Premium Financing Transactions

Product: TAM Series 6 & TAM Series 7

Have you ever sent a refund check to a customer when it should have been sent to the Finance company?

The two finance transactions are very different from one another, and you should be sure to select the correct one. Do not let their descriptions mislead you. When deciding which transaction to use in these financing situations, it will all depend on whether the agency's cash account is involved. If the agency is responsible for collecting the money from the Finance Company and forwarding the money to the Company Payable, then you will enter a FIN transaction. If the agency's cash account is not involved with either the accounts receivable or the company payable, then you will enter a CFN transaction.   

FIN: Outside Finance

Use this transaction when a premium is being financed and you need to remove the balance on the customer account and transfer it to the Finance Company's account.

A FIN moves the receivable balance from the customer to a Finance Company.

CFN: Company Finance

Use the CFN when the premium will be sent directly to the insurance company from the finance company (whether it is an outside finance company or the insurance company).

Credits Accounts Receivable and Debits Company Payable

How to Transact a Finance Transaction (FIN)

  1. Invoice the policy (e.g., NEW, REN, +EN, RIS, etc.).
  2. Invoice the policy transaction as a FIN.
  1. From the General Transaction list, click Add, Add a Transaction, Select Finance Co. transaction. Be sure to select the correct policy in the bottom of the window and click OK.
  2. In the next window, select your finance company and fill in the amount (the amount that you are financing).
  3. On the next screen, you can select the FIN and apply it to the NEW, REN, etc.

Now the customer's balance has been reduced by the amount of the financed portion, and the balance has been moved to the finance company. If only a portion of the premium has been financed, then the customer's balance will reflect the down payment that he or she owes. When the customer pays this amount, enter a customer cash receipt.

When the finance company pays you, you do not deposit the money to the customer; do a deposit to the finance company.


How to Transact a Company Finance Transaction (CFN)

  1. Invoice the policy (e.g., NEW, REN, +EN, RIS, etc.).
  2. Go to Invoices, Add, Add a transaction, General transaction.
  3. Select the proper policy.
  4. Add the CFN transactions. The amount of the CFN should be the amount that is being sent to the company on the agencies behalf.
  5. You are asked if you wish to j/e between items. Click Yes. Apply the CFN to the NEW, REN, etc. Now it will appear on the account current/company statement and you can issue the check through reconciliation. You will need to flag the original production item (NEW, REN, etc) and the CFN transaction. Together they will net out to either what you owe the company or what the company owes you in commission.

Note: If the agency's bank account is not involved in the Accounts Receivable or the Company Payable, use the CFN transaction.

Reversing Finance Transactions

Did a FIN Instead of a CFN

Billed as FIN because you thought that the Finance Company was going to pay the agency, but they sent a check directly to the insurance company instead. In this case, you need to take the money out of accounts receivable (credit) and also take the money out of company payables (debit) because the money has already been sent to the insurance company.

  1. Enter a CFN.
  1. Enter negative FIN.

Did a CFN Instead of a FIN

Billed as a CFN because you thought the money was going to be sent directly to the insurance company, but now the Finance Company has sent the money to the agency.

  1. Enter a negative CFN.
  1. Enter a FIN.

You Need to Get Rid of the FIN Altogether

Because the insured is going to pay the agency directly instead of financing the policy, or you put it on the wrong Finance Company and need to back it out.

  1. Enter in a negative NEW, REN, +EN, etc.  
  2. Normally, you would use the same transaction type that was originally entered into the system.
  1. Enter a negative FIN.
  1. Re-transact the NEW, REN, etc. Use the same transaction type as you did in the first step.

Did a FIN for the Wrong Amount

You did not get the policy on time, and so the amount financed is reduced by the amount of the first installment due from the client. To prevent this problem, change your workflow so that you do not transact the FIN until after the contract is signed and you have sent the finance agreement.

If you need to INCREASE the amount financed for any reason, do not follow the steps below; simply add another FIN transaction for the difference.

To DECREASE the amount financed:

  1. Enter a negative NEW, REN, or use the same transaction type that was used when the policy was billed.
  1. Enter a negative FIN.
  1. Re-transact the NEW, REN, or use the same transaction type used in the first step.
  1. Re-transact the FIN for the correct amount.

Financing Cancellations

Cancellation of a Financed Policy

  1. Enter a CAN transaction as normal.
  1. Enter a Negative FIN.

If you receive a return premium check from the insurance company or the finance company, apply it against the company payable or the CAN you entered will appear as a credit on the company statement. You will then flag the CAN. It will deduct it from the total amount due the next time you pay the company statement.

Cancellation of a Company Financed Policy

  1. Enter a CAN transaction as normal.
  1. Enter a Negative CFN for the amount of money that the Finance Company or the Company is returning to the customer on the agencies behalf. 

Note: If the CFN is entered for the full amount of the cancellation, when reconciling the items together there will be a balance of the returned commissions that would be owed back to the company.

  1. If there is a balance left on the client, that means that the agency may need to issue a check for the return commissions to either the client or the finance company involved. If it is the client, enter in a Return Premium check to that client. If the check needs to be issued to the company, enter in a Negative FIN for the returned commission amount.

If you run into a situation that is not addressed above, please refer to the Billing Situations document for additional billing information.

Last Revised:February 19, 2008 02:23 PM