Applied Epic Agency Billing: Common Discrepancies and How to Address Them

May 22, 2024

If your responsibilities at your agency involve accounting in Applied Epic, have you become frustrated due to any of these Agency Billing scenarios?

PPE: You are reconciling a Premium Payable to pay the company/broker, and the transactions you are trying to reconcile are not showing up for that entity.
Attachments: The necessary documentation is not attached in Applied Epic to complete a workflow.
Invoicing: Your Premium Payable reconciliation total does not equal the amount on the invoice or agency statement.
Financing: The policy has been financed, but it has not been transacted using the appropriate financing method or a financing method was not completed fully.
Receipting: The transactions have not been entered on the client’s side to apply funds received.
Applying Credits to Debits: Credits and Debits have not been properly applied to each other, or the system advises that they cannot be applied to each other.

Odds are, if any of these issues sound familiar to you, it’s slowing down your day as you try to find what is incorrect to complete your workflow.

For the Account Managers out there, you may not realize how the data setup on the client’s account directly affects accounting and the General Ledger in Applied Epic. A way to establish a cohesive workflow between Servicing and Accounting is to understand WHY these scenarios can cause inefficient accounting processes that can result in incorrect financial reporting.

Let’s discuss the major types of discrepancies regarding agency bill processing—and the Why and How to fix and prevent these from occurring.

PPE Discrepancies

There could be several reasons for a PPE discrepancy scenario. Here are two main scenarios.

The Issuing Company (ICO) Is Also Listed as the PPE on a Policy Application.

While there are certainly times when the ICO and PPE are the same, often these two entities are different and should be reflected as such on the policy application in Applied Epic. Look at your Companies in Applied Epic and double check that only the ones that are truly PPE entities are checked as a Billing Company. Brokers are automatically eligible to be selected as a PPE and cannot be selected as an ICO.

Reminder: Billing Companies are where the money comes from or is paid to. Accounting will reconcile against the statement/invoice received from the Billing Company. If the PPE is incorrect on the policy, the agency bill reconciliation and payment cannot be completed correctly.

The PPE is Duplicated in Your Applied Epic System.

If you have multiple accounts for the same entity, there could be some inconsistencies where the incorrect or duplicate PPE is selected when entering a policy application. For accounting to properly reconcile an agency bill statement or invoice, the transactions with the incorrectly selected PPE will need to be reversed and re-transacted. We recommend locating any duplicated entities in your system and inactivate the incorrect one.

Reminder: We have seen instances where an entity is entered both as a Company and a Broker. If the PPE is truly a Broker, their Company file should be inactivated.

Important Note: ANY CHANGES MADE TO A COMPANY’S PPE/ICO STRUCTURE WILL NOT AUTOMATICALLY CHANGE THE POLICY APPLICATION. ACCOUNT MANAGERS NEED TO MANUALLY CORRECT THE PPE WHEN AN INACCURACY IS FOUND.

Attachment Discrepancies

When accounting reconciles and pays agency bill invoices or statements, the first step is to locate the carrier’s invoice and/or statement in attachments. We recommend attaching the carrier invoice to the client’s policy, and then send that to accounting in the defined agency bill activity. Carrier statements need to be attached to the company/broker account.

Once accounting locates the invoice, they should proceed to reconcile the premium payable and verify that the net invoice total ties to the agency bill reconciliation total. Ideally, if everything was invoiced correctly, then the reconciliation should tie to the invoice or statement.

Invoice Discrepancies

Accounting should always verify the net amount owed to the carrier before the invoice or statement is reconciled and paid in Premium Payables Reconciliation. When the invoice transactions selected to be paid to that carrier match the invoice or statement total, accounting will then proceed to finalize and pay the premium payable reconciliation. If the carrier’s invoice or statement doesn’t match the invoiced transactions, then there is a discrepancy that needs to be investigated and corrected.

Reasons for a discrepancy can include:

An incorrect premium/tax/fee
An incorrect commission percentage
A financing discrepancy
Missing or duplicated transactions
Invoices billed to the wrong PPE

At this point, accounting must stop the reconciliation process and reach out to the servicing team using the designated activity to get the discrepancy corrected. While this causes delays in the workflow, it will directly affect the agency’s financial statements if not corrected. Having clearly-defined workflows in place for the premium payable process will ensure that all agency bills will be successfully invoiced and paid in Applied Epic.

Financing Discrepancies

There are two ways for financing transactions in Applied Epic. Your agency may use both processes depending on the Finance Company. With the CFIN method, your agency may only take down payment, and the rest of the funds are sent from Finance Company to the Company/Broker. With the Actions > Finance Transaction method, your agency is taking down payment, and Finance Company sends your agency funds to forward to Company/Broker.

Here are some common mistakes we see related to financed transactions:

1: When an agency is expecting funds from the Finance Company, the transactions on the client’s account are not moved over to the Finance Company’s Transaction screen in Epic (Actions > Finance Transaction method). You do not want the balance to remain on the client’s account. One reason being is that it can create confusion about what balance is truly due from the Finance Company and what is due from the insured. By moving the balance to the Finance Company, you can track the balance you’re waiting on or the balance that is due back to the Finance Company.

2: If you enter a CFIN against a transaction, but are receiving funds from the Finance Company, you will not have a balance to apply funds to once received.

Be sure to always double check which finance transaction method should be used. Depending on what Finance Companies you use, either method could be implemented.

Receipting Discrepancies

A common occurrence involving Receipts in Applied Epic is not having transactions to apply client payments to. If you record funds received for a policy—and that policy has not been billed yet—your option is to apply funds to the Account vs the Receivable(s). While this is not necessarily wrong, it does cause an extra step once the policy is billed. To clear the A/R balance, you must remember to go back to the client’s account and apply credits to debits.

Of course, there are times when premium payments are received prior to binding. However, there should still be transactions entered based on a quote or estimate to send the client an Applied Epic invoice. As soon as you have the invoice from the carrier, check if the amount differs from what you originally billed. If it does differ, you must revise the premium or taxes/fees and either re-bill the client or issue a refund.

Having transactions entered prior to receipting fund received cuts down on the need to go back and apply credits to debits. The last thing you want is a long Receivables report with multiple credits and debits to be applied. That process takes up more time to clear these than you expect!

Applying Credits to Debits

Applying credits to debits is a very important step that affects several areas and reports in Epic. Whether Servicing or Accounting (or both departments) performs this task, have a defined workflow in place to ensure that all payments get applied properly. Applying client payments (credits) to transactions (debits) ensures that the client’s accounts receivable balance is lowered or cleared. Also make sure that the credits are applied to the proper debits. This process ensures accurate receivable balances, premium payable balances, and Pr/Br commission payable balances.

Your Applied Epic accounting methods in configuration also play a role in how your producers and brokers are paid and how the agency recognizes the income. If either of those are set to Cash Fully or Partially paid, the income will not be recognized unless debits/credits are applied. Before closing a month, the agency needs to ensure that all credits to debits have been properly applied so producers and brokers can get paid—and agency income is properly recognized. To confirm all applicable credits to debits are applied for client payments, we recommend reviewing two reports: the Balancing Current Receivables and the Unapplied Cash/Credit Reports.

There are instances when you need to apply credits to debits for offsetting positive and negative invoiced transactions that net to zero (manually reversing a transaction). You may have also received that dreaded pop-up notification in Applied Epic that says, “Credit to debit situation does not exist for this account within the same agency.”

When this happens, it can be due to transactions being billed under one agency, but the payment is applied under another. If that client is not configured for the billed agency structure, Applied Epic will not allow you to apply payment to the account. You also cannot apply credits to debits across agency structures. This error will also occur if the transaction has been billed to an Additional Interest or Broker. If the correct billing procedure is used for those items, you’ll need to apply credits and debits on the Additional Interest or Broker.

If you receive that previously mentioned pop-up message, review the transactions and reverse, void, and/or correct the transactions accordingly. Then, re-enter the Receipt or Disbursement in the General Ledger. You will now be able to apply credits to debits.

Getting Help with Applied Epic and Agency Billing

Within Applied Epic, there are many steps within an agency bill workflow that can cause issues when not fully executed correctly. Understanding and establishing a cohesive workflow between Servicing and Accounting is integral for accurate agency bill processing and, ultimately, financial reporting.

At KiteTech, our Agency Consulting team’s goal is to assist agencies in creating these workflows and training on the importance of accurate data. You can check out our past webinar on Agency Bill Transaction in Applied Epic or check out our additional resources for Applied Epic users.

If your agency needs a partner for the Agency Billing processes or has Applied Epic questions, reach out to our team!