I think it’s safe to say that business owners, CFOs, accountants, controllers, or even bookkeepers cringe at a workers’ compensation final audit. Most business audits are painful; they take time and resources and sometimes create unexpected financial consequences, such as additional premiums or tax bills.
I can’t speak to IRS audits, but I can say that workers’ compensation final audits are not as painful if adequately prepared. At Fusco Orsini & Associates, we keep our clients updated throughout the year, so there are no surprises at the final audit. We believe that any quality insurance agency should do the same.
Two weeks before workers’ compensation expiration, we send all clients an email labeled ‘DO NOT Miss Your Chance to Ace Your Workers Compensation Audit!”
In this BLOG and VLOG, I will provide three tips on acing your workers’ compensation audit. There are several others, but I think these three will get you off to a great start. Don’t hesitate to reach me directly at 858-384-1507 with questions. You may also follow our agency for more helpful tips by visiting our social media links below.
TIP # 1 – COMPLY!
I know everyone is busy and overworked. I feel the same at times. But it’s essential to designate resources to ensure your workers’ compensation final audit is completed! If you do not have time to work with the auditor or complete the paperwork, please delegate it to a colleague or partner. A timely response is essential to avoid a non-compliant audit.
The nasty letters and bills arrive once an audit is returned as non-compliant. This sets everyone off on the wrong foot; nobody appreciates the letters or bills, but keep in mind that the insurance code in most states allow carriers to bill for estimated premium if the audit isn’t handled.
Also, a non-compliant audit may negatively affect your experience modification factor. An increase in your experience modification factor will cause you to pay higher rates than peers in your industry.
Finally, it takes lots of time to unravel a non-cooperative audit. If you don’t wish to spend extra time dealing with an activity that many consider a timewaster, it’s essential to comply with your audit!
TIP #2 – ORGANIZE YOUR RECORDS!
Any quality business has adequate and organized records. Let’s face it – poor recordkeeping causes friction when trying to grow a company, nevertheless, manage one effectively. The person or organization handling the process must receive records that make sense with any audit. And the same goes for your final work comp audit.
Two weeks before policy expiration, we email our clients with a list of the documentation to prepare for the audit. Here are some items to have in mind:
Tax Information
W2 forms
1099 forms
Form 941 and 944
Payroll Records
Accounting ledger
Payroll journal
Overtime payroll records
Material and labor payments
TIP # 3 – COLLECT INSURANCE CERTIFICATES
If you hire subcontractors or independent contractors, you must collect certificates of insurance and provide them to the audit.
Certificates from subcontractor
Certificates from independent contractors
Please remember that if you do not supply certificates of insurance for your subcontractors and independent contractors, you may have to provide coverage for them and pay premiums.
We find that clients receive additional premium bills at the final workers’ compensation audits because they often fail to provide certificates of insurance. Although we can often dispute the audit and supply certificates for a revised audit, it takes time and resources to get it done.
TIP # 4 – HIRE AN AGENCY THAT KEEPS YOU IN LINE FOR THE FINAL AUDIT
If you’re having issues with your final workers; compensation audit, you need to find an agency that understands and will keep you in line for success.
Our team at FOA helps our clients prepare for their final audits, and we are happy to do the same for you. You may call us at 858-384-1506 to connect with an agent or complete the form below to connect with us. Thank you again for visiting!
