The Power of VUE Compensation’s Revenue Reconciliation for Insurance Distributors
Accounting and auditing can be very complicated especially for businesses. Although accounting has evolved with technology applications such as Excel and Quick Books, more often than not it is still a predominantly manual process. A few years ago while attending a meeting I was introduced to a software solution that immediately captured my attention. I was fascinated by its capabilities, and verbalized that if it was available for personal accounting I would be first in line to purchase it.
This solution can recognize earned income; identify discrepancies in commission payments made by carriers, allowing users to recover rightful income; forecast cash inflow based on various parameters; and compare, side-by-side, expected commissions versus the amount received from carriers, ensuring total accuracy and smooth transactions. This solution is a feature of VUE Compensation called Revenue Reconciliation, built specifically for MGAs, FMOs, IMOs, and Insurance Brokers.
Per Investopedia, Reconciliation is an accounting process that uses two sets of records to ensure figures are accurate and in agreement. People use it to determine whether the money leaving an account matches the amount spent, ensuring the two amounts balance at the end of the recording period. This is basic double-entry accounting that people have been using for centuries to ensure that the account balance recorded by their financial institution matches their personal records. Historically this is done at the end of the month or quarter by individuals and businesses.
Revenue recognition is an accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which revenue is recognized or accounted for. Generally, revenue is recognized only when a specific critical event has occurred and the amount of revenue is measurable. For example, if a company provides a service for you with an agreement that you would be paid a specific amount of money once the job is completed, completion of the service is the critical event.
Revenue reconciliation focuses specifically on ensuring that the revenue received from another entity/business is correct. In the financial industry, and the insurance industry in particular, this can be a very complex undertaking. For example, an insurance distributor with 5,000 agents selling multiple products for 30 carriers will have a very complex hierarchy arrangement, multiple bonus plans, gamification payouts, etc., that will make calculating commissions time consuming and error prone. One agent may be selling similar products for multiple insurance carriers at different commission rates; alternately, several agents may be selling the same product for the same carrier again at different commission rates. Keeping on top of these complex arrangements can be a real nightmare with numerous spreadsheets if they’re being done manually.
VUE’s Revenue Reconciliation is a robust tool that automatically identifies a policy when you upload a “carrier commission file,” even if policy number or identifier is not provided. VUE supports multiple search options and ease of operation with extensive reporting to look at received, expected, aged and unpaid policies/revenue. It reconciles receivables against revenue and identify and fix mismatches by either rebilling the carrier for the balance or creating write-offs based on specified occurrences. VUE’s Revenue Reconciliation, can project cash inflow from carriers for a predefined number of months on a rolling basis, take snapshots of projected data in the projection cycle and, compare projections using snapshot data to identify changes. This solution is capable of doing this and so much more. The processes that are covered in the solution are policy reconciliation, deposit reconciliation, account receivables, revenue recognition, revenue reconciliation, and reporting.
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