This eGuide provides you and your insurance agency the resources needed to better understand your accounting system and consider new ways to make it run more efficiently and effectively. Topics covered include: -Cash vs accrual accounting -Switching to a new accounting system -Integrated accounting -Tracking commission

1. 1
Getting Your Agency
Finances in Order:
Accounting Tips for Independent
Insurance Agencies

2. 2
Accounting tracks the most important aspect of your agency: your cash
flow. Knowing your income and expenditures means knowing the core of
your agency. If you don’t have a handle on your accounting processes, it’s
time to get a grip.
This eGuide hits the high points of your accounting systems and provides
ways to make your accounting process run more efficiently, and in turn
help your agency run better. Whether you’re just starting out or are in need
of a system re-vamp, this eGuide is designed to help you determine what
your agency needs to keep up with finances.
Getting Your Agency
Finances in Order:
Accounting Tips for Independent
Insurance Agencies

3. 3
Tracking Your Cash Flow.........................................................................4
Making a Change....................................................................................6
Integrating Accounting ..........................................................................11
Calculating Commission........................................................................14
CONTENTS

4. 4
Tracking
Your Cash Flow
In the accounting world, there are two primary ways to handle
your agency’s finances. The first is cash accounting, which
tracks income and expenditures only when money actually
comes in and out of your agency. The second, accrual
accounting, records expenses and sales when they take
place, regardless of whether or not invoices have been paid
or funds have been received. These two methods have their
pros and cons, and you should examine both to see which is
a better fit for your agency.

5. 5
Cash Accounting
+ Shows a clear record of your agency’s cash flow
+ Takes less time to learn and explain
+ Gives clear picture of funds in your accounts
- Makes it difficult to keep track of open invoices
- Shows misleading picture of your profitability
month to month
- Poses problems when cash flow is low
Accrual Accounting
+ Shows true finances as it captures money owed,
not just money in the bank
+ Providers clearer view of long-term profitability
+ Makes it easy to follow up on receivables
- Takes more time to learn and understand
- Gives false picture of cash flow
- Requires professional input to set up and run
Before making a decision,
talk things through with
your agency’s accountant or
accounting team.
Keep in mind,
if you are changing from one
method to another you will
need approval from the IRS
before proceeding.

6. 6
Making a
Change
Although each accounting type has its own benefits and drawbacks,
most insurance agencies tend to use an accrual accounting system.
If you’re using a cash system you may find that, as your agency
grows, you are outgrowing the cash accounting method. As you start
to think about switching to accrual, you should take a step back and
ask yourself a few questions.

7. 7
1.
Although the IRS requires certain types of businesses to use
accrual accounting, it is unlikely your agency is required by law
to switch. However, you should consider switching if:
n You are tracking your profitability over the long-term
n You have more than a handful of employees—salaries tend
to operate better with an accrual system as there may be
times you don’t physically have the cash to pay your staff
n You talked with other agencies in your management
system’s user group and find many use the accrual system
If you identify with two or more of these criteria, switching to the
accrual accounting system is the right move for your agency.
Once you know you need to switch, start creating a plan by
asking yourself the following questions.
Do I need
to switch?

8. 8
2.
There is no “universal” perfect time
to switch. It will be different for every
agency. Think about your year: is there
a time when things are a little slower?
This is the right time to make the switch
to a new system. If there isn’t an easily
identifiably slow time, your best option is
to change systems at the beginning of
your fiscal year.
When will
I switch?

9. 9
3.
Your employees should definitely be in on your accounting system
change. The best way to get the word out is to assign a small team to
head up the switch. Have them create a timeline, document the new
process, and organize training. Eventually everyone in your agency
should be well versed on your new system and know their place in
the process.
Another very important group that needs to know you’re
changing accounting systems is the IRS. The IRS requires any
company or organization switching accounting methods to fill out
Form 3115 - Application for Change in Accounting Method. You
MUST file this form within 180 days (about 6 months) of the end of
the year in order to make your switch.
Who needs
to know?

10. 10
4.
Take a look at the accounting system you’re using.
Most agencies use Quickbooks or an accounting
system that integrates with their agency management
system. No matter what you’re using, however, things
are going to change. Talk with your provider to find
out what you need to do to prepare and start making
adjustments sooner rather than later. As with anything
new, you will have a learning curve. Take your time
and make sure you know what you’re doing, and be
patient with mistakes. Remember, you didn’t learn
your current system overnight, either!
How will
things change?

11. 11
Integrating Accounting
with your Agency Management System
Regardless of whether you use cash or accrual accounting,
we highly recommend using an agency management system
with an integrated accounting feature. The benefit of this
is that all of your agency data is stored in one place. This
makes tracking and reporting on finances much easier, and
creates a streamlined system that ties all aspects of your
prospect-to-client process together in one place.

12. 12
Integrated
Accounting
Benefits
n PROCESSES DATA DAILY:
Once you’ve set all your
invoices, payments, etc. they’ll
process automatically on the
dates you’ve set.
n PROVIDES DIRECT BILL
COMMISSION DOWNLOAD:
This capability dramatically
reduces duplicate data entry by
ensuring data accuracy, saving
your agency hundreds of work
hours.
n CREATES EXPENSE
REPORTS: With integrated
accounting, you can easily select
the data you need and create
a plain or visually interesting
expense report in minutes.
n OFFERS EASY BRANCH
ACCOUNTING: For agencies
that handle multiple insurance
types, integrated accounting
makes it easy to view financial
information for each branch
separately.
n SHOWS COMPLETE CLIENT
RECORDS: You can see all
financial activity from each client
in one place, making it easy
to see total financial history
including prices of assets, policy
costs and payment information.
n INCREASES ACCESS TO
FINANCIAL INFO: Since your
accounting is linked with your
agency management system,
you can access it just as
easily as any other part of your
management system

13. 13
The better agency management
system providers offer integrated
accounting as an add-on to
the basic system. We suggest
you consider adding it to your
processes. Not only are the
benefits of integrated accounting
endless, it will end up paying for
itself with the time and money
you’ll save.

14. 14
Calculating
Commission
If you’re tracking your agency’s premiums and commissions by Excel,
STOP right now. Back away slowly from your computer…you don’t need
to do this! Using Excel to track your commissions is like using a pair of
scissors to cut your lawn: it gets the job done, but it is painstakingly slow
and prone to human error.
You want a system that is easy—where you just input premiums and pay out
months and you get your commissions in one keystroke. You want something that
shows your total commission minus lead costs and other factors.
There
is a
better
way.

15. 15
When looking at accounting systems, be sure to find one
that breaks down commissions and premiums by:
n LINE OF BUSINESS: By
analyzing commission by line of
business, you can get a good
picture of your strongest and
weakest service lines. This will
help you determine if you need to
put more resources towards one
service line over others.
n PRODUCER: Breaking down
commission by producer allows
you to see who is doing well
and who needs to step up.
This type of data also makes
it easier for your producers to
calculate income.
n CARRIER: Breaking down
commissions by carrier helps
you see which carriers owe
commission to you and/or your
producers. This can help you
determine whether or not you
need to drop carriers that aren’t
bringing in enough business.
In addition to these
breakdowns, you should
also look for an accounting
system that offers…
n *PRE-CREATED REPORTS
that likely cover the above
breakdown options, along with
options such as year-to-year
comparison reports, marketing
campaign reports, and
personal lines to commercial
lines comparisons.
n *CUSTOMIZED REPORTS
that give you the freedom to
create specific data outputs
for the needs of a certain
carrier, producer, or employee
as needed.

16. 16
Taking
the Next Step
We hope this eGuide has given you some food for thought and caused you to
consider some changes in your agency’s accounting procedures, tools and practices.
As you move forward, consult with your agency management system provider and
your user groups to make a plan on how to upgrade your accounting practices.
If your agency management doesn’t include integrated accounting, or if you
are considering a new management system, we urge you to speak to an SIS
representative today to find out if our system is right for you. Contact us today at
800.747.9273 or sales@sisware.com.
View a short demo of Partner XE Accounting

17. 17
About SIS
Headquartered in Columbus, Ohio, Strategic Insurance Software (SIS) is
the team behind Partner XE—an innovative web-based insurance agency
management system that helps independent agencies streamline workflow
and grow their business. Built on a foundation of strong technology and
exceptional service, we’re moving forward with a constant eye on innovation
that will make independent agents’ lives easier.
About Partner XE
Supporting downloads from nearly 300 carriers, real time interaction,
integrated agency accounting, and much more, Partner XE is a full-featured
agency management system at an affordable cost for the independent
insurance agency. For more information, please visit www.sisware.com
4181 Arlingate Plaza, Columbus, Ohio 43228 | 800.747.9273 | www.sisware.com