I, like many others, find myself occasionally sharing my home office with a significant other.
My husband is an insurance broker in Australia, for many years a majority of his clients were Tradespeople.
One day, I overheard him asking a trade client “what is your estimated annual turnover?”.
Sheer curiosity from my Accounting & Bookkeeping days got the better of me, and later that day, I asked the question of “why?”
He explained that “the insurers require this to rate public & product liability premiums”.
This took us down a rabbit hole of questions:
Q: Do you receive copies of the company’s financial reports?
A: Not always.
Q: Do you request a 12-month cashflow forecast?
Q: What if the figure is wrong, won’t they be underinsured?
Q: Do you require the asset registers?
The questions did not end here, but I think you get the point.
So here are the things I learnt about insuring a trade business:
1. Sole Traders vs Businesses
Both businesses and sole traders are required to carry certain insurances. For example, all tradespeople need Public Liability. Tradespeople could be denied access to a job site without this. When a business hires subcontractors, the business should make sure each subcontractor has their own Public Liability cover.
If you are a business with salary employees, it is mandatory to have Workers Compensation, however Sole Traders are not eligible. Alternative covers such as Personal Accident Insurance can be obtained.
2. Motor Vehicle vs General Property
General property covers things like tools or portable devices, and as you may assume, Motor Vehicle covers cars.
Motor Vehicle insurance does not necessarily cover everything inside the car, if there was a claim.
3. Premiums can increase as the business grows
I know this sounds obvious, but it is not just about the turnover.
The number of staff, cars, devices, phones and stock could all have an impact on the insurance premiums.
4. Understanding of the business and financials is essential
Below are some items that need to be declared when applying or renewing policies:
- 12-month Turnover
- Estimated turnover for the upcoming 12 months
- Number of staff
- Subcontractor wages
This information is general in nature, and it could be worth going down your own rabbit hole.
As Trusted Advisors, there are some key things you can do to take your industry expertise to the next level:
Find out what insurance policies they have, when these policies renew, and mark your calendar.
Prepare for report requests.
Partner with an Insurance Brokerage. If you notice fluctuations in your clients insurance fees, refer them to a broker for a health check.
Make sure your trade clients have access to accurate and timely data, not just at renewal time.
Access to job data and WIP reports are imperative to ensure they are not underinsured.
Using NextMinute, you can help your clients budget effectively, track costs, employees, and subcontractors, and see their profit margins. Our WIP and Backcosting reports will show how each job is tracking. By comparing year to year, you can identify growth in their business and guide their future decisions. NextMinute will seamlessly sync to Xero for sales invoices, supplier bills and timesheets.
Using an expense management tool like AutoEntry or Dext not only captures receipts, but acts as a filing system for proof of asset purchases.
All of this information syncs back into Xero to collate the financials and provide accurate financial reports. It’s not just about streamlining the administrative processes, but will also guide the bigger picture business decisions.