An insurance agency's books look simple from a distance — commission checks come in, expenses go out. Up close, they are anything but. Commissions arrive from several carriers on different schedules, each with its own statement format. Some are advanced and can be taken back. Some agencies handle client premium money that was never theirs to begin with.
Getting these right is the difference between knowing what your book of business earns and finding out from a chargeback notice that last quarter's income was not really income. Here is how a competent bookkeeper handles an agency's books.
Reconcile commission statements, carrier by carrier
Every carrier sends a commission statement listing the policies, premiums, commission rates, and amounts behind each payment. Do not just record the deposit. Match each deposit to its statement, and record commission income by carrier so you can see where your revenue actually comes from.
That match is also how you catch missing money. A renewal that should have paid and did not, a policy coded at the wrong commission rate, or a statement that never arrived only shows up if someone compares what was expected to what was paid. Carriers do make mistakes, and they rarely correct them unprompted.
If you run an agency and pay sub-producers a split, record the full commission you receive as income and the producers' share as commission expense. Netting the two hides both your true revenue and your true cost of producing it. If you are a sub-producer paid your share by an agency, your income is what you are paid, and the agency's statements are your support.
Advances and chargebacks
Some lines of business, particularly in life and health, pay commission in advance — a large portion of the first year's commission paid up front when the policy is issued. If the policy lapses or is cancelled within the carrier's chargeback period, the carrier takes back the unearned part, usually by deducting it from future commission payments.
Record chargebacks as a reduction of commission income, not as an expense, so your revenue reflects what you actually kept. And track your outstanding advances separately, by policy and by the date each one becomes fully earned. An agent with a large pile of unearned advances can look very profitable right up until a wave of cancellations. How advances are treated for tax purposes is a question for your accountant, but the books should always show how much is still at risk.
Many agents set aside a portion of each advance in a separate account until the chargeback window closes. Whatever reserve you choose, it only works if the books tell you how large the exposure is.
Client premiums are not your money
If your agency collects premiums from clients and forwards them to carriers — agency billing, as opposed to direct billing where the carrier bills the client — those premiums belong to the carriers. Record them as a liability owed to the carrier, never as revenue. Your income is only the commission.
Many states require premium funds to be held in a separate fiduciary or trust account and not mixed with operating money. Check your state's rules, keep the trust account reconciled every month, and never pay agency expenses from it. A trust account that does not reconcile is a regulatory problem, not just a bookkeeping one.
Track what it costs to write business
Keep agency-specific expenses in their own accounts so they are visible: errors and omissions insurance, license renewals and continuing education, carrier appointment fees, purchased leads, quoting and CRM software, and marketing. If you buy leads, tracking the cost by source next to the commissions those leads produce is the simplest way to know which sources are worth renewing.
Collect a Form W-9 from any sub-producer or independent contractor before you pay them, and track payments through the year so 1099s are straightforward. For payments made in 2026, the Form 1099-NEC filing threshold is generally $2,000, up from $600 in prior years — confirm with your accountant which payees need one. Carriers typically issue you 1099s for commissions too, and those should tie to the commission income in your books.
Evolv Bookkeeping is $199 per month flat, with 1099 prep handled at year end. If your commission records are months behind, cleanup is $199 for each month behind, completed within 2 days and guaranteed in writing. No contracts, cancel anytime. Get an instant quote on our homepage.