The workers' comp audit came back with $22,000 of additional premium due in 30 days. What covers it?

A workers' comp premium is an estimate on projected payroll, trued up at the end of the policy year by an audit. If the business grew, or the auditor put staff in a higher-rated class, the adjustment is a real bill. The one that surprises contractors most is subcontractors: any sub you paid who cannot be shown to have carried their own comp gets treated as your employee, and their entire payment is added to your payroll exposure at your rate.

The bill is typically due in 30 days, and an unpaid audit balance is grounds for cancellation. A contractor without comp cannot be on most job sites, which is why this is a deadline and not a negotiation to leave for later.

Ask for the auditor's worksheet. Line by line: which subs were counted, which employees were put in which class, whether overtime premium pay was excluded as the rules allow, whether officers were included who should have been excluded. Then collect certificates of insurance from every sub who had their own coverage during the year and send them in. Audits are revised on evidence more often than people expect, and a revised audit is the cheapest money on this page.

Carriers routinely accept installments on a large adjustment for a policyholder who is current on the new year's premium — a few months is normal, sometimes longer. Ask the agent to request it in writing. It costs little or nothing and it is better than any loan.

What the plan does not cover, or if the carrier insists on payment in full, a working capital loan or a cash advance on your last three to six months of deposits covers in one to three business days. Send the audit statement and the cancellation date with the bank statements; a funder reading a dated insurance bill on a growing contractor is reading a normal request. Borrow the balance, not a round number, and ask for weekly payments that match how your draws land.

Collect a certificate of insurance from every sub before the first check, not at audit time. Report payroll to the carrier quarterly if they offer it, so the estimate tracks reality and the true-up is small. And put a share of every month's payroll aside for the adjustment, because a growing contractor will owe one every year. A line of credit is the backstop for the year it is larger than the set-aside.