Finances can be a sensitive subject in any business, and this is true in an insurance agency. Whether it is accounts receivable and payable, commissions, contingency income, payroll, or bank accounts, all of these things are critical to its function. To ensure that the agency can continue operating at the most efficient level financially, someone must manage all of these moving parts effectively.
These duties may be the responsibility of one person or spread across multiple people depending on an agency’s particulars. Still, appropriate controls are necessary for agencies of all sizes. Here are some critical items to keep in mind when reviewing financial management practices in your agency.
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Desperate Times Can Create Desperate Measures–
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Everyone has seen the news stories of C-Suite level executives stealing massive amounts of money from a Fortune 500 company. Just as familiar are local, smaller-scale reports of small businesses being taken advantage of by an accountant or bookkeeper slowly moving money out of the business and into their own pockets.
Some individuals committed these acts maliciously, creating elaborate schemes to steal as much money as possible. Often, however, individuals have found themselves in difficult financial situations. Whether it is mounting medical bills or overwhelming gambling addiction, siphoning money from the agency is still a crime. What starts as a small “loan” the individual has all intentions to repay can create a slippery slope to additional money transfer activity happening more frequently and for larger amounts. While the severity of fraud may be at varying levels, it is still devastating to a company financially and culturally. Implementing the right practices will significantly reduce an agency’s exposure to these issues.
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Checks and Balances Keep Everyone In Check –
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Setting up and enforcing proper accounting practices is critical to any business and is valid for an insurance agency’s operations. Without the right oversight, errors or outright fraud can occur without anyone realizing it, leading to disaster in the long run. While the idea of “trust but verify” might make an agency owner feel like they are communicating a message of distrust, agency owners must protect the agency. This protection includes all assets and individuals.
With the proper checks and balances, individuals with access to funds know that all transactions receive appropriate review and sign off, which reduces the chances of mistakes or illegal activity taking place. Agency owners also remain up to date on the finances of the company. These processes are essential to keeping the agency healthy and ensuring that it can continue to run effectively.
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Hire Expertise to Handle Agency Finances –
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Agency finances can be very complicated and require a lot of attention to detail. It may be tempting for agency owners to handle these details on their own even though they may not have the right level of experience or expertise to manage all the specifics. Even if an owner is wearing many hats, including CFO, obtaining the appropriate assistance to manage finances is essential to the company’s long-term success.
Whether an agency needs a part-time professional from outside the agency, a full-time accounting person on staff, or an entire financial team, agency leaders must make sure the organization’s fiscal health is in the hands of someone with the required skill set. Without the right person in place, an agency is at risk of overlooking some of the finer points necessary to the company’s operations.
The financial well-being of an agency is imperative to protecting the integrity of the company and the livelihood of its employees. Adopting the right practices will reduce problems and help the agency continue growing and improving..
For more on this topic, check out the full topic of The Independent Agent here.
About the Author
Justin Goodman has spent the past 20 years in insurance. He is the co-founder and CEO of Total CSR and co-founder and Managing Director of Project 55. By the age of 29, he was recognized as one of the top five construction insurance experts nationwide by Risk and Insurance Magazine. He also was named to Insurance Business Magazine’s Hot 100 and most recently the 2024 Insurance Journal Agent of the Year.
Justin has trained over 50,000 CSR’s, account managers and producers through his work at Total CSR. He has a passion for developing the next generation of insurance professionals. When not with his family, he devotes his free time to speaking engagements and advising agency owners across the country.
