As a business owner, you may not see the benefits of premium audits, but they are just as important to you as they are to your insurance carrier. Business policy premiums are based on the amounts of payroll, sales and other costs that you are reasonably expected to have when you are first issued your policy. Now that you have the real numbers for that year, that information can be reassessed to determine the correct premium amount.
Depending on the size of your policy and how your business operates there are three different methods your insurance carrier can use to conduct your audit including:
1. Mail Audit: Your insurance carrier will mail you an audit form and the instructions to complete the form. Once you complete the audit, you mail it back to your carrier to be reviewed.
2. Phone Audit: Your insurance carrier will hire an independent audit company to conduct your audit over the phone.
3. Physical Audit: Your insurance carrier will conduct the audit at your place of business, but it could also be conducted at an alternative location, such as your accountant’s office.
Whichever method your business has the audit done by, audits always include your disbursements and payroll journals, ledgers, tax and Social Security reports, state unemployment forms and other accounting records. We have a few tips to help you prepare for your audit, help it run smoothly and end positively.
Before The Audit
– Try and get an idea of what the auditor will be reviewing. Look at the auditor’s worksheets and past audits.
– Decide who will work with the auditor, whether that is you personally or another employee; be sure that whoever it is has the knowledge of your accounting records and what kind of work is done by various employees and departments.
– Have on hand all the accounting records that will be used for this audit. Make sure your payroll documents include a breakdown of wages according to class code, department and employee.
– Be sure to have certificates of insurance for all subcontractors you have used. Don’t forget to make sure that these certificates show the contractors have their own general liability and workers’ compensation insurance.
Day Of The Audit
– You might want to request the audit be conducted at your business, in case the auditor needs something, you can find it easily.
– If you have questions, don’t be afraid to ask the auditor to explain any points that aren’t perfectly clear to you.
– Request a hard copy of what the auditor finds, for your records.
After The Audit
– Look over the audit billing statement, comparing it to your original policy.
– Don’t agree to pay any additional premium until you have made a list of all the changes and discussed any problems you see with the auditor.
Don’t let an audit surprise you or catch you off guard. Here at R.C. Keller & Company we try to advise you in a way that results in the best possible insurance program while protecting you and your business. Don’t hesitate to call or contact us if we can assist with achieving the best business objectives for you.