Advance Payments to the Company

Product: TAM - Series 7 & Above

This document explains how to handle direct-billed policies where the agency collects the money from the insured and the money needs to be forwarded to the Insurance Company. There are a few different ways that this can be done in TAM. It will depend on whether you need to issue a check and send it to the company or if the Insurance Company is electronically withdrawing the money from the agency's checking account. The different situations are explained below.

Advance Payment to the Company

When a payment is received from a direct billed client and a check needs to be sent to the company on the client's behalf, use the following steps to accomplish this task.

TAM

  1. Select Accounting, Disbursements, Enter a Cash Disbursement
  2. Select the Journal Number of the cash account from which the check needs to be issued.
  3. Select Company as the type of check that is being issued.
  4. Select the Insurance Company to which you are issuing the check.
  5. Enter the Amount of the check.
  6. Select Direct Bill Advance as the Company payment type.
  7. Select the Client Code of the client who gave you the payment.
  8. Click Select Items to apply this check to the client's payment.
  9. Click Detail to view the entries of the check.
  10. Click OK to process the check.

Advance Check for More Than One Client

Option 1: Vouchers

When entering a direct bill advance, the program only allows one item to be advanced on each check to the insurance company. There are times when an agency has more than one item to advance on any given day and they don't want to issue a separate check for each. Use the following steps to accomplish this task.

  1. Enter a Voucher for each check to be advanced to the insurance company.
  2. Click the Group by Payee radio button. You will enter these vouchers just as you would any regular direct bill advance checks by choosing direct bill advance and entering your customer number.

Note: You may want to include the customer code and policy number in the description line of the voucher. This prints on the check stub for filing purposes and may also be helpful in correcting any errors associated with the voucher.

General Ledger:

  1. Batch Process Vouchers because you entered them to be processed as a group, all vouchers entered for the same company will be processed and issued on one check.

General Ledger:

Option 2: Transactions

This option is used for an agency that is Direct Bill and collects money up front from the client and advance all to the company. Many of these are coming in each day and you need a way to do this on one check and be able to provide a report with policy information.

Section 1 - Initial Setup

  1. Set up a User-Defined Transaction. Set this transaction up as an Agency Billed transaction, Non-commissionable and has no effect on the premium.

Note: It is very important that this transaction have no effect on the premium and be non-commissionable or it will inflate your Book of Business report and/or inflate your Producer commissions.

  1. At the client, create a policy screen that is Agency billed, zero commission, and zero premium.
  2. Create the Direct billed policy for this client as well.

Section 2 - Procedure

  1. Deposit the cash to the client account. Leave this payment on account and do not apply it to a specific policy.
  2. Invoice the Agency billed policy with the User-Defined Transaction.  Journal entry between items and apply the payment to this item.
  3. Invoice the policy on the Direct billed policy in TAM. This transaction is needed in the system to be able to accurately track your Direct Billed Income.
  4. When it is time to pay the company for all those items, run an account current reconciliation for that company.
  5. Flag all items on the account current reconciliation. This will flag all the User-Defined Transactions at zero percent commission.
  6. Run an items flagged to be paid report. This will give you a report of all the clients, User-Defined Transactions, and policy information that have been entered into the system.
  7. Exit out of the reconciliation. You are asked if you would like to issue a check now. You can issue the check to pay the company for all those items.

Electronic Fund Transfers

Electronic Fund Transfers are done when the company directly removes the client's payment from your checking account. There are a couple of different ways that you can show these in TAM.

Option 1: EFT

Section 1 - Initial Setup

  1. Set up a new GL account called Advance to the Company. This account is a Level A account, Type 1 (Assets), Group 10 (Current Assets), since this is a holding account.

TAM (Series 7 & Above)  Utilities, Accounting, Account Maintenance, Enter/Revise Chart of Accounts.

  1. Set up a miscellaneous User-Defined Transaction called EFT. Set up this transaction as a type (M) Miscellaneous, and use the GL account created in Step 1 as the offsetting account.

TAM (Series 7 & Above) Utilities, Accounting, Receivables, User-Defined Transactions.

Section 2 - Procedure for Each Withdrawal

  1. Enter a direct bill transaction (as normal) at the customer level to track production and commissions.
  2. When a customer issues a down payment, enter the cash receipt as a normal customer payment. This puts the money in the agency's checking account and puts a credit (PAY) on the customer's account.
  3. When the agency is notified that the company has deducted the money from the account, enter a Miscellaneous disbursement for the entire amount. Be certain to use the type Miscellaneous so that the next available check number is not used, since a check is not actually written. Use the GL account created in Section 1, Step 1 as the offsetting account. This reduces (credits) the agency's checking account and increases (debits) the Advanced to the Company account. Consider using the Schedule field within the disbursement to indicate the company that is withdrawing the funds from your bank account.
  4. The bank account is now correct, but there is still a credit balance on the customer's account and a credit in the Advanced to the Company account. To clear this, enter the EFT transaction as described in Section 1, Step 2 for each customer that the company withdrew money for.

Note: Enter an EFT transaction on each customer the company withdrew money for. At this point, the customer side is zero (for this billing situation) and the Advanced to Company account is reduced (credited) via an automatic Month-End journal entry.

If you follow these steps, there will be an audit trail at the customer level. Run a Miscellaneous Production Report for only EFT transactions to track this transaction type. If the GL account is set up as described in Section 1, Step 1, activity for this type of business will appear on a Status of Accounts. (Select Yes to Include Month-End journal entries. ) The GL account should eventually zero out, but if there is a balance, running these two reports should help to verify the balance in the GL account.

If the agency reconciles direct bill, this would be done in the normal manner (e.g., flagging each item that the company has sent the agency a commission check for). The act of reconciling does not have any effect on the above steps.

Note: If you need to issue a check for more than one client, you can also follow the EFT workflow and issue a check instead of a miscellaneous disbursement.

Option 2: Receipts

  1. Enter a direct bill transaction (as normal) at the customer level to track production and commissions.
  2. When a customer issues a down payment, enter the cash receipt as a normal customer payment. On this client payment put EFTIN in the Schedule field. This puts the money in the agency's checking account and puts a credit (PAY) on the customer's account. With using the schedule field, this will help you to track the client payments coming in and you can compare them to the client payments being withdrawn from your checking account.
  3. When the agency is notified that the company has deducted the money from the account, enter a Cash Receipt to the client for a negative amount. For example, if John Smith gave you a payment of $100.00, when the company removes the money from your cash account enter in a deposit to John Smith for a -$100.00. Using the Schedule of EFTOUT on this client payment.
  4. To track the EFTIN's and the EFTOUT's run a Schedules Report. This report is located under Reports, General Ledger, General Ledger Schedules.

Notes:

Last Revised: September 22, 2010 02:48 PM

SWE25355