Applied Epic Direct Billing: Common Discrepancies and How to Address Them

In our last article about common discrepancies in Applied Epic, we discussed commission issues centered around the Agency Billing processes. This time around, let’s talk about Direct Billing in Applied Epic.  

Direct Billing can create some frustrations that slow down your day and workflow. Below are 6 of the most common issues we hear about. Take a look through to see which you resonate with—then look for that section below to dive into how to address that issue.  

  1. PPE: You are reconciling/recording Direct Bill commission (whether by Download, import, or manual entry) and a policy does not appear under the PPE for that commission statement. 
  2. Recording/Reconciling: You are recording/reconciling and have multiple entries (separate PPEs) for one commission statement; commissions are being applied to the wrong policy term; commission recording/reconciling cannot be complete because policy has not been renewed or entered. 
  3. Attachments: The commission statement you are trying to process is not attached in the applicable company/broker file in Epic. 
  4. Transacting: If on accrual basis and NOT downloading, importing, or manually recording DB commissions, the amount transacted will most likely be different than amount ultimately received.   
  5. Receipting: The way commission is being receipted is not aligned with your accounting method configuration; DB commission is not being associated to a sub-account; money is not being receipted in the same month it is received in the bank.  
  6. Direct Bill Sweeps: Client receipt and premium advance are not both being entered, leaving a balance on the A/R; the Disbursement for the sweep is not being entered correctly (advance vs return). 

We’re going to discuss why these scenarios can cause an issue in your Direct Bill workflow. We’ll also explore how to fix and ultimately prevent it from happening. Our goal is to help you establish accounting efficiency and accurate financial reporting.   

PPE Discrepancies

PPE discrepancies for Direct Bill are very similar to Agency Billing. We mentioned in our Applied Epic Agency Billing blog that if the PPE is incorrect for an agency bill transaction, accounting will not be able to reconcile a premium payable entry.  

The same goes for direct billing. If the PPE is incorrect on a policy, accounting will not be able to complete a Direct Bill commission reconciliation 

Let’s say you are recording direct bill commission (whether by Download, Import, or manual entry) and you cannot locate a policy. It could be because that policy is coded to a different PPE than the one you are working on. If the policy is coded to an incorrect PPE, it should be corrected by the account manager so you can complete your workflow.  

Now, accrual-based agencies transact direct bill transactions and reconcile commissions. If you try to create a reconciliation entry and cannot locate the transaction, it could be because the transaction was entered against the incorrect PPE. The most accurate way to fix this would be the following:  

  1. Enter a reversing transaction for the wrong PPE. 
  2. Fix the policy application. 
  3. Re-bill with the correct PPE. 
  4. Then, continue your reconciliation. 

Recording/Reconciling Discrepancies

Multiple Entries for One Commission Statement or Receipt

What’s the most common discrepancy regarding recording/reconciling direct bill commissions? Having multiple entries for one commission statement or receipt.  

As mentioned before, this discrepancy results from not having your policies set up to the correct PPE. There could be a duplicate situation where your company/broker is set up twice and there are policies established under both. This causes you to record or reconcile commissions under separate entries.  

During the last step of the direct bill workflow, you may have multiple entries that need to be associated to one receipt. If one direct bill commission entry you made is a broker, but your receipt is tied to a company—you guessed it—Applied Epic will throw an error. The system will not allow you to associate the entry to the receipt if the receipt is not a broker. The same is true if the receipt is a broker, but the entry is a company. Applied Epic will still throw the error and not let you associate.  

It’s imperative to have your PPEs configured correctly so your Direct Bill recording/reconciling workflow (whether by download, import, or manual entry) can be done smoothly with one entry per commission statement and receipt. 

Commission Applied to the Incorrect Policy Term

Another common scenario is commission being applied to the incorrect policy term. Commissions should be applied to the specific policy term that they are received for. Check if the policy has not been renewed in Applied Epic. You may see it unassigned in Direct Bill Download Suspense or cannot locate it when importing or manual entry.  

Reach out to that policy’s account manager and let them know the policy application needs to be entered or renewed for the policy term. That will allow you to apply commission to it. If you are direct bill accrual, reconciling commission to the incorrect policy term can affect your income. 

Additionally, if you apply the transaction to a prior term because the policy has not been renewed, the renewal policy will appear on your Polices With No Transactions report. The billable premium/commission will reflect as $0 for the new term and duplicated for the prior term.  

Attachment Discrepancies

An attachment discrepancy occurs when the commission statement is either attached to the wrong account or is completely missing in Applied Epic. When accounting reconciles or records direct bill commission statements, the first step is to locate the carrier’s commission statement in attachments. We recommend attaching the commission statement to the company/broker account in Applied Epic.  

The workflow of some agencies is that the account manager or CSR attaches the statement in Applied Epic. A defined Direct Bill Commission Statement activity (i.e.: $DBC) should be sent to accounting to notify them that there is a commission statement ready to be reconciled/recorded.  

Now, if accounting is responsible for attaching the commission statement, then they should do so before proceeding to receipt the commission and reconcile/record the direct bill statement. Once accounting locates the statement, they should match the commission statement with the commission deposit from the carrier. Then, proceed to download, import, or manually reconcile the direct bill commissions. Be sure to review the commission statement for MVR fees or other miscellaneous charges to record on the GL Receipt. The total commission line on the receipt must match the total commission on the statement. 

Transacting Discrepancies

Is your agency on a true accrual basis? You will transact commissionable premium on the clients’ account at the time of binding and select Reconcile when creating a Direct Bill entry. This allows you to select outstanding transactions and pull them into the General Ledger. It also ultimately ties to the receipt of the commission received.  

However, since you transacted on the clients’ accounts, you probably transacted full term premium. What happens if you get commission in installments? During a policy term, if you are receiving installment commission, you can select Partial Pay’ for a client and enter the commission and premium per the commission statement. Applied Epic will then show premium and commission still due.  

At the end of the term, if there is still a balance, you can select ‘Final Payment’ to fully close the reconciliation for a client. With accrual, it’s normal if there is a leftover balance of a few cents at the end of a policy term. It just depends on when you transacted the premium (off the quote, binder, invoice). The policy premium can differ slightly.  

Receipting Discrepancies

It is very important to enter a General Ledger direct bill commission receipt correctly. Discrepancies can cause several different issues when it comes to the reconciliation/recording of commissions and the financial statements. Enter direct bill commission receipts in the GL accounting month that they were deposited in the bank. That way, you have accurate financial statements and bank reconciliations. Also, know your direct bill accounting methods configuration to make sure you are receipting with the correct workflow. For example, do you receipt commission to the direct bill receivable account, cash on account, or directly to the direct bill commission income sub account?  

Keep in mind: You are not able to void GL receipts. If you have entered a receipt in error, enter a new GL receipt backwards (opposite debits and credits) and then enter the correct GL receipt. To reverse a cash on account receipt, you will need to create a disbursement instead of an opposite receipt to clear the outstanding cash on account PYMT transaction. Then you enter a new receipt correctly. Make sure these are all entered in the same accounting month. You don’t want to cause a discrepancy in the financial statements and bank reconciliations.  

Lastly, check your bank statement and commission statement to ensure that you are receipting the commission deposit to the correct PPE. This will verify that the PPE on your reconciled/recorded direct bill commission matches the PPE on the GL receipt. 

Direct Bill Sweeps Discrepancies

Some agencies offer clients the opportunity to help pay their direct bill policies to the carriers. The agency will deposit the client’s payment into the agency’s bank account and make the payment to the carrier on behalf of the client. This is called a direct bill sweep.  

If this workflow isn’t executed correctly, though, it can cause a discrepancy in the client’s account and/or an out-of-balance situation on the bank reconciliation.  

To avoid an accounting discrepancy, enter the GL receipt to the client’s account when the payment is deposited into the agency’s bank account. Then, enter a premium advance disbursement to the carrier to reflect the payment that will be swept out of the agency’s bank account. You will apply credits to debits when you apply the disbursement to the client’s payment within the GL disbursement. The bank reconciliation will be out of balance if one side of the sweep isn’t entered correctly in Applied Epic.  

Get Help with Applied Epic and Direct Billing

There can be many scenarios regarding Direct Bill processing that can cause delays in your daily workflow and inaccuracies in your financial reporting. Having a better understanding of how discrepancies can happen, how to fix them, and how to prevent them can all help you process direct billing more efficiently and accurately. In turn, you will produce reporting data that you can count on. 

At KiteTech, our Agency Consulting team assists agencies in creating workflows and training users on the importance of accurate reporting and billing.  

We offer a variety of Applied Epic Resources online, including webinars, blogs, and Consulting Corner episodes. Have a look through to find helpful information on all things Applied Epic. 

If your agency needs a partner for Direct Billing processes or has Applied Epic questions, reach out to our team!  

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Buffy Johnson

Agency Consultant
Kite Technology Group

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Kellie Halfpap

Agency Consultant
Kite Technology Group