Accounting Vs. The Front Office

In talking with various agencies around the country, one thing they have in common is the conflict between the service staff and the accounting department. Misunderstandings arise between the two departments when they need to interact with one another and when their job functions affect one another. Much of what transpires in the accounting department depends on the invoicing being performed by the service staff. The service staff’s primary responsibility is servicing the client — not invoicing.

From the accounting department’s perspective, time is wasted when the company statement and the invoice don’t agree. This frustration grows when the service staff is interrupted in the middle of an important task by the accounting department to verify and correct the discrepancy.

More and more carriers are moving agencies from payment by account current statement to company statement, placing the burden of reconciling on the agency. The accounting department needs to match each item on the carrier statement to the invoice. Frequently, items aren’t invoiced or the premiums and commissions are wrong.

INVOICING PROBLEMS

Whether the invoice is direct bill or agency bill, the same issues and concerns arise. It’s not the invoicing process that’s the problem. All agency management systems have the ability to process invoices. The real issue is training and understanding the specific agency codes. Here are the most common problems:

• Incorrect commission percentages
• Incorrect premiums
• Incorrect tax and fee codes, such as agency fee vs. broker fee
• Incorrect payee (entering paper carrier instead of payee company)

When there are a number of invoicing corrections on an account, the client’s ledger becomes difficult to read. The producer will either pass the task of collection to the CSR or will need to sit with the CSR to decipher the account before contacting the client. If monthly statements are mailed to the client, they’ll phone the agency confused about how much they should pay.

WORKFLOW SOLUTIONS

Let’s look at what’s causing the billing discrepancies. In today’s office, the invoicing previously handled by a senior CSR is now an assistant’s responsibility. The senior CSR might understand the repercussions from invoicing, but what about the assistants who are doing the invoicing? The assistant isn’t involved in receivables.

Problems with billing errors are compounded when the service staff is backlogged. Developing and implementing effective workflows will eliminate most billing discrepancies. The process of creating your invoicing workflow should start with a task force, including service staff and accounting. Bringing the two departments together in the task force will encourage an environment of understanding.

Task force members should determine agency guidelines for various areas, including binder billing, direct bill, agency bill, and invoice corrections. Once you’ve created your guidelines, continue the process by creating the most efficient workflow for your agency management system. Use this outline as a starting point to determine the areas on which your agency needs to concentrate:

CREATING INVOICING GUIDELINES

• Responsibility and Timing

• Set responsibility for invoicing — Account Manager vs. Assistant
• When is a policy to be invoiced and if it’s to be binder billed
• Determine a timeline in which endorsements will be processed and invoiced from the date received from the carrier
• Determine a timeline in which a discrepancy notice from accounting will be resolved
• Determine when to bill a cancellation premium

• Policy Set Up

• Line of business code
• Writing Company vs. Parent Company vs. Broker
• Profit Center
• Producer, Account Manager

• Direct Bill

• Does your agency bill direct bill from the policy or from the statement?
• Do you bill annually or on an installment basis?

• Invoice Dates

• The invoice date is always ‘Today’s Date’
• The transaction effective date is the effective date of the insurance transaction

• Future Bills

• Who prints and mails future invoices and when?

• Installment Invoices

• Make every effort to obtain the installment schedule from the carrier before invoicing
• Who prints and mails future installments and when?

• Invoice Printing and Distribution

• Determine if invoices are printed immediately or batch printed
• Set timeline in which invoices are to be mailed after printing
• Determine timeline to print and mail future installments

• Commission

• Verify commission percentage from carrier before invoicing
• If multiple commission percentages apply to one policy, determine if the premium is to be divided by line of coverage or to be rounded
• Verify producer commission before invoicing

• Invoice Memos

• Create standards for messages on invoices

• Invoice Corrections

• Based on your agency management system, determine if invoices are to be revised or voided and then re-invoiced
• Set guidelines for correcting installment plans and future bills

TRAINING SOLUTIONS

Once you’ve developed workflows, establish a training and implementation plan. When people fully understand the outcome of an action, they take more time and consideration in performing it. Consider an Insurance Accounting 101 training class for all service staff involved in the invoicing process. This isn’t an accounting class, but a class detailing what happens when an invoice is done. Explain the different areas affected by a single invoice. Use this outline for your class:

• Explain how company payables are created
• Explain how producer commissions are created
• Explain how different taxes and fee codes affect the different payable or income accounts
• Demonstrate the company payable reconciliation process
• Demonstrate the correct invoice premiums and installments
• Demonstrate how to make invoice corrections

CONCLUSION

Keep the lines of communication open between the accounting department and the service staff to reduce friction between the departments. Remind your staff that they need to take extra time at the beginning of the process to save time for everyone at the end of the process.