The following article ran in the February 2005 edition of the Spokes Newsletter To go to the Spokes Newsletter Website for current and past editions
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	If You Don’t Care Where You’re Going….                                          Any Road Will Get You There Not long ago I had a new client tell me that if not for the audit letter they received they would of continued to go along status quo not caring what the balance was in their Trust Account, who was sweeping what, or who was taking monies, only caring that it was never overdrawn.  With a five thousand dollar “float” in the account (or so I was told) this theoretically should have never been a problem.  However, not only did we discover many errors in sweeps, but the actual balance which should of resided around the 5,000 dollar mark, was actually depleted down to 450.00.  It would take too long to go into detail as to where the money went as there were mistakes by many.  The one thing that came out of this exercise was the understanding that the Trust Account - although by theory should have a running zero balance or whatever the beginning balance is - actually has too many transactions running in and out that tests the laws of probability guaranteeing that mistakes both big and small will happen. After further review (to borrow an NFL quote) I came to the conclusion that most of the agency owners I work with don’t treat their Trust Accounts as their Inventory.  When I brought this up I was given funny looks, “Inventory? What Inventory?” “It’s just a Trust Account that is the company’s monies, not mine.”  I then decided to give this idea even more thought, but kept coming back to the same conclusion.  In the Insurance industry there are mostly intangibles, the largest being the cash that is collected on premiums and down payments.  Without these collected monies, there would be no commissions to run the business.  Thus making the collected premiums, down payments and add- ons, in essence the inventory of the business.   Tracking the Intangible Inventory Imagine if you would for a moment the thought of going to your local grocery store.  Its busy, lets say Thanksgiving season, and the lines are long.  The checkers are all feeling the rush and the pressure of those waiting in line.  But wait, soon the lines starts moving faster, how could this be you ask yourself.  You reach the front of the line in no time discovering that your friendly checker is not even worried about scanning the items anymore, they are going directly from the convenient conveyer belt right into your bag, be it paper or plastic.  The bags are full in no time and you’re on your way, not paying a thing, because hey, the checkers were busy, the lines were long and time was short.  “Don’t worry about it,” your friendly checker says, “The owners have plenty of money anyway, and your hundred dollars isn’t going to matter.”  Crazy I know, and undoubtedly would never happen.  So why then do so many in the Insurance business let this happen with their trust accounts? Lets picture this, it’s a busy Monday or Friday and the people are seated 3 deep in the office.  Each agent is busily doing their best to get the people in and out.  Policies written, payments taken, Tow Packages sold, endorsements dealt with, etc.  Monies are taken, but its just to busy to write that inner office receipt so they hand out the company website receipt, not bothering to see if the website dollars match up with what was actually received.  It’s been a hectic day and everyone of course is in a hurry to hit the road.  The deposit needs to be put together so all the checks, cash, money orders, etc are all rounded up and compiled into a deposit, all the money is there or so it would seem, as there is nothing to match it too.  The money makes it to the bank, another day down, with the next day sure to be just as busy.  I’m sure we can all see the problem with this picture and the reality that lies therein. Some folks wont look up until they lay flat on their backs If your agency resembles this at all don’t fear there is hope.  First let me say congratulations on being this busy; these problems are much easier to fix then generating the additional business.  Secondly though, these problems must be controlled before they turn into a nightmare.  Your Inventory must be controlled, checked, and double checked to insure that the companies’ monies are theirs, and your money is yours and not theirs too.  My mentor in the accounting field used to tell me that “some folks wont look up until they lay flat on their backs” which always made perfect sense to me, just not in the way it was intended!  Don’t let your Trust Account get out of hand and have you lying on your back wondering what went wrong.  Call us today to help – remember your not alone, there’s nothing we haven’t seen either going in or coming out of Trust Accounts.
			The following article ran in the January 2005 edition of the Spokes Newsletter
		2005 Resolutions - To Finally Balance the Trust Account Being Audit Worthy with your Trust Account(s) is more important then ever, especially with the crackdowns being performed by various States commission Auditors.  We’ve all heard the horror stories of the agency fines and revoking of licenses that have been levied upon agents and their agency owners for misappropriation of trust funds, mishandling of funds, etc., etc.  If you haven’t - I’ll tell you that they are all true.  Take a minute and visit your states insurance commissioners website and look at penalties and fines that have issued this past year to get a surprising education.   Fortunately though, there are more owners out there that understand the importance of proper handling of the trust funds and deal with them accordingly and by the law.  I have found though that most agents & owners are confused when it comes to what the law actually states or what steps they should be taking to insure that they themselves never land on the states “Bad List”. Dollar in, Dollar out, what makes this so very difficult With the age of electronics came the age of EFT’s and the desire to be paperless.  Everyone in the business is familiar with this process.  You take a payment from the customer; the payment is uploaded on the company website, the money is deposited into your trust account to later be swept out by the company.  Dollar in, Dollar out –Simple - or so it would seem.  The agencies that I’ve dealt with tend to incur problems in either the depositing of the funds, the receipting of the funds, or the actual balancing of the account.  All of these issues can be resolved by putting these basic tasks into place: 1.        A proper receipting system needs to be in place.  This can consist of anything from hand written deposits to a full-blown management system, or something in between. Receipting each dollar taken however is the key. 2.        Deposits being made daily that can be balanced with the receipts written for the same time period, insuring that every dollar brought in does indeed go to the trust account and doesn’t mysteriously walk away. 3.        Payments taken that are going into the trust account are uploaded immediately to the companies’ websites.  This insures that the proper payment is taken alleviating short falls in your account. 4.        Quick response to NSF’s.  It’s your money that should be collected from the client or refunded from the company if it has been swept.  Very important to stay on top of these items as they can snowball if left unattended. 5.        Balancing of the trust account.  Proper balancing of the account needs to be done monthly upon receipt of the bank statement. 6.        Proper follow up on items or errors on statement.  Double Sweeps by companies, over and under sweeps, non sweeps (possible lost commissions), NSF’s, missing deposits, etc.  All need to be dealt with in a timely manner.  The money belongs in your trust account, if taken mistakenly by a company it is still due to your account, by law. By implementing these simple tasks your account can be clean and audit worthy, giving you peace of mind throughout the year.   Average yearly savings 4,000 – Average cost of service 3,600 – seems like a no brainer In early 2000 I was fortunate enough to be able to help a friend in need that was going through a nasty audit.  He had recently purchased his agency from an owner who never balanced their trust accounts, and did not keep required records.  Having an accounting background I volunteered to help him get through the audit.  After hours of working together we developed a receipting system that’s very user friendly and windows Access Database driven.  This was all they needed to insure proper receipts were issued.  I then took his trust accounts and balanced them as well as could be expected (after 3 years of never being balanced).  Once the auditor saw the changes that had been put in place my friend was able to walk away without any penalties. Seeing the need in the industry I started my business, In-Trust Accounting, dealing solely with Trust Accounts.  We have been very fortunate to grow from one client in 2003 to 26 offices throughout Washington State, by offering valuable services at a more than affordable price. Having been told of the need for our services in many locations throughout the US, by both agency owners and company sales reps, we have decided to expand and help more agencies have clean - audit worthy trust accounts, as well as Peace of Mind. “Your service has been invaluable to this agency. In addition to saving me hours per month verifying EFT’s made by the insurance companies, you have actually saved me money by finding mistakes made by the agency or insurance companies withdrawing monies which do not belong to them.   Over the course of 2004 In Trust Accounting has helped recover more than $4000.”                                                                        Dan – Kirkland, WA “You have put my mind at ease just knowing that someone who has the knowledge of the way the insurance accounting system works can balance and reconcile the books.  It has saved me hours, and I do mean hours every month in which I can use my time elsewhere, I will continue to use your services as long as you will put up with me.”                                                                        Kea – Spokane, WA EFT’s aren’t the enemy, Companies aren’t the enemy, and the bank isn’t your enemy – Not balancing your Trust Account is. All agency owners spend sufficient time in balancing their Operating Accounts, of course this is where the commissions are and the bloodline of the business is.  The Trust Account must be treated as an equal though; because if not tended it can suck your resources dry, as well as lead to the aforementioned audit nightmares.   I’d love to be able to show you what we could do for you, and help in any and all areas where your Trust Account is concerned.   Please visit our website at www.InTrustAccounting.com for much more information or email me at Tony@InTrustAccounting.com or if preferred, please call (509) 869-3752.