports. While you can easily add more vendors, the same restriction on deleting names of clients also applies here too.
Tracking your commission on premium paid.
When clients pay a premium, you are fully aware that only a percentage of the value is recognisable as commission income in your profit or loss while the rest should be treated as a liability or payable; to be remitted to the insurance companies. How then can we treat this in QuickBooks? here is what you should do:
- Create a service item called “premium” and map it, under the income account drop down to a “premium payable account (account type: liability) and save.
- Create another item type for “other charge” and enter the agreed percentage of premium you are entitled to and map it to the income account; this is the actual income (brokerage) that will display on your profit or loss report. Failure to follow this important steps means “all premium received will be wrongly posted as income”.
- On the invoice window, select a line item for the premium paid and another line for the commission income.
- As the cash is paid into your bank, you are also expected to use “record deposit” on QuickBooks to record all inflows to your bank accounts.
For premium paid to the insurance companies on behalf of clients.
Since all premium paid by your clients sits in your bank account, it is usual for you to pay off the payables by remitting all premium received to the insurance. QuickBooks displays all premium payables with the “pay bills” available to help you make payment from your bank account to a selected vendor (insurance company). Before you make payment, you need to have setup your banks and their respective balances.
The same way you make payment for the premium on behalf of clients, that is how you record all administrative expenses from your petty cash.
At the end of the month, you are expected to reconcile your bank balances with your QuickBooks cleared balances; use the reconciliation window to process all missing transactions in your bank statements like credit transfers, bank charges, dishonoured credit, uncredited cheque etc. The end point of your reconciliation is that the beginning balance of the following month in QuickBooks should correspond with what you have in your bank.
While these are few of the basic deliverables of implementing QuickBooks for an insurance brokerage firm, you are free to talk to our consultants on specific areas we can solve your toughest accounting challenges. Connect with us by sending a mail to firstname.lastname@example.org or call 08105090001 or 08084219399.
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