Direct Bill (Broker Billed)

Newton User Guide: Accounting - Invoice/Billing

Related Pages

Agency Bill Agency Bill (Broker Billed) Direct Bill General Ledger Profile Invoice: Create An Invoice Policy & Billing

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Direct Bill

Direct bill refers to an invoice where the Broker pays the insurance company direct. The agency commission (GA) is sent to the agency by the insurance company and recorded with GL 1130 - Company Receivable. The broker commission creates a credit Accounts Receivable balance that is paid through reconcile (GL 1120 - Accounts Receivable).

See Direct Bill for regular personal or commercial retail Direct Bill invoices.

Direct Bill Invoice Accounting Entries

A Direct Bill invoice for $10,000, with 20% agency commission (GA) and 10% broker commission would result in the following balances

GL Account	Name	Debit	Credit	Action
1120	Accounts Receivable	$ 10,000.00		The broker owes you 10,000.00
1120	Accounts Receivable		$ 11,000.00	Direct bill reversal + broker commission. ($10,000.00 + $1,000.00)
1130	Company Receivable	$ 2,000.00		The company owes you $2,000.00.
4120	Direct Bill Income		$ 2,000.00	You have earned $2,000.00.
5109	Broker Expense	$ 1,000.00		You have incurred an expense of $1,000.00, with a net income of $1,000.00 ($2,000.00 - $1,000.00)

Receipt Money (Cash) From the Broker Accounting Entries

If you receive a payment from the Broker on a direct bill transaction, that is called a transmittal. A transmittal consists of two transactions; cash in, and a check out.

In our example, you can see that there is no balance on Broker; they owe the money to the company, not you. The transmittal will not change the balance either; the monies will be passed through your office, but will not permanently change the balances.

When the money is received, a cash receipt is created. If this were for $10,000.00, it would affect these accounts:

GL Account	Name	Debit	Credit
1100	Cash in Bank	$ 10,000.00
1120	Accounts Receivable		$ 10,000.00

A check is then issued to reset these balances. The check must charge the Accounts Receivable for this broker to reset his balance. The payee on the check is overridden to the company.

GL Account	Name	Debit	Credit
1120	Accounts Receivable	$ 10,000.00
1100	Cash in Bank		$ 10,00.00

Receipt Money (Cash) From the Company Accounting Entries

When you receive payment from the company, you will create a cash transaction crediting the company receivable.

GL Account	Name	Debit	Credit
1100	Cash in Bank	$ 2,000.00
1130	Company Receivable		$ 2,000.00

Broker Check Accounting Entries

The check to the broker is similar; it will reduce your bank account and zero the accounts receivable.

GL Account	Name	Debit	Credit
1120	Accounts Receivable	$ 1,000.00
1100	Cash in Bank		$ 1,000.00

Direct Bill Processing - Final Accounting Entries

At the end of all of these transactions, the account balances are:

GL Account	Name	Debit	Credit
1100	Cash in Bank	$ 1,000.00
1120	Accounts Receivable	$ 0.00
1130	Company Receivable	$ 0.00
4110	Direct Bill Income		$ 2,000.00
5109	Producer Expense	$ 1,000.00