Being proactive is the key to a painless audit
The word audit can strike fear in the in the heart of any business owner. However, educating yourself and your bookkeeping staff on the process and keeping good records throughout the year can go a long way in calming any anxieties. We are happy to give you the information you need to accomplish this.
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The audit will pertain mostly to General Liability and Workers’ Compensation. You insurance policy premium is based on your estimated work, payroll, and subcontractor payments for the coming year. As tempting as it is to underestimate your work projection to get a lower premium, we advise against that. You’ll pay for it on the backend. Work up as accurate an estimate as possible.
The best offense is a good defense. When facing an insurance audit that means diligent recordkeeping and insisting subcontractors comply with your requirements. Doing so achieves one of the most important goals of any audit: a happy auditor. Auditors hold a lot of power so accurate, up-to-date documentation keeps you in good graces.
There are several recordkeeping tactics that will benefit you as a contractor and assure a smoother audit. Detailed payroll records are important. Overtime and double time should be broken out in the payroll journal. Also be sure to account for severance and sick pay. There are division-of-labor rules of which you should take advantage. These and other tipsare explained fully in our video.
Subcontractors also have recordkeeping requirements. We recommend you only work with subcontractors who providecertificates of insurance, and that you keep them on file and updated. It’s also important that subcontractor invoices break down labor vs. materials
What the auditor wants
The auditor will request to see the following records:
Payroll records (gross wages and overtime)
- QuickBooks payroll summary
- Manual payroll register
- QuickBooks vendor summary
- 1099 summary report
- Cash disbursement journal General ledger
- Checkbook register
- Bank statements
- Certificates of Insurance
- Tax documents
For articles and videos on other topics or to receive a quote, please visit us at Sadler Contractor Insurance.