Home > Operations > Allocating Expenses to a Voyage

After you commence the voyage and enter port activities and expenses, you can see the Voyage Profit/Loss and the TC/Equivalent at any time in the voyage P&L panel.

The voyage, from load port to load port, is the unit that is central to accounting. Voyage revenues and expenses are allocated to the voyage, which is straightforward for freight, port expenses, demurrage, and miscellaneous invoices. However, bunker costs and Time Charter hire expenses can be difficult to tie to a voyage. You are paying upfront, but the expense might cover several voyages, or there might be multiple payments for one voyage. These expenses go to inventory accounts and need to be allocated to a voyage. Voyage Period Journals enable you to allocate your prepaid expenses, such as hire and bunkers, to the proper expense accounts.

Bunkers

Because fuel is generally used on more than one voyage, its cost must be allocated to each voyage. The method of allocation is an accounting decision. The allocation depends on the Bunker Calculation Method, the method of valuing the fuel onboard, which is selected in the Voyage Manager. The calculation happens automatically, as part of the P&L.

Example

You buy 1,000 MT of IFO at $400 (= $400,000), then 600 MT at $500 (= $300,000). You consume 700 MT on a voyage. How are costs allocated to the voyage?

• AVE = Average method: The weighted average cost is (Total Initial Bunker Cost + Total Lifted Bunker Cost) / (Initial Qty + Lifted Qty). In this scenario, $700,000 / 1600 = $437.50/MT. Multiplied by 700, your voyage bunker expense is $306,250. Many companies use this method, but it is not fair if bunker prices are high during a voyage when that voyage might not even use those bunkers.
• TBM = Tramper Business Method: With this method, you buy all the inventory at the beginning of the voyage and sell all at the end, so you know the exact cost for the voyage. The consumption is calculated. You might use this method for a Time Charter In or Out that is delivered and redelivered with the same amount, or if you just want to override all values.
• FIFO = First In First Out (default for new Voyage Estimates and Fixtures): FIFO treats bunkers as an asset and depletes the first asset before going on to the next. Starting with the oldest, you use 700 MT at $400/MT, for a total cost of $280,000. This is the most common method.
• LIFO = Last In First Out: Starting with the most recent, you use all 600 MT at $500/MT (= $300,000) and 100 MT at $400/MT (= $40,000), for a total cost of $340,000. The reason for using this method is that it defers revenues when prices are going up, so you can maximize expenses currently and defray savings until later, for a tax advantage.

Of course, you do not start a voyage empty, so previous inventory is also taken into account; this is a continuous process. For that reason, you want to set this option once and not change it, even though there might be an advantage one way or another if the market goes up or down.

As the voyage progresses, you might buy more fuel; if you do not use it on this voyage, it does not affect this voyage's costs. If you change the voyage, the change in fuel needed is estimated. When the voyage is completed, and the Completed check box is selected, the accounts can be reconciled. On the Voyage Cost Allocation form (enabled by configuration flag CFGEnableVCA), select the Post Bunker Cost check box to send a message to Financials to allocate the bunker costs to the voyage.

To get the most information about bunkers, see the Bunker Details on the Voyage Profit & Loss Report. In the Voyage Manager, click  and then click Voyage Profit & Loss Report. Select Details and Bunker Details and then click OK.

Posting Bunker Costs

You can post bunker journals from Voyage Period Journals in Financials. Security access can be restricted with Module Rights so that, for example, only Operators can post Voyage Bunker Period Journals.

When posting bunker costs, a single Source Code is used by all bunker types: VBNK.

• One Journal Entry is created for all bunker types, rather than several individual journals.
  • When configuration flag CFGItemizeBunkerJournal is enabled, instead of being aggregated per fuel type, bunker journals are generated in the breakdown level.
• When filtering the Financials Lists, selecting Voyage Bunker Cost displays all relevant records, regardless of the bunker type.
• If Invoice Approval/Posting/Reject Types are enabled in User Properties (Object Rights tab), there is no need for individual permissions per bunker type; one permission is sufficient.

When the Voyage Period Journal Entry is posted, it appears in the Posted column in the Voyage Manager under Bunker Expenses. If any changes are made to the voyage that impact the bunker expenses, and they have already been posted, the difference is calculated, which can be posted.

Bunker Breakdown Example

Time Charter Hire

If you Time Charter In a vessel for a year, you might use it for several voyages during that time. Because you are paying a daily rate for the vessel, hire is allocated on a time basis. However, if you are paying in 15-day increments, those might not line up with voyages.

Using a balance sheet and paying every 15 days, for a 60-day voyage, you can then use a Journal Entry to associate those four payments back to the voyage.

You can post TC In Hire from the Voyage P&L, using the Voyage Period Journals button, or from Voyage Period Journals in Financials.