2004 Best Practices Study
AGENCIES WITH REVENUES BETWEEN $1,250,000 AND $2,500,000
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.
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 .
Tangible Net Worth (as % of Net Rev)
Receivables The following ratio measures the collection practices of an agency, with a lower ratio representing more timely collections.
Over 60 Over 90
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 .
SERVICE STAFF INFO
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
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