As an insurance agent, there is no one who understands the importance of protecting your assets better than you. You’ve got your clients covered when it comes to their vehicles, home, business, assets, family members, and every other important aspect of their life. Why not do the same for your insurance agency? Proper accounting and bookkeeping practices help protect your business from potential disaster by ensuring your finances are always in order, no matter what comes your way.
Top 20 Accounting Tips for Insurance Agents to Protect Your Business and Keep It Running Smoothly
- Find an efficient way to track income and expenses. The first accounting tips for insurance agents is to keep track of money coming in and money going out. It is important to track expenses as they really are and not how you want them to be. Having an efficient system for tracking expenses and income is the only way to know how your business is performing financially.
- Create a budget and stick to it. Categorize and track all expenses for your insurance agency. Your budget should include monthly expenses for different aspects of your business such as payroll, marketing, utilities, office rent, office supplies, business meals, and vehicle expenses.
- Separate business and personal expenses. One of the first orders of business for insurance agents should be to set up a business bank account and use it for all business expenses. That way, when tax time comes you will only have to review your business account bank statements for deductions and expenses, rather than reviewing your personal account and trying to remember which expenses were for your insurance agency.
- Set aside time for business bookkeeping and accounting. If you prefer to do business bookkeeping yourself, try set aside at least one hour each week to pay bills and update your income and expenses.
- Don’t miss out on deductions, big or small. Noting even the smallest tax deduction can add up over the course of a year and really help out during tax season. Any money spent on improving or maintaining your business is tax deductible, as long as the expense is ordinary and necessary. Visit our previous posts on business deductions here, here, and here.
- Create a home office. If you use part of your home to conduct insurance business, you may be able to claim a home office deduction. The IRS requires that the space designated as your “home office” must be used regularly and exclusively for your insurance agency business.
- Track vehicle expenses. While you can’t deduct your drive to and from the office, all the other driving you do for your insurance agency is deductible, like driving to see clients or taking the office staff to lunch. Make sure to keep an accurate log of all miles driven for business.
- Pay close attention to important tax deadlines. The most important tax deadlines to be aware of for insurance agents are Estimated Quarterly Taxes, which are due four times each year.
- Outsource payroll. Most insurance agents start out doing their payroll in-house; however, when your insurance agency reaches a certain point of growth, you may find the time and effort put into payroll isn’t worth the cost anymore. Outsourcing payroll frees up your time and provides access to the knowledge and expertise of professional accountants, who are less likely to make mistakes while processing payroll.
- Choose benefits wisely. The most sought-after benefit for employees is health insurance, followed by retirement, life insurance, and paid leave. Employees also appreciate extra perks like wellness programs, gym memberships, and child care assistance.
- File taxes early to prevent fraud. Not only does it relieve your stress, to get taxes done early, it reduces the risk of identity theft.
- File a tax extension when you need to. Here’s how.
- Employ your children. Whether they’re cleaning your insurance office or answering the phone, their wages are tax deductible and they can be a big help to your business. Teaching them work ethic at a young age is an added bonus, right?
- Invest money wisely in your business. Don’t spend money carelessly, even if you feel like you can afford it. Make business purchases wisely and invest in the aspects of your business that will provide you with the most profit long-term.
- Set your salary. Decide on a monthly amount or percentage of profit from your insurance agency for your take-home pay. For tips on setting your own salary as a business owner, visit this post here.
- Develop an exit strategy for your insurance agency. If you’ve partnered with another insurance agent, an exit strategy helps keep the relationship professional and is an added security for the business. Make the tough decisions about how your partnership could potentially end now, rather than when things may be tough down the road.
- Develop a succession plan for your business. Additionally, setting a plan of who will eventually take on more business responsibilities within your insurance agency helps keep things on track.
- Save money where you can, but don’t cut corners.
- Utilize technology. Stay up to date on the latest accounting software for your industry, in addition to utilizing tools like smart phones and tablets to track expenses.
- Hire a professional accountant. Mazuma accountants can take care of all the taxes, catch-up bookkeeping, and accounting for your insurance agency for less than $100/month. It only takes ten minutes to upload your information monthly or stuff your Purple Vyde Envelope with receipts and invoices and send it off to Vyde accountants who take your financial records and turn them into neat and tidy profit/loss statements.
Protect your business finances like you protect your insurance clients and you’ll be prepared for any unexpected financial crisis that comes your way.
FAQs for Insurance Agents Regarding Accounting Practices
1. How does efficient tracking of income and expenses benefit my insurance agency?
Efficient tracking offers clear insights into financial performance, aiding informed decisions and ensuring accurate financial assessments.
2. Is it mandatory to set up a separate business bank account for an insurance agency?
Establishing a separate business account simplifies tax processes, enabling easy identification of business-related expenses during tax assessments.
3. Why consider outsourcing payroll for an insurance agency? Outsourcing payroll, especially with business growth, saves time and minimizes errors. Professional accountants handle complexities more efficiently.
4. What’s the significance of filing taxes early and considering tax extensions?
Early tax filing reduces stress and minimizes identity theft risks. Tax extensions offer flexibility, ensuring accurate filings without unnecessary rush.
5. How can utilizing technology benefit insurance agency accounting?
Adopting updated accounting software and tech tools streamlines expense tracking, enhancing accuracy and efficiency in managing financial records.