2005 Best Practices Study

2005 BEST PRACTICES STUDY - APPENDIX

F INANCIAL S TABILITY

1. Current Assets - Assets that can be converted to cash or a cash equivalent within twelve months. Includes cash, marketable securities, accounts receivable, notes receivable maturing within twelve months, and prepaid expenses. 2. Current Liabilities - Liabilities that require a cash outlay during the next twelve months. Includes accounts payable, the current portion of long-term debt (the portion due during the next twelve months), payroll and income taxes payable, and payroll that has been earned but not paid.

3. Current Ratio - Current assets divided by current liabilities.

4. Intangible Assets - Includes expirations (purchased customer lists), restrictive covenants, and goodwill.

5. Tangible Net Worth - Total assets minus intangible assets equals total tangible assets. Total tangible assets minus total liabilities equals tangible net worth.

6. Accounts Receivable - Amounts due from insureds.

7. Accounts Payable - Amounts due to insurance companies.

8. Receivables/Payables Ratio - Accounts receivable divided by accounts payable.

9. Aged Receivables - Measures the length of time that receibvables are past due (over 60 days, over 90 days).

E MPLOYEE O VERVIEW

1. Revenue per Employee - Net revenues divided by the total number of full-time equivalent employees.

2. Compensation per Employee - Total compensation divided by total number of full-time equivalent employees. 3. Spread per Employee - Total revenue per emloyee minus compensation per employee. While revenue per empoloyee is a standard for measuring productivity, the “spread” measures the dollars per employee available to pay all other agency expenses adn generate a profit for the agency.

P RODUCER I NFORMATION

1. Validated Producer - Producers whose book of business is sufficient to cover his/her wages under agency’s commission formula. 2. Annual Pay per Producer - Includes compensation that shows up on the producer’s W-2 and resulted from the producer’s production responsibilities.

S ERVICE S TAFF I NFORMATION

1. Service-Related Personnel - Non-commissioned personnel who have responsibility, either directly or indirectly, to provide or support service delivery to the agency’s clients. 2. CSR - Customer Service Representative - Positions with the main responsibility of client service or to provide support in providing client services. Includes Account Executives, Senior CSRs, CSRs, Account Managers, Assistant CSRs. 3. Customer Service & Processing - Includes activities such as processing new and renewal accounts, issuing endorsements/ID’s/certificates of insurance, file maintenance, speaking with customers on the phone, company correspondence, invoicing, etc. 4. Administration - Includes any time spent on non-customer service functions such as training, education, receptionist duties, internal meetings, agency matters, general clerical duties, etc.

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