Joint Venture

As mentioned at the outset of this lesson, different companies will each have their own procedures laid down for entering, checking, authorising and paying accounts but however this is done it leads on to the final all-important reporting stage of the managers’ function. The test of a ship manager’s costing skill is contained in the budget/actual analysis statement.  This is actually prepared either monthly or quarterly as a record of management performance. The budget figures appear in one column, the actual costs incurred in a second column, and the difference (perhaps with a percentage variance calculation) in a third. The frequency of these statements is a matter for discussion and agreement between owner and manager. Whilst a monthly analysis is said to keep the manager on his toes, quite small differences in payment dates can lead to large and misleading fluctuations in costs. On the other hand, whilst a quarterly statement eliminates many of the fluctuations, if the analysis is being used as a sensible management tool, such a delay may result in problem areas not being identified promptly enough.  Monthly statements combined with a cumulative analysis as illustrated probably provide the best compromise solution. A list of figures, however, is not sufficient.  Managers must support their analysis statements by a reasonably detailed commentary on all significant variances. The ideal relationship between owner and manager should resemble a joint venture or partnership, featuring an honest, open approach; the manager should never try to conceal difficulties but be prepared to discuss them with the owner with a view to finding the best solution.  Used properly, the analysis statement can frequently provide early warning of a ship’s operating problems, so that steps can be taken to avoid a deteriorating situation. As stated above, the owner will look to the ship manager to provide him with essential information to enable the correct commercial decisions to be made.