It’s just not fair! Can’t tell you how many times I’ve heard someone say that about a workers compensation audit problem. Sometimes they’re right…sometimes they’re wrong…and sometimes the truth lies in between!
We were recently contacted by a contractor who operates their business as a sole proprietorship and in doing so they run their business through their personal checking account. During the physical audit of their accounting records the auditor discovered a payment made to the clients hairdresser. Please understand…this client is a construction contractor…they build things! The auditor, while at the contractors place of business, called the hairdresser to verify the payment as shown in the check register. The audit was then completed and the auditor left the business.
A few weeks later the contractor received his audit statement and some supporting paperwork from the insurance company. And guess what! Upon closer review the contractor found where the insurance company had included the payment made to her hairdresser in the workers comp payroll base for calculating their audit premium!
Wow! Strange things happen when you run your business out of your personal checking account! What about that payment to the newspaper boy?
Lesson Learned: When it comes to workers comp audits, you have to watch the details! Oh yea…if you’re a sole proprietor…think about keeping your business checking account separate from your personal one. Do you really want an insurance company auditor nosing around your personal account? It just makes things simpler!