Overview of Accounting Management

In order to ensure that operations of an insurance broking firm run smoothly and seamlessly, it is necessary that proper recording of accounts is done by the business according to the best practices followed in the insurance industry and what has been prescribed by the Insurance Regulatory and Development Authority of India (IRDAI). Accounting management for insurance brokers includes recording and maintenance of accounts, financial transactions, invoices etc. The tools such as financial accounting, cost accounting, business analysis, economics etc., are included within the ambit of accounting management. Accounting management is essential in the preparation of financial statements because it provides the relevant data based on which the financial statements are prepared. It further assists the management in strategic decision-making for the business.     

Need for Accounting Management for Insurance Brokers 

Accounting management is needed for Insurance brokers for the  following reasons:

• Monitoring consumer behaviour: Accounting Management can give the insurance brokers great insights into consumer behaviour, such as what kind of products they are buying more, what sectors the consumers like etc. and accordingly, the management of the insurance brokers can make changes in their business strategies thereby generating more revenues for the firm.   

• Detecting bottlenecks in ease of doing business: Accounting management helps in detecting the bottlenecks in various stages of the business and offers the management an opportunity to rectify those areas for a steady flow of cash into the firm.

• Aids in controlling expenses: Accounting Management aids in finding out unnecessary expenses and inflated overheads made by the organisation and allows the management to control these expenses and increase savings of the organisation.   

• Helps the broker in adapting according to the business cycle: Accounting management presents the data about the changes taking place in the insurance industry and thus gives the management to introduce changes so that the business can easily adapt to the changes in the business cycle.

Accounting management services for Insurance brokers 

The following services form part of the accounting management services for the Insurance brokers: 

1. Developing and integrating an Accounting System: The insurance broking business involves a number of financial transactions taking place on a daily basis. This financial data is crucial for financial reporting and managing the financial and operational tasks of the business. Thus, it becomes necessary that there is an accounting system where all such transactions are recorded and every employer of the insurance broker involved in the accounting processes follows the same SOPs while accounting is being done. In order to ensure systematic recording and accounting of the financial data, it requires developing and integrating an accounting system which is not only a repository of all the accounting data of the insurance broker but also performs the accounting functions as per the standards prescribed by IRDAI. The process of development and integration of the accounting system should be affordable and efficient in order to be effective.  

2. Cost accounting, Financial Accounting, Business analysis: Accounting management involves a number of tasks such as cost accounting, financial accounting, business analysis etc. In simple words, the tasks of recording, accounting, analysing, summarising and reporting all the financial transactions taking place in the business for a specific period of time together form part of account management. A summary of this data is then used for the preparation of financial statements. Further, accounting management also gives an overview of the operational performance of the business.   

3. Accounting of the assets of Insurance Broker: Another crucial task performed during the process of accounting management is the accounting of the assets of the Insurance Broker. It records the value of acquiring those assets, depreciation of those assets over a period of time, and valuation and disposal of those assets. It also assists in tax planning and assists the auditors in enquiries and audit schedules. Tax reporting with the appropriate department also requires the right estimate of the figures that accounting management can provide to the broker. All this data allows the management to take key decisions on the assets of the business.

4. MIS Reports: Another important component of accounting management is the preparation of MIS reports which track various operations of the insurance broker, such as the assets held break-up, renewal premium, expenses made by the management and benefits paid to the policyholders. It further tracks the leads generated and leads converted. All the above-mentioned information in the MIS allows the management to make key decisions for the business.      

5. To calculate amortisation and depreciation of assets: The practices of calculating the depreciation of the assets over a period of time and amortisation of the assets also become possible with proper accounting management. This practice further comes in handy at the time of valuation of the Insurance broker and other associated tasks such as tax planning, tax filing, mergers and acquisitions etc.

6. Budget Preparation: Accounting management is indispensable in the preparation of a budget for an Insurance broker. Without a true picture of the accounts and figures, it will be impossible to prepare the budget of the insurance broker. Therefore, it becomes very important for an insurance broker to properly account for all the transactions and present the management with true figures and data so that decisions can be taken with the best resources available by the insurance broker.

Enterslice has a proven track record of offering Accounting Management services to Insurance brokers. Enterslice can assist in the management of accounting software and overall accounting management of your Insurance broking business as we are a team of accounting management experts. We also provide end-to-end consultancy for our partners. We offer legal consultancy services too.