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AGENCIES WITH REVENUES BETWEEN $2,500,000 AND $5,000,000
90
EXECUTIVE
PERSPECTIVES
PROFILE
REVENUES/
EXPENSES
FINANCIAL
STABILITY
EMPLOYEE
OVERVIEW
PRODUCER
INFO
SERVICE
STAFF
INFO
TECHNOLOGY
INSURANCE
CARRIERS
APPENDIX
FINANCIAL STABILITY
A.
Current Ratio
A current ratio greater than 1:1 indicates that cash and assets with short-term
maturities are sufficient to meet a firm’s short-term obligations.
B.
Tangible Net Worth
The tangible net worth is an important measure as it represents the net value of the
corporation if it were liquidated. A low or negative tangible net worth impacts a firm’s
ability to invest in new opportunities, develop new products, hire new employees, make
other capital expenditures and handle stockholder redemption obligations
.
C1.
Receivables
The following ratio measures the collection practices of an agency, with a lower ratio
representing more timely collections.
C2.
Aged Receivables
D.
Receivables Management Practices
Participants were asked to indicate which practices they utilized and to score the
practices’ effectiveness where
1 = NOT EFFECTIVE
and
5 = EXTREMELY EFFECTIVE
.
Average
Top 25%
Liquidity/Current Ratio
1.48:1
2.04:1
Average
Top 25%
Tangible Net Worth (as % of Net Rev)
6.1% 23.1%
Average
Top 25%
Receivables/Payables Ratio
51.2%
5.5%
Average
Top 25%
Over 60
15.5%
8.0%
Over 90
9.3%
3.3%
% Utilizing
Score
Management reviews receivables regularly
Have strict collection policy
Hold producers responsible for bad debts
Encourage/require use of direct bill
Encourage/require use of premium finance
Use pre-billing and binder billing
Do not allow agency financing
Centralize collections & remove producer involvement
Provide clients with written copy of collection policies
Other
"The key for us is having the payment of producer commission tied to the collection of
the premium."
0%
100%
0.0
4.0
3.0
2.0
1.0
5.0