Ship Agency

The treatment of insurance deductibles is one for owners to decide.  Sometimes costs which are not recoverable by reason of the deductible are permitted to lie where they fall, probably as extra maintenance/repair items. Otherwise the budget can assume one or more insurance claims will arise in the year and so ensure that appropriate deductibles are allowed for. Here one includes superintending expenses, renewable dues, subscriptions and fees including agency costs where applicable for “owners’ items” and communication costs.  Also shown under this section would be the management fee assuming the vessel is operated under contract by an independent ship manager. Where the ship management is an in-house department, a prudent owner will calculate the cost of running the management department and decide upon an appropriate percentage to be apportioned to each ship in the fleet. Once the budget estimate has been discussed with and agreed by the owners, a cash flow forecast is prepared based on the budget.  The cash flow forecast has been divided into monthly periods and the amounts expected to be called by the manager each month are estimated.  The monthly amounts will vary depending on for instance when insurance premiums fall due or when drydockings are due to take place.  Notes provide this information which may also show other variances from the original proforma.  In this case the crew wages are due to increase in July making the cash flow crew costs $9,000 higher than originally expected.  In a real situation the budget would then be revised to allow for this change. It is common practice in the case of independent managers for the cash flow forecast having been agreed by the owners to form the basis of a monthly funding requirement for the managers.  This enables the managers to pay the crew and to settle bills received for supplies and services on the owners’ behalf.