Trust Accounting Glossary

Use this glossary to look up terms used in HawkSoft Trust Accounting, its QuickBooks integration, and our help articles on these topics.

Account Current

Insurance premiums that are invoiced to the customer by the agency. When paid by the customer, monies are held in the trust bank account to be paid to the carrier.

Many agency Bookkeepers may reference their agency billing as account current.

Accounts Payables (Agency Bill)

Billing performed by the agency for money owed to a carrier, general agency, or broker. When the agency creates an invoice to bill the customer, HawkSoft also records an Accounts Payable (amount due) for monies owed to the carrier, general agency, or broker.

Accounts Receivables

This is money owed to the agency by the insured. This includes monies that will be forwarded to the carrier as company payables. An invoice or receipt is created in HawkSoft to track money owed to the agency from the insured.

In QuickBooks, the Accounts Receivables account will reflect the transaction of money received from the insured and the money being paid to the carrier and/or agency.

Agency Bill

A process by which the agency collects premium from the insured, retains commission, then sends payment to the carrier. Agency payment to the company may be due upon customer payment, or may be paid against a carrier statement.

See also Agency Bill.

Company Payables Per Policy

An Agency Bill process where the agency bills the customer and sends payment for each policy to the carrier. When you process receipts per policy, HawkSoft creates a separate company payables check for each policy.

Company Payables Per Statement

An Agency Bill process where the agency bills the customer and sends payment to the carrier for multiple policies in a bulk payment against a carrier statement.

Credit Memo

A credit memo applies credit to a customer account without receiving a corresponding payment.

Some reasons for creating credit memos include: Waiving balances, endorsing (changing) a policy, or refunding unearned premium or retained commissions.

Billing Type

A policy field where the agency can identify how the customer is billed. For example: Direct Bill, Agency Bill, etc.

Customer Receivables

Balances owed to the agency by the insured.

Direct Bill

A process in which the carrier issues an invoice to the insured and the insured pays the carrier.

Some agencies may assist in facilitating payments directly to carriers in-office via carrier websites. These payments are still considered direct bill, because the agency does not hold the monies at any point.

Some agencies, as a courtesy, will take customer payment and pass it through their trust account to the carrier. This is sometimes referred to as "payment direct to company".

Direct Bill Commission Statement

A Direct Bill Commission Statement is provided by carriers to the agency, listing all the transactions for which the carrier is paying the agency.

A commission statement is issued by some carriers as part of a regular download. Typically used to reconcile commission transactions.

Commission statements may also be provided as a pdf file or importable spreadsheet.

End-of-[period] (Day/week/month/year) Processing (AKA Close of Day/Close of Week/Close of Month)

The process an agency takes to complete a specific time period’s accounting workflows. This involves sending transactions to QuickBooks or correcting errors that may have come up during the period.

Examples of End-of-period workflows:

End-of-Month

End-of-Month tasks are when agencies reconcile their bank account with their accounting system (such as QuickBooks). Each agency determines how often they perform each task, based on their needs.

During reconciliation, an agency will review all the payments and checks that were created for that month and make sure everything matches up. Once the bank account has been reconciled, it is best practice to not edit any transactions that were reconciled for the month. This process is most commonly performed on a set date each month, but may be performed more frequently, depending on the agency's needs.

If any errors are found during reconciliation, the agency may need to perform detailed research to find out what really happened.

Common End-Of-Month Tasks

Correcting invoices or payments created in the last month.
Exporting payments and invoices to QuickBooks that have not been exported for that month, if any.
Reconciling the bank account with the accounting system.
Reconciling company payables with statements received from carriers.
Reconciling between HawkSoft and the accounting system to ensure they are in sync.
Reporting on retained commission and/or agency fees earned throughout the month, and transferring that money from the Trust Account to the Operating account.

End-of-Year

At the end of the year (calendar or fiscal, depending on the agency), this is part of finalizing the agency's books for tax season. This is a very important time and the agency must be accurate in the bookkeeping, as they cannot easily undo mistakes after this process is completed.

If errors are found at this stage, agencies may "fix" some errors by waiving small balances or by using other advanced bookkeeping. Such fixes should be done in consultation with a Certified Public Accountant (CPA), such as HawkSoft Managed Insurance Accounting Services.

Once this process has finished, the book is considered “closed” for that year and generally cannot be modified anymore. Modifying books that have been closed is not recommended practice and could cause tax problems.

Common End-of-Year Tasks

Creating "correction" transactions to balance the trust account.
- This can include General Journal entries moving money to and from a “balances waived” account.
The agency reimburses the trust account for any "lost" monies to ensure the account is returned to the "float" amount.
- This may include NSF funds, service charges, waived fees, and more.
Performing extensive review of all transactions created during the year to ensure accuracy

Endorsement

Endorsements are legally binding amendments to an insurance contract. They can be used to add, delete, exclude, or otherwise alter coverage. They can be issued during the policy term, at time of purchase or at renewal. An endorsements may also be called a rider.

Changes made through endorsements may result in premium adjustments. Most endorsements remain in effect until the policy expires, unless specified otherwise.

Fiduciary Funds

Money deposited into a trust account that will be paid to the carrier. Personal agents, Commercial agents, and brokers are mandated by state laws to receive transacted premiums in a fiduciary capacity, as trustees (custodians instead of owners) of the premium funds. The funds are then distributed to the carriers.

General Ledger Account

A specific record for accounting purposes, used to track related assets, liabilities, equity, revenue, or expenses. For example: NSF Fees, Premium Trust, or Direct Bill Liabilities.

Trust accounts are liabilities accounts.

These are configured in Trust Accounting Settings.

General Journal Entry (GJE)

General journal entries, often simply "journal entries" or "journals", are used to enter transactions using debits and credits in a general journal or ledger. They are used to transfer amounts from one account to another, and require careful balancing of debits and credits, as well as detailed knowledge of which accounts should be affected and how.

The HawkSoft recommended workflow is that all transactions should ideally start in HawkSoft, eliminating the need in many cases to create General Journal Entries. When journal entries are required, consulting with a bookkeeper is recommended.

Invoice Line Item

A line in an invoice that notes how much a customer owes, the reason for the charge, and who the money is for.

Line Item Template

Line item templates are created in Trust Accounting Settings and control the payee, bank account, and reporting account.

Line Item Description

Line item descriptions display on invoices to describe what a line item is used for. These can be typed in manually on an invoice or selected from a list the agency creates in Trust Accounting Settings.

Managing General Agency (MGA)

A broker that may act as a writer for a number of carriers. A policy written through an MGA usually has the MGA set as the policy carrier.

Open Invoice

An invoice wherein all or part of the monies originally owed are still due.

Open Balance Equity

When you set up your company account in QuickBooks, "as of" a specific start date, any existing company assets and liabilities must be entered. QuickBooks uses these amounts to create an equity account called Opening Balance Equity.

Opening Balance Equity is the offsetting entry used when entering account balances into QuickBooks for the first time. This account is needed when there are prior account balances that are initially being setup in HawkSoft to integrate to QuickBooks.

Payment

A payment is the record of monies paid by the customer and received by the agency. Payment is entered into HawkSoft using a receipt. Payments are shown on the client.

Receipt

A receipt is a record of a transaction happening. Most receipts are a record of a payment received and how that payment was applied. For example, if a customer writes a check to pay their premium, that check is a payment, and your agency will create a receipt showing that the customer made a payment against their insurance premium.

A receipt may be linked to a payment (customer receivables), invoice, credit memo, or check (company payables). A receipt can also be created when applying customer credit or issuing a refund from a credit memo. Receipts are reviewed during the end-of-period process using Trust Accounting reports.

Rider

Endorsements (or riders) are legally binding amendments to an insurance contract. They can be used to add, delete, exclude, or otherwise alter coverage. They can be issued during the policy term, at time of purchase or at renewal.

Changes made through endorsements may result in premium adjustments. Most endorsements remain in effect until the policy expires, unless specified otherwise.

Reconciling accounts in QuickBooks

Reconciliation is the process of comparing the transactions recorded in your accounting system against a reliable external source - typically your bank statement, which serves as the "source of truth."

During reconciliation, you review each transaction line-by-line to confirm that it matches the corresponding entry in your books. If discrepancies are found - such as missing transactions or incorrect amounts - they should be corrected in your records to reflect the actual activity.

In essence, reconciliation is a monthly review where you verify that what you recorded in your system aligns with what actually occurred, as confirmed by your bank or other trusted source. Any issues are resolved by identifying and correcting mismatches between your records and the source of truth.

Reconciling your accounts in QuickBooks is an essential step to ensure the accuracy of your financial records. As you write checks, make deposits, incur bank charges, or pay invoices, it's important to record each transaction in QuickBooks promptly.

Retained Commission

Commission amounts that the agency retains in the Trust bank account from the gross premium payments received on a policy. In cases where the carrier allows the agency to retain commission, the carrier receives a net payment (the payment amount minus retained commission).

Money held within the trust account is not considered income until it is moved to the operating account as income.

Trust Account

The insurance code in many states require agencies to have a trust account. The “trust” bank account holds funds for specific purposes such as customer premium payments, so they can be separated from the agency’s business operating funds. Some agencies refer to this bank account as a "premium" account or "sweep" account.

Trust Accounting

Trust Accounting is the bookkeeping of trust accounts in accordance with state requirements. It refers to accounting that is specific to the bank account where fiduciary transactions, such as premium payments received, credits to the insured, and agency fees, are deposited.

Unapplied Credit

An Unapplied Credit is a Credit Memo or Payment that has not been fully applied to an invoice yet.

In the case of a Credit memo, there is still an amount due. For Payments, there is an unapplied amount left.