Successful businesses run like well oiled machines but those machines can come to an alarming stop if something goes awry like a crinkle in your cash flow.
Decisions such as payroll and procuring materials are absolutely critical but one often neglected item, Insurance Audits, can throw a monkey wrench in your well oiled machine which can seriously hinder your cash flow for a couple months and complicate your life.
Here are a few tips on how to maintain your cash flow fluid and avoid big audits.
- Liability policy premium – most often, this is based on your revenue and your worker’s comp policy premium is based on your payroll. The carrier will audit these insurance policies at year end to confirm they received enough money for coverage. There’s a possibility you will get a refund if your revenue and payroll are overstated. However, If the revenue and payroll were understated, you will have the unfortunate obligation of owing the carrier much more money.
- Staying ahead of the game – meet with your insurance broker either quarterly or at the least provide bi-annual updates. To avoid getting slammed with big audits at year end, you need to re-estimate. Staying on top of what your revenue and payroll will be during the policy year can potentially save you thousands or even tens of thousands. This is critical since the audit will hit when you are making down payments on your renewal policies – usually 20% of the the total premium.
In a nutshell, keep your insurance broker regularly updated when you see increase in revenue or production time expand. You are far better off paying the additional premium you owe on the payment plan during the policy year rather than one large sum at the end.
To learn more about how to manage and maintain your insurance policy, give me a call at (800) 400-SAVE or click the button below and complete the form to drop us a line: