The Annual Money MOT: Auditing Insurance, Banking and Card Fees in a Small Firm
Photo: Francisclarke, CC BY-SA 4.0, via Wikimedia Commons
Small firms rarely lose money in one dramatic moment. More often, margin leaks through renewals that are paid without comparison: an insurance premium that has crept up, a business current account charge that no longer suits the firm's transaction pattern, or card-processing fees that have become a composite of terminal rental, gateway charges and compliance fees. None is large on its own. Together they can be material.
An annual audit is not a crude cost-cutting exercise. It is a structured review of whether the firm is paying a fair price for cover and services it actually needs. The aim is to keep essential protection, remove duplication and make fees visible before they renew.
Set a review date, not a resolution
The most common reason small firms fail to review these costs is that no one owns the task. Insurance renews on a fixed date. Bank charges arrive monthly. Card fees are buried in statements. A single diarised review, ideally ten to twelve weeks before the main insurance renewal, gives enough time to gather documents, request alternatives and negotiate without pressure.
For a firm with several policies, a simple calendar entry for each renewal is better than one annual scramble. The same discipline should apply to the business current account and card-processing arrangements, even where there is no formal renewal date.
The annual audit checklist
- Gather the documents: policy schedules and summaries, the latest renewal premium, twelve months of bank statements, merchant statements, terminal or gateway agreements, and any overdraft or loan facility letters.
- List every product and fee: each insurance class, account maintenance charges, transaction fees, cash-handling charges, card merchant service charges, terminal rental, gateway fees, chargeback fees and minimum monthly charges.
- Check regulatory status: for insurance, confirm the insurer and intermediary on the FCA Register and check their permissions. For business current accounts, check the basis on which deposits are protected and whether the Financial Services Compensation Scheme applies. For card services, ask for a full breakdown rather than a single blended rate.
- Compare cover, not just premium: sums insured, excesses, exclusions, business interruption cover, employers' liability, professional indemnity, cyber and legal expenses should be checked against the firm's current activities.
- Benchmark the banking and card costs: calculate the total annual cost and an effective rate. For card processing, include terminal rental, gateway charges, compliance fees and chargebacks, not merely the headline percentage.
- Identify duplication and gaps: two policies covering the same risk, an old terminal still being rented, or cover based on turnover from several years ago are common findings.
- Decide, document and diarise: record what was compared, what was changed and when the next review is due.
Compare cover before comparing price
A cheaper premium is not a saving if it leaves the firm underinsured or excludes a risk that matters. Employers' liability insurance is compulsory for most employers. Professional indemnity may be required by a client contract. Business interruption cover should reflect current turnover and fixed costs, not the figure used when the policy was first taken out.
Firms should also check the excess. A higher excess can reduce the premium, but only if the firm could comfortably meet that cost after a claim. The cheapest quote should not be selected automatically; the right cover at a fair price is the objective.
Negotiation scripts that keep the relationship
Negotiation is easier when it is framed as a review rather than a threat. Useful lines include:
- 'We are carrying out our annual review and have a comparable quote. Before we decide, can you review the renewal premium and confirm whether any optional covers or excess levels could be adjusted?'
- 'Our card-processing effective rate is higher than we expected once terminal rental and gateway fees are included. Can you provide a full breakdown and review the total cost?'
- 'We value the relationship, but we need the total annual cost to be competitive. What can you offer to retain the account?'
- 'Please confirm in writing the cover, limits, exclusions and start date before we proceed.'
Do not cancel existing cover until the replacement is confirmed in writing. A short gap in cover can be more expensive than the premium being challenged.
A twelve-week timetable
Twelve weeks before the insurance renewal: gather documents, list policies and request comparable quotes. Eight weeks before: compare cover and ask the broker or insurer to justify any increase. Six weeks before: negotiate premiums, excesses and optional covers. Four weeks before: make the decision and check that the new cover matches the firm's activities. Two weeks before: confirm start dates and cancellation of the old policy. After renewal: check the first statement and diarise the next review.
Card-processing fees merit a quarterly check, because transaction volumes change. Bank charges should be reviewed annually alongside the insurance audit. A brief quarterly review of statements can catch a new fee or an old terminal rental before it runs for another year.
Common traps
Auto-renewal is convenient but expensive when no one checks the terms. Comparing only the headline premium can hide a larger excess or narrower cover. Duplicated cover across policies is surprisingly common. Old turnover figures can leave a firm underinsured. Terminal rental can continue after a card service has changed. Forgotten direct debits can survive a switch.
The audit does not need to be elaborate. A spreadsheet, a folder of documents and a calendar reminder will do. The value lies in making the costs visible, comparing like with like and asking for a better deal before the renewal date arrives.
