Bookkeeping for Insurance Agencies: 5 Benefits to Outsourcing Bookkeeping

Introduction:

I worked in the insurance industry prior to opening my bookkeeping business. One commonality that I observed across all the insurance agencies that I worked with was that there was never a shortage of work to do in a day. This includes educating clients on the best types of insurance, quoting clients on insurance premiums, and assisting with policy and claim management.

Additionally, insurance agents must stay on top of their competitors to ensure they are offering competitive prices and stay on top of the state laws and regulations. This is all to say that insurance agents must balance a lot of roles in their business.

Insurance agents must have a solid understanding of their agency’s financial health in order to make strategic business decisions for their business. This would mean that agents would have to keep up with their bookkeeping on a regular basis so they could have accurate financial reports. Unfortunately, bookkeeping often falls on the back burner for many agencies.

Some insurance agencies elect to outsource their bookkeeping needs to bookkeeping agencies to help keep up with the day-to-day financial responsibilities of the business. Here are 5 reasons why insurance agencies should hire a bookkeeper:

1.       To Focus on What Matters Most:

A successful insurance agency will have many transactions and expenses that will need to be organized and categorized effectively. This can become a time-consuming process each month.

Reconciling accounts can also take a lot of time, especially if there is a discrepancy between your ledgers and the bank statement. This ultimately takes away agents’ time away from activities that provide excellent customer service and grow their business.

Insurance agencies may opt to outsource their bookkeeping to help the business focus on what matters most: providing their clients with education and peace of mind. By doing this, agencies can use their energy to grow their book of business by utilizing their time.

2.       To Reduce Staffing Costs:

Some insurance agencies may choose to hire an in-house bookkeeper to help with the business’s finances. The agency will have to be then responsible for the employee’s salary and pay for their benefits.

The agency may also have to spend time training this new employee.  This will ultimately affect the business’s bottom line as they have to dedicate financial resources and a lot of time managing an employee.

Other agencies may elect to partner with a bookkeeping agency to satisfy the business’s financial needs. This could be a less expensive option than hiring an employee because the bookkeeping agency would be responsible for paying for the bookkeeper’s salary and benefits.

Insurance agencies may also be able to save money because they could elect to only pay for bookkeeping services that are necessary.

3.       To Have Access to Bookkeeping Experts:

A lot of businesses leave the bookkeeping tasks to their office manager and leave the office manager to learn how to organize the business’ transactions and prepare documentation for the accountant at tax time.

This may work when the business is small but can become overly complicated as the business grows. This could lead to problems at tax time. This is because office managers’ bookkeeping tasks are only one component of their position, and they don’t do bookkeeping enough to become an expert at it.

Insurance agencies that hire a bookkeeping service can have peace of mind that their financial records are accurate throughout the year because they will be hiring experts who do bookkeeping every single day. Thus, the bookkeeping agency will have the experience to identify and solve issues when they occur.

4.       To Have More Accurate Financial Information:

 Insurance agencies sell peace of mind to their clients. Insurance agents should also have peace of mind that their financial reports are accurate. Making errors can lead to costly mistakes. For example, not categorizing transactions appropriately could lead to not paying the correct amount of taxes. This could lead to penalties and having to pay the IRS interest on the outstanding payments.

Hiring a bookkeeping agency can help insurance agencies have accurate financial records. Bookkeepers complete bookkeeping tasks every single day whereas office managers or CPAs may only do a company’s bookkeeping once a quarter.  

Bookkeeping agencies have developed and refined processes and procedures to accurately categorize transactions and reconcile accounts. This will lead to greater confidence in financial reports and peace of mind that the business’s financial health is in good hands.

A Bookkeeping agency may also help insurance agencies with cash flow management. This may include monitoring accounts payable and accounts receivable. This can help business owners better understand how much cash the business has on hand and how much money is waiting to be received.

Bookkeepers can also create cash flow reports that can help insurance agencies make more accurate budgets or anticipate slow business seasons.

5.       Bookkeeping Agencies Are Insured:

I have discussed earlier that bookkeeping mistakes can end of costing a business a lot of money in the long run. Another benefit of hiring a bookkeeping agency is that the bookkeeper should have their own Errors and Omissions insurance.

This means that in the unlikely event that a bookkeeper makes a mistake and costs the insurance agency money, there is an active insurance policy to help with the loss. This would not be available to office managers or other staff at the insurance agency that would be doing the business bookkeeping. This is a great benefit.

Conclusions:

Insurance agencies have a lot of daily tasks that they need to focus on to keep their business afloat. Bookkeeping activities often get placed on the backburner. However, doing this leads the agency to not have a firm grasp of their finances and cash-flow. Both are necessary to make well-informed business decisions.

Outsourcing a bookkeeping service can help insurance agencies improve their business because they will gain access to a professional who has a firm grasp of bookkeeping and accounting fundamentals.

A bookkeeper will be able to ensure that your financials are correct and that agencies will be well prepared for when they meet with their accountant in tax time. This allows agencies to get back to what they do best.

Are You Ready to Hire a Bookkeeper?

Our team at Hudson Bookkeeping Co. is ready to assist your small business with its bookkeeping needs. We focus on what we do best so you can focus on what you do best.

Call us today for a free consultation to see how we can help.