Financial Loss Due to Error

No matter the size of your business, even the smallest accounting mistakes can be detrimental to your operations. In some cases, they can cost you a fortune in damage repair. At other times, they can place a massive hit on your reputation. Armed with the results of a BlackLine study, a recent CFO Daily News article revealed the number one cause of financial mistakes is human error, representing 41% of all accounting mistakes. The consequences of such simple faux pas can spread far and wide in their damage potential. We at Smith Brothers Insurance care about you and your business and want to keep you educated on common accounting errors and how to prevent them from happening to your business.

Watch this video from Do Hard Money which covers what Errors and Omissions Insurance is.

What are the most common accounting errors?
  • An accounting error is an error in an accounting entry that was not intentional.
  • An accounting error should not be confused with fraud, which is an intentional act to hide or alter entries for the benefit of the firm.
  • Accounting errors can include duplicating the same entry, or an account is recorded correctly but to the wrong customer or vendor.
Types of Accounting Errors
  • Error of Original Entry – An error of original entry is when the wrong amount is posted to an account. The error posted for the wrong amount would also be reflected in any of the other accounts related to the transaction. In other words, all of the accounts involved would be in balance but for the wrong amounts.
  • Error of Duplication – Error of duplication is when an accounting entry is duplicated, meaning it's debited or credited twice for the same entry.
  • Error of Omission – An error of omission is when an entry wasn’t made even though a transaction had occurred for the period. This is common when there are many invoices from vendors that need to be recorded, and the invoice gets lost or not recorded properly. An error of omission could also include forgetting to record the sale of a product to a client or revenue received from accounts receivables.
  • Error of Entry Reversal – Error of entry reversal is when the accounting entry is posted in the wrong direction, meaning a debit was recorded as a credit or vice versa.
  • Error of Principle – Error of accounting principle occurs when an accounting principle is applied in error.
  • Error of Commission – Error of commission is an error that occurs when a bookkeeper or accountant records a debit or credit to the correct account but to the wrong subsidiary account or ledger. A payment to a vendor that's recorded as an accounts payable, but to the wrong invoice or vendor is also an error of commission. The error would show as posted to the wrong vendor on the accounts payable subsidiary ledger.
  • Compensating Error – Compensating error is when one error has been compensated by an offsetting entry that's also in error.
Detection and Prevention of Accounting Errors

Keeping track of invoices to customers and from vendors and ensuring they're entered immediately and properly into the accounting software can help reduce clerical errors. A monthly bank reconciliation can help to catch errors before the reporting period at the end of the quarter or fiscal year. Of course, no company can prevent all errors, but with proper internal controls, they can be identified and corrected relatively quickly.

Why does my company need coverage?

To put it very simply, everyone makes mistakes. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect. But, an error made at your business could be costly or even cause you to go under. You can protect your business with an errors and omissions insurance policy. Errors and omissions, or E&O, can save your company from certain customer lawsuits. At Smith Brothers Insurance, we can provide coverage from many insurance carriers, so you receive the Error and Omissions insurance for your budget and needs.

Call us today 860-652-3235 or visit us online at to discuss or review your current policy.


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In business interruption claims, minutia could mean millions

A business interruption (BI) claim is likely to be triggered by either some form of property damage, a cyber event or a product recall/contamination issue. Policies often define business interruption or loss of business income using verbiage like ‘net profit plus continuing expenses’. The latter may include payroll for a determined period. This is known as the ‘bottom-up’ (BU) approach.

An easier method to follow, which ultimately should be reconciled to the BU approach is the ‘top-down’ (TD) method, which projects gross revenue, reduces it for any actual revenue earned during the indemnity period, and then further reduces it by what’s called a saved/discontinuing/non-continuing expense, usually expressed in percentages (e.g., cost of goods sold).

When dealing with certain industries, other records are also warranted (e.g., rent rolls and occupancy reports for condos & co-ops; widget production for manufacturing; visitor attendance reports and weather statistics for theme parks). That gets us to a business interruption value in a nutshell.

BI claim calculations are part science and part art. Most specialists servicing clients’ needs within this niche will have an affinity for and credentials in forensic accounting, which by definition encompasses financial knowledge and acumen and presentation suitable for court proceedings, meaning that another professional should easily understand and follow your analyses, calculations and conclusions.

Although we may give an opinion on a loss estimate, it should not be construed as an “opinion” provided by auditors on financial statements. We merely evaluate the evidence, project a loss of business income, including all pertinent considerations on both a macro and micro-economic basis, as well as utilizing typically two years of historical, detailed, monthly profit and loss (P and L) statements. Tax records are always assessed to verify the accuracy of the reported P and L data.

Five accountants will come up with five different but relatively similar determinations and calculations. It’s about the relevant range. The ‘but for’ thesis and underpinning, such as, “What would the insured have likely done revenue and expense wise but for the loss (had it not been for the fire, flood, hurricane, etc.).” In the U.S., even a claim of $100K is likely to have both an independent and public adjuster involved. The former being employed by and working in the interest of the insurance carrier, while the latter works on behalf of the insured.

Making the complex or complicated simple

Financial statements often include items like one-time charges in detail that need a thoughtful and trained mind.

Complexity is compounded nowadays with COVID-19 and the respective exclusions. Daily sales data will be the best determinant. If sister-stores exist, a correlative analysis may prove insightful; it depends on proximity to loss location — down the block or on the other coast are drastically different and ‘make-up’ would likely come into play if the sister store was down the block and was found to have done better after the loss location went down. A key question here is: Are they under the same policy?

Comparison data sets provide insights but be careful about applying too general of a trend. For instance, one of our clients is a specialty restaurant with limited competition in the immediate five-block perimeter, not to mention an area for outdoor dining. In our due diligence, we came across statewide-based statistics that stated restaurants, in general, have suffered a reduction in revenue by approximately 58%. However, that’s statewide, and although COVID-19 may have impacted the ‘but for’ argument, I cannot objectively say it would be correct to apply such a trend. My point is that it is likely to have some impact, but not 58%!

Here are some steps to follow when you have a business interruption claim:

  1. Get a team and know what’s covered.
    1. CFO/controller/board/risk manager;
    2. Broker and/or adjuster and/or coverage attorney;
    3. Property/cyber/product-recall-related recovery specialists:
      1. Physical remediation & repair;
      2. Forensic accountant to assist and support your internal resources and focus on the claim submission & related developments.
  2. Document everything (and be prepared to support exactly how each claimed dollar is a direct result of the loss event).
    1. Damage to hard assets, losses of inventory, canceled sales orders;
    2. Requests for rent abatements due to repairs or other loss of functionality; and
    3. All delays to reopening outside of your control.

COVID-19 is delaying repairs and related inspections, which will affect the period of indemnity. Insurance companies are paying in other ways beyond business interruption claims, which frequently have pandemic exclusions. Businesses may not get back to square one immediately. It will take time, and this is why extended period coverage may be appropriate. Risk managers should also consider looking for coverage under contingent business interruption policies.

For more information regarding business interruption claims or to request your free business insurance quote give Smith Brothers Insurance a call at 860-652-3235 or visit us online at


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Reducing Your Cyber Risk

As businesses become more dependent on technology, the risk for cyberattacks increase. Cyberattacks pose financial and reputational risks to the business. The cost of data breaches worldwide for businesses of all sizes could cumulatively grow to $5 trillion by 2024. There are many cost effective ways to reduce your cyber risk.

  1. Understand Your Cyber Risks – Businesses are vulnerable to cyberattacks through hacking, phishing, malware, and other methods.
  2. Train Employees – Your exposures can be reduced by having and enforcing a computer password policy for your employees.
  3. Update Software – Routinely check and upgrade major software.
  4. Create Back-Up Files and Store Off-Site – Create back-up files on an external hard drive or on a separate cloud account to help prevent ransomware.
  5. Proper Firewall and Antivirus Technology – Evaluate the security settings on your software, browser, and email programs.
  6. Data Breach Plan – Remind employees to periodically review the data breach detection tools installed on their computers. Ensure employees know if a data breach occurs they must notify the business immediately.
  7. Cyber Security Insurance – Protect your business with the appropriate cyber security insurance to provide protection for the costs associated with data breaches and ransomware.

When your business is in the market for a cyber insurance policy, or looking to renew an existing policy, Smith Brother’s cyber security advisor, Scott Garcia, will consider all the risks your business faces. Contact Scott at (860) 430-3330 or email him at to discuss your cyber liability coverage!

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Beyond 2021: Reshaping your Defined Contribution plan

2020 brought a global pandemic, economic crisis, civil unrest, and record-breaking wildfire and hurricane seasons – 2021 hasn’t started out the best either! Employers are balancing the desire to protect their employees with the need to cut costs, often through workforce actions ranging from suspension of retirement plan contributions to pay cuts to furloughs and layoffs. Employees are juggling essential roles or working from home, often alongside e-learning children. The resulting financial stress from the pandemic alone is amplified in the midst of these other events.

Retirement savings are at risk. More than a quarter of US employers have downsized their workforce through layoffs and/or furloughs. An estimated 10% of employers have suspended or delayed retirement plan contributions. These actions reduce employee and employer dollars going into the retirement system.

Some employees are tapping into retirement savings to cover short term needs. Last year legislation passed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided employees additional flexibility to access their retirement savings without certain negative tax implications. Employees taking advantage of these coronavirus related loans or distributions may see longer term impact on retirement preparedness.

While younger employees have time to get their retirement savings back on track, mid and late career employees may find they need to defer retirement for a year or two or adjust their standard of living in retirement. A 45 year-old saving 7% of his $50,000 salary, and receiving a 6% employer match, may need to defer retirement two years if he stops saving for one year and also withdraws $25,000 to cover short- term expenses.

We are already seeing a shift in retirement, with employees retiring later and transitioning to retirement more gradually. COVID may further this trend. A recent Voya survey found that more than half of employed Americans are planning to work in retirement. Employees are looking to improve their financial security in retirement and create a buffer to protect against market volatility. The pandemic has reshaped “normal” in so many ways. Creating a “new better” applies to retirement plans as well. Employers should take action now to better understand the long-term impact of potential 2021 events on employees’ retirement readiness and broader financial security. The right plan design, employee support, and structure can pave the way to future success.

Understand the impacts. Now that we have started into 2021, it will be important for employers to understand the long-term impact on employees’ financial wellbeing and the potential cost of delayed retirements. Though there are some benefits to an older workforce, an employees’ inability to retire at an appropriate age can lead to higher employer cost and limit advancement opportunities for younger employees, potentially creating more turnover.

Understanding and quantifying these impacts is a first step for employers who want to be in position to drive the best outcomes for both their employees and their business strategy.

Revisit plan design. Now is a great time to take a fresh look at the retirement program. An ideal plan design encourages adequate retirement savings, provides a minimum level of security for employees who can’t afford to save, supports a diverse workforce, and promotes the ability to retire at ages viable for both workers and the company while staying affordable for employers.

Employers who suspended the company match will want to create a plan for reinstatement, communicating to employees in advance so they have time to adjust their contributions. All employers should monitor changes in employee savings and investing behaviors and remind employees to restart or increase their retirement contributions as soon as they are able.

Address financial wellbeing. Focusing on broader financial wellbeing can improve employee financial security, create resiliency to future events, and drive better retirement outcomes. Employers should take steps to identify their employees’ unique financial challenges to make sure their financial wellbeing program is aligned. A range of options exists for addressing most topics, and in some cases, can be integrated with the retirement program.

For example, employees who have emergency savings are better able to weather economic downturns. About 10% of large employers provide access to emergency savings, but recent activity suggests that number could increase. Earned wage access programs, another way to support short term financial security, are also growing.

Consider lifetime income. The SECURE Act requires employers to begin disclosing the amount of lifetime income employees can expect from their 401(k) balances beginning in September 2021. As employees are already looking for sources of guaranteed income in retirement, the new disclosures will likely drive more demand for lifetime income options in defined contribution (DC) plans. Employers can begin evaluating options now and taking steps to help their employees manage income through retirement.

Reduce cost and risk, and weigh your options. DC plan litigation is on the rise – fee related class action lawsuits filed are already triple what we saw during all of 2019. Employers should take immediate action to ensure they have a strong governance structure that is being followed diligently. Check that investment and recordkeeping fees are appropriate. Consider shifting risk and responsibility to experts through delegation of investments or joining a pooled employer plan (PEP), a new type of 401(k) created under the SECURE Act. Joining a PEP can dramatically lower fees and costs for both employees and employers, and relieve employers of many of the fiduciary duties they have today operating their own 401(k) plans. This approach allows employers to spend less time on DC plan management and more time on their business and more strategic endeavors.

Managing through the pandemic and resulting economic crisis has highlighted opportunities for improvement in the current system. Employers can take advantage of lessons learned from 2020 events to improve outcomes in the future. If you are interested in learning more, give us a call at 860-652-3235 or visit us online at

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A Letter From the President- January 2020

Welcome to our first newsletter of 2020. This past week we held our annual State of the Company meeting for our entire team to spend some time together reflecting on 2019 and looking forward to 2020. We ended last year with growth and in the Top Quartile of our industry, remaining one of the Top 100 Brokers in the U.S. A tribute to our people and partners – and a thank you to our clients. I’d like to share a couple themes I feel are worthy to share – not only because you are a stakeholder (or interested enough to read this newsletter) – it may be something to think about for your own business. Along with these couple of themes, I’ve listed the top 10 tactical action items we can expect to invest in: • Delivering on our Client Experience promise and being a Great Place to Work, results in Profitable Growth. • Continuous improvement is a key for us to be able to be more effective with the client experience we deliver, the need for financial performance, and the attraction and retention of the top performing professionals in our industry . 1. We have targeted several areas for process Improvement – using our Quality program and service teams model (LEAP TEAMS) 2. We are advancing our development of our people through a theme of Personal Growth with some emphasis on the power of the brain and a focus on “train your mind”. At our meeting, we engaged a guest speaker, Dr. Jerry Teplitz, who showed us how the mind can be an effective way to enhance your day and life, along with some techniques to use on a daily or situational basis so one is using their mind to their advantage. 3. We had three trading partners sponsor our annual meeting this year – PURE Insurance, Hanover Insurance, and The Hartford. The all had the benefit of attending our annual meeting and our sales meeting that followed – where we spent more time with Dr. Teplitz using the power of the brain to remove fear as a hurdle and gain confidence and resilience. 4. We will have several leadership training sessions in 2020 for our leaders – anyone who has been granted authority in their role to oversee and develop others need to attend these in order to be “management certified” at Smith Brothers. We feel this will bring consistency and alignment to our Servant Leadership management philosophy and consistency across our business as we grow. We believe we can scale this in a way that allows us to grow and not lose our unique culture. 5. One of our sessions will be on enhancing our Employee Development Plans that we use as our number one engagement and development process. We have over 200 of them active with a goal of 100% participation, engagement, and development around enhanced two way conversations – peer to peer – with aligned specific goals and resources for all team members. 6. We have several new people who have joined Smith Brothers recently and will continue to bring in talent as we invest in succession and growth. 7. We have our eye on one to two acquisitions in 2020. We will be picky and conservative at todays asset prices. In our annual meeting, we discussed the Debt Cycle and where we may be as an economy in the economic cycle and our model of moderate debt to weather future storms and be prepared to take advantage of our competitors who have been less people focused and less disciplined. 8. Managing a clients Total Enterprise Risk is at the core of our differentiation. In 2019, over 22% of our new business came from current clients and our retention was over 95%. We get the interdependency of sales and service – not one better than the other. 9. We held our annual meeting via video conference live for all of our regions to tune in and we held it in our new Growth Room – a room dedicated to the theme of “always growing”. A businesses profitable growth and a persons personal growth are part of the vibrancy and health of being well. 10. We will give back to our community in the spirit of Helping Others as we always have. Situational help and donation of time and dollars will be continuous for us. I am always glad to – and enjoy – exchange of strategies and best practices with any business or family. Be well in 2020! Be Sure Joe

A Letter From the President- December 2019

On this last month of the year 2019, I want to start by thanking all of those who have a stake in Smith Brothers – our team, our clients, our community, our trading partners, and our financial partners. Smith Brothers works extremely hard to be a company that performs its purpose of Help Others in a way that optimizes all of our stakeholders – not one at the expense of another. This often makes work a lot “harder” and takes extra effort and creative thought that constantly seeks those “third” solutions to get to win/win. Our team members are the key to making this all happen consistently and as we grow not to lose the special culture we all have created. They work hard to see ahead, align, stay client focused, and investing in themselves to grow personally as well as professionally. An amazing thing to watch. We will end 2019 with another solid year financially ranking in the Top Quartile of our industry. Our size makes us a top 100 Broker in the US and growing double digits annually (for the last 20 plus years). We have chosen to take a path that can show for profit businesses can do good, be good people, be kind to others, help others, care for others – and yes – be top performers in their industry – financially and operationally – allowing for optimizing all stakeholders and re-investing in ourselves for sustainability. Businesses do not have to sacrifice goodness for value creation. Caring and being kind to others is a powerful force. Not only are you choosing to conduct yourself with the contribution of adding value to someone else’s life, you are feeding the roots of happiness within us individually. In a society where individual achievement and focus on individual “feel good “ is so prevalent, research shows, caring and kindness matter more to “feel good”. Research by Dr Richard Weissbourd, a Harvard professor, indicates people focused on caring for others and having a balanced understanding of achievement and individual happiness tend to be healthier, happier, and more successful than those focused more on achievement and individual happiness. I am a believer that taking care of yourself is critical in making sure you can take care of others. You cannot serve from an empty vessel. What is note worthy is taking care of oneself alone won’t do it. It isn’t always easy as the world can be a nasty place. I saw a quote the other day – “be kind to the unkind”. Not necessarily easy, yet probably can change the world if we all started doing it. ‘Tis the season to be kind to others – yet make it a point to carry it through 2020 and make it truly a “Happy New Year”. Be Sure Joe

BroadStreet Partner Smith Brothers Featured at the Yale School of Management: Business Succession

Our partner in Connecticut, Smith Brothers, was recently featured as the subject of a case study at the Yale School of Management. Joe Smith, CEO of Smith Brothers in Glastonbury, Connecticut has built a reputation as a forward-thinking entrepreneur, and Yale University approached him to provide his perspective on strategies for business succession and M&A. The case tells the story of Smith Brothers prior to partnering with BroadStreet. They were (and continue to be) a growing, profitable, Top-100 Agency, actively making tuck-in acquisitions in the Northeast. The case narrative builds up to a strategic decision for Smith Brothers: How would the management team handle succession in the context of the rapid consolidation underway in the insurance brokerage industry? The leaders at Smith Brothers were considering their options: Stay the course, remain independent, grow organically and acquire opportunistically…but defer action on ownership succession; Sell all or part of the business, create liquidity and accelerate growth…but risk cultural and operational disruption with a new partner; Arrange for internal ownership and maintain Smith Brothers’ unique culture…but limit investment in growth initiatives. We know that the case study has a happy ending. Since partnering with BroadStreet in 2014, Joe Smith and his team at Smith Brothers have continued to prosper: they’ve made multiple tuck-in acquisitions, grown organically, added new owners and continue to consistently deliver on their “Be Sure” promise to their colleagues and clients. Smith Brothers was considering three mutually exclusive options. What they found with BroadStreet, is that agency owners don’t give up culture in exchange for partnership; it doesn’t have to be “either / or”. Our co-ownership approach succeeds in delivering the best attributes of each option and eliminates the negative consequences for agency owners facing the same alternatives that Smith Brothers considered: our partners maintain the advantages of staying the course, accelerating growth with a partner and perpetuating ownership internally. It’s a big promise, but one that we’ve made, and kept for each of our 22 Core partners. We’ve been helping agency owners navigate succession and growth for over 15 years. I encourage you to contact me to begin a conversation about becoming a BroadStreet partner.

A Letter from the President

During the month of June, Smith Brothers Insurance piloted an Emerging Advisor Intern Program with two college students – Ronan Jacoby (rising Junior at Wesleyan University) and Grace Smith (rising Sophomore at Babson College). Ronan and Grace excel in the classroom, are athletes who understand the importance of team, collaboration, and communication – and they spend time giving back to the community. Our pilot program was intended to provide young people exposure to our industry and our agency through a short and intense curriculum of learning, doing, and shadowing. With help from several of our of carrier partners, clients, and Smith Brothers team members, Grace and Ronan learned about risk, how the insurance industry works, sales, service and operations, and the importance of company culture. They visited with our carriers, attended client meetings, researched client prospects, participated in team meetings, and attended “soft skills” training (communication styles, conflict resolution, personal branding). They contributed to an external marketing team, demonstrating their skills and adding to our culture with their energy and work ethic. In their summary presentation about their experience, they shared the following key takeaways:
  • Insurance is NOT boring and this industry offers lots of opportunities
  • The importance of building strong relationships (with yourself and others)
  • The impact a strong culture has on a company and it’s people
  • Big Data is key
  • Soft Skill Development (Grit, Knowing your Communication Style and those you work with, Emotional Intelligence)
In the presentation they made about their experience, the following stood out to me – “One of our favorite parts of the experience was the soft skill development we received. We went through a number of different learning opportunities – Communication Styles, Conflict Resolution (win/win), Personal Branding, Interview Preparation, Mock Interviewing, as well as other opportunities that helped set us apart from our peers in internships where there is not a reinvestment in them. The reason we thought the soft skill development was so important is because we feel it is something many people assume individuals have, yet, if you never work on them, there is a good chance the full potential of an individual is not met.” We look forward to having Ronan and Grace back next summer for our Emerging Advisor II program and welcome in another group for the Emerging Advisor I program. Be Sure. Joe
Start saving money on your commercial insurance now. Call 860-652-3235. For more information on business liability insurance, visit: Smith Brothers provides Auto/Car Insurance, Homeowners Insurance, and Business/Commercial Insurance for all of Connecticut, Massachusetts, New Jersey, New York, and internationally. Smith Brothers Insurance LLC 68 National Drive Glastonbury, CT 06033 860.652.3235
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Letter from the President – April 2019

I recently attended the Travelers Leadership Council and wanted to share some work the Travelers Institute is doing on distracted driving. This public policy and thought leadership division of the Travelers created a symposium series, Every Second Matters, aimed at raising awareness about distracted driving risks through events on college campuses across the United States and Canada.

According to the Travelers Institute, “Each day nine people are killed by distracted driving, leaving their stories unfinished.”

This month I am attaching items from the Travelers Institute website:

1. The first is an article titled Everyone Can Play a Role in Preventing Distracted Driving. This quick and important read gets you thinking about your own distracted driving habits, the rise in accidents, and the increase in auto insurance rates. According to this article, “studies have shown most people believe distracted driving is not their problem; it’s the other person’s problem.”

Everyone Can Play a Role in Preventing Distracted Driving

2. Two links to the Unfinished Stories or Phil LaVallee and Shreya Dixit – both were killed by distracted drivers and never got to finish their stories.
The Route: Phil’s Unfinished StoryThe Stage: Shreya’s Unfinished Story

Please share with your kids – your family – your employees – your neighbors and your network – let’s make the stigma of distracted driving not acceptable in our society so we can stop Unfinished Stories caused by distracted driving.

Be Sure.


Letter from the President – February 2019

I’m proud to let you know that last month, Smith Brothers was recognized
by Connecticut Associated Builders and Contractors (CT ABC), as it’s 2019 Associate Member Of The Year. This recognition is awarded annually to companies that enhance the association through participation and involvement.

This award results from our significant involvement in the construction
industry in CT over the last several decades. With our industry engagement we have gained incredible experience and expertise in Risk Management, Surety, and insurance needs of contractors. Many of our great people participate and serve to help deliver on ABC’s mission. We do this through Board and Committee memberships, as well as participation in ABC’s Emerging Leaders program. We have volunteered our time for education sessions, event sponsorships, and programs with carriers and Surety’s tailored to Contractors.

Smith Brothers is highly supportive of the construction industry. This
industry is made up largely of entrepreneurs who take risk every day to
advance their companies and drive economic growth. Many are family owned or closely held private organizations that create, innovate, and give back to their communities. For this, we are very proud of our involvement and appreciative to be recognized for our contributions.

If you would like to learn more about how Smith Brothers Construction
Practice can be of value of our company, please contact Tom Formica at or 860-430-3259.

Be Sure!