Best Practice in Ships Financial Management

While Finance and Accounting departments normally do not have much influence on a company’s financial performance directly, they play a huge role in providing accurate data and thereby enabling other departments and the management to make the right decisions. During 2013 GL and Fraunhofer CML experts conducted a study involving about 100 ship managing companies across the globe to find out what they are doing to improve their operations and what they consider as “best practice” in the industry.

2014.03.26 - Best Practice in Ships Financial Management

On top in the current financial situation, having solid and true numbers produced and reported to banks and investors is vital. According to the GL and Fraunhofer CML, banks reported that the current state of Financial Management in many shipping companies has room for improvement, but the ability of providing accurate and consistent figures often plays a role for them in investment decisions.

Despite the stated importance, only 45% of the respondents actively look at best practice measures in Finance measures, of which again the majority are process and IT measures (55% of respondents each) while organizational measures this time are last (50% of respondents) related. This is not corresponding well to the importance and mid-term challenges seen in the Finance area, which ranked 3rd in this study. However, among the respondents finance staff had the smallest representation, which might distort this picture a little.

In summary the findings from the interviews done by GL and Fraunhofer are:

  • Finance teams are not well integrated into the operational business, which is more and more seen as problematic. One respondent stated a possible cause and solution: “Managers with field experience should be employed in finance.” The separation not only has an organizational or cultural dimension but is also caused by disintegrated processes and systems.
  • The complexity build up in the tooseparated Finance departments is historically grown with many businesses and needs to be reduced, which will help also the re-integration into the business. We have seen chart of accounts with 1,000 and more accounts for relatively “small” businesses.
  • State-of-the-art process supporting and data collecting and reporting systems have found only little use so far. Many small local providers built accounting systems 10–15 years ago which are still in use. The large ERP suites are not shipping specific. Modern systems would not only enable more reliable numbers in less time but also help integrate finance processes with operational ones.

Based on the interviews of this study and research conducted by GL and Fraunhofer, the summary of key elements of best practice in Financial Management are:

  • Integrate Operations with Finance
  • Simplify and harmonize the accounting structures
  • Centralize the invoice registration process
  • Harmonize and automate reporting
  • Invest in cash management procedures

The full report developed by GL and Fraunhofer CML can be found by clicking HERE and contains many interesting findings for other aspects of Ship Management such as Technical, Crew, Safety & Quality.

Leave a Comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: