Volga Dnepr Airlines (UK) Ltd
Industry : Outsize & heavy cargo
market
Scenarios : Accounting Procedures
Company background
Volga-Dnepr operates a fleet of ten AN-124-100 "Ruslan"
aircrafts, the largest freighter in the World. The aircraft has no rivals
due to its exceptional capabilities. Each aircraft can take a 120-tonne
payload and has a cargo hold of 1,100 cubic meters. The airline offers
delivery of outsize and heavy loads to anywhere in the world and also
support for complicated industrial logistics programs. Its customers include
Government Agencies, The United Nations and SONY. Typical consignments
include; heavy industrial equipment, oil and gas equipment, aerospace
products, wheeled and caterpillar heavy vehicles, cars and large
consignments of automotive spare parts, stage equipment, to support world
tours of pop and rock celebrities and large consignments of general cargo.
The Selection Process
The Volga Dnepr Group were using SAP R/3 as the main ERP
package at its Headquarters in Moscow. However, Volga Dnepr UK had been
using Sage Line 50 since the company was established in 1999, but were
struggling with two main limitations of the software. These limitations were
to do with the very limited multi-currency functionality and reporting
capabilities. The company were using Microsoft Excel spreadsheets for all
their management reporting. However, following the successful implementation
of Navision Financials at a partner organisation, Navision was chosen to
provide Volga Dnepr UK with an accurate management information and cost
analysis tool.
With Headquarters in Moscow many of the key personnel for this project were
Russian-speaking, causing a potential language barrier for the parties
involved. However, Anglia Business Solutions were in the unique position of
having a Russian-speaking consultant available to drive the project and
ensure that the business processes and requirements of all parties were
fully explained and understood both in English and Russian.
A Windows 2000 Network Audit was also carried out prior to commencement of
the project to analyse the current network structure, identify any
configuration issues and make recommendations to ensure that the
infrastructure could accommodate and grow with the new Navision Solution.
The Business Solution
Each flight will incur costs that can be categorised as direct or variable.
Direct costs that occur for every flight include fuel, landing charges,
handling costs, parking or navigation. Variable costs can include aircrew
allowances, accommodation or phone call charges. These costs may or may not
be charged for a particular flight. Returning aircrews are required to
provide ‘Flight Operational Returns’ which allow the estimation of costs
such as fuel and the charter price. However, Volga Dnepr have a specific
problem in that it often takes airports and other suppliers anything up to 9
months to invoice for services provided and it is not possible to keep
flight revenue information on a Work in Progress account for that length of
time. These Figures need to be shown on turnover accounts.
In order to obtain a realistic picture of how flight revenue and costs
balance, Volga Dnepr were using a clumsy method of cost accruals. Flight
cost calculations were made based on historic data contained in their
Commercial Calculator database, and fuel costs estimated from information
given on the Operational Flight Returns. Once the flight had taken place,
these “virtual” costs were then registered on a Flights Accruals account.
Once supplier invoices were received a lengthy admin process was required to
replace the accrued costs with actual costs.
The job costing functionality forms the backbone of this Navision Financials
solution. The existing Commercial Calculator database wasn’t structured for
accountancy use, so bespoke tables were created in Navision to mirror the
Commercial Calculator functionality. Over time the use of Commercial
Calculator for the estimation of flight costs will be totally replaced by
the use of live data from within Navision.
Fig 1. Job Card / Flight Costing Input Screen
Once a flight contract is signed, a flight job card is created. A sales
invoice can be produced which will register revenue for the job. The system
automatically creates entries in the General Ledger for all nominal accounts
involved, in the Sales Ledger against the customer, and in the Job Ledger
against the job. Accruals are entered in Accrual Journals; debiting the
appropriate General Ledger cost account and crediting the Flight Accruals
account. Accruals entries are completed with regards to a particular
stopover airport, which are represented in Navision by Phases. Users can
input from a pick-list the airports that aircraft will visit during the
flight.
When invoices are received, the posting routine checks whether there has
been accruals posted on that particular cost account and, if found,
automatically reverses them. Thus Accruals are replaced with actual figures.
This solution allows Volga Dnepr to analyse cost variances per supplier as
well as per job.
All routine accounting procedures are performed using standard Navision
functionality provided by the General, Sales and Purchase Ledgers.
Accounting reports, such as Aged Debtors and Balance Sheets are produced
using standard Navision reporting or user-defined Account Schedules.
Navision also has the flexibility to meet the reporting requirements
requested from Volga Dnepr Group Head Office in Moscow.
Data ports were created to migrate existing customer and account information
from the redundant SAGE system.
The Business Benefits
The business benefits achieved by this Navision Financials solution are
3-fold.
Using Navision multi-currency functionality, Volga Dnepr can now accommodate
transactions in any currency without having to use an additional conversion
tool, greatly reducing administration.
The reporting functionality within this Navision solution facilitates
greater visibility of flight-by-flight operating costs and revenue, as well
as being able to analyse costs per airport (phase) or supplier.
Use of administration resources has also been significantly reduced by the
automation of the accruals reversal process, and the speed with which job
quotations can now be produced using live data. This allows Volga Dnepr to
devote more time to pro-active areas of the business such as customer
relationship management and service excellence.
“This Navision Solution means that we can see profits from individual
flights without waiting months for the invoices to be received”, comments
Derek Wade, Financial Director for Volga Dnepr UK. “We now have extremely
efficient business processes, a clear view of our performance and reporting
functionality to satisfy both our needs and those of our Head Office in
Moscow.”
Wade continues, “The added bonus of Anglia having a Russian speaking
consultant was “the icing on the cake” to remove the language barrier that
existed during the initial discussions with my Russian colleagues. The
continued service and support that we receive from Anglia is outstanding.”
Services Required
Navision Solution Model
Windows 2000 Audit
Project Management
Business Consultancy
Navision Bespoke Design
Navision Programming & Testing
Navision Financials Integration & Testing
Ongoing Maintenance & Helpdesk Support
Software & Hardware
Navision Financials