If a Client has decided to finance the cost of the annual Insurance, the Finance Company may charge interest and fees on the loan. This happens with most private brokers, whereas insurance companies like iCare (Workers Compensation) and Industries Guilds allow periodical interest-free instalment payments. 

When Insurance is financed through a Broker (such as Premium Funding), you will need to obtain both loan documents and Insurance invoices from the Client.

The loan documents should include:

• A Summary of all Insurance invoices included in the loan;
• The total of payable Annual Interest;
• Any Administration fees and/or other borrowing costs.

The Chart of Accounts in Xero should also include two Liability accounts:

• Financed Insurance #insurancetype or #brokername
• Financed Insurance #insurancetype or #brokername Payable Interests

Record the Loan Interest Journal

1. Check the total of payable interest and admin fees on the loan paperwork
2. In Xero go to Accounting > Manual Journals
3. Click on [New Journal]
   
   è  The New Journal screen opens
   
   
   
   
4. Select/Enter the following details
   • Narration > Type: Payable Interest #insurancetype
   • Date > Type the date of the Loan
   • Amounts are > select No Tax
   • Line 1: Accounts > Select the Financed Insurance #insurancetype or #brokername Payable Interests account and post the total value of the annual interest in the Debit column
   • Line 2: Accounts > Select the Bank Charges Expense account and post the value of the Admin Fees in the Debit column
   • Line 3 Accounts >Select the Financed Insurance #insurancetype or #brokername Payable account and post the journal balance in the Credit column
5. Click on [Post]