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Accounts, Cashbook, Reconciliation Adjustments (General Insurance)

The standard process for making adjustments during reconciliation is described in Accounts, Cashbook, Reconciling (Insurer & Adviser Accounts, etc). It is similar to this for General Insurance when adjusting commission resulting from Direct Debit business, but different for Cheque type business, where there is a corresponding client invoice in the Sales Ledger, which the client may already have settled. Consider the following…

  • The insurer’s purchase invoice for a net premium of £450 needs to be adjusted down to £400
  • But the client’s sales invoice for a net premium of £450 + £50 commission has already been settled
  • In such a case the system (as shown below) will automatically adjust the sales invoice, so that its net premium matches the revised figure of £400, and will prompt the user to add the remaining £50 to either the commission (recommended), or as a management charge (not recommended, as under FSA rules all charges should have been disclosed, and cannot thereafter be changed). The system will also automatically adjust the actual policy’s figures too, so there is no need to “jump” back to edit them. The following example illustrates the process, starting from the original premium screen…..

    1. The original premium screen is shown below, where the insurer’s nett premium + IPT = £450, the commission = £50 and there is no management charge.

    2. The posting preview is shown below, with £500 to the client, £450 to the insurer, and a pay-away of £30 to the adviser.

    3. The insurer’s reconciliation screen is shown below, with £450 appearing as due, and a “smiley face” indicating that the client has already paid her own £500 invoice.

    4. However the insurer’s statement shows that only £400 is expected, as shown below, so the £450 has to be adjusted down by £50.

    5. In the “Ledger Adjustment” dialogue, shown below, the user has chosen to re-allocate the £50 as extra commission, and has left the box ticked to “Adjust adviser and lead commission proportionately”.


    6. The system makes the adjustment by automatically creating a credit (see the one for -£50 below). You can easily spot such automatic adjustment invoices (or credits, as in the case below) because they will have the letters “(ADJ)” after the POLICY HOLDER name. The system will similarly automatically make a new adjusting invoice for the client, with zero value, but with two lines which move the £50 from the net premium nominal to the one for charges. These (ADJ) invoices MUST NOT BE DELETED. The client ones will have no value and can simply be ignored. Effectively they are a bit like journals, in that they just re-allocate the adjustment figure between two nominal accounts. The reason that this is done through adjustment invoices rather than by journals is so that the transferable commission routine can also keep track of the changes.

    7. The illustration below shows the new “(ADJ)” invoice in the Purchase Ledger that reduces the insurer’s premium by £50. Use the “Signpost” option to “Show policy holder” if your current display is just “Showing policy numbers”.

    8. The illustration below shows the matching “(ADJ)” invoice in the Sales Ledger, for zero value, that re-allocates the £50 between two nominals.

    9. The illustration below shows the full details view of the matching “(ADJ)” invoice in the Sales Ledger. You can clearly see that it is for zero value, and that the £50 is simply re-allocated between two nominals.

    10. Back on the premium screen of the policy, you can see how the system has automatically reduced the insurer’s Nett + IPT figure to the required £400, and added the extra £50 of commission (to a new total of £100), while not actually changing the overall invoice amount. 

    11. Although not required, you can see from the example below that if you were now to re-post this policy, the insurer’s invoice would be the adjusted £400, the client’s would be for the original £500 sum, while the adviser’s would be changed pro rata to have £60 of commission (i.e. the same percentage, but of £100 instead of £50).