From the Bridge: Budget a priority for concise refit invoices

From the Bridge: by Lucy Chabot Reed

Myriad factors must be balanced when a yacht captain manages a refit, and chief among them is the budget. Once a scope of work is approved and a budget authorized, captains and crew monitor shipyard and vendor work, ideally reviewing progress in incremental steps along the way.

More important than proposals and estimates to many yacht captains are the invoices received from both the shipyard and subcontractors. Not only do they track progress and update the budget, they double as important records of maintenance.

We asked a group of captains gathered for our second annual refit-focused roundtable discussion at the Refit Conference in Ft. Lauderdale what works best when it comes to invoices, those often flimsy pieces of paper that carry much weight.

“I did a refit at a yard in Jacksonville that was probably the easiest invoice ever to be received,” one captain said about a 10-week, 25-year Lloyd’s survey at BAE Systems Ship Repair. “You went in with a work list and they gave you a fixed cost on each item. This was approved by the owner. You would get a weekly report showing each one of your repair items. On the right side, you would have colors — red, yellow, green, waiting to be started, under way and complete — with the dollar figure beside each one of what money had been spend.”

“Our procedure with Derecktor was very close to that,” said another captain who has not only been a yacht captain but also a shipyard manager. “It was basically an Excel spreadsheet and we would do a progress payment every two weeks. Each week, I would get the latest edition of that Excel spreadsheet. Although it wasn’t color-coded, it would show me the amounts that had been billed to that job order number, and at the end of the sheet was either a blank space for a time and materials project or a figure, which is the figure they had given me. … I felt that was the clearest I’ve dealt with.”

Individual comments in these discussions are not attributed to any particular captain in order to encourage frank and open discussion. The attending captains are identified in an accompanying photograph.

When it comes to smaller shipyards and subcontractors, however, sometimes invoices aren’t so good. They aren’t detailed enough, the captains said, often lacking even the basics of phone number and payment information not to mention a breakdown of labor hours per specific task.

“We need to be able to determine what has been done and what you are paying for as opposed to what was originally proposed,” a captain said.

Attendees of The Triton’s March From the Bridge lunch were, from left, Herb Magney, Mike Mullen of M/Y Relentless, W. Tucker Yingling, Don Anderson, Martin Secot of M/Y Arthur’s Way, Wendy Umla (freelance), Bill Hipple of M/Y Lady Kath, Rusty Allen of the Natita fleet, Glen Allen of Fleet Miami, Ron Gonsalves of M/Y Red Pearl. PHOTOS/DORIE COX

“The planning that we put into our projects helps us a lot,” said another captain who uses a software program called SharePoint from Microsoft to create purchase orders. “We keep a running yard control sheet. We know every job that we want to do, pretty much. We go through the entire list with the yard. There’s a purchase order attached to each one of those jobs and that’s the only way it gets paid. I’m finishing a $3.5 million refit at Derecktor’s right now and we’re within $100,000 of where we thought we would be.”

So how much detail is required on an invoice? These captains made the distinction between small and large jobs, noting that the larger the job, the more detailed the invoice needs to be. That small-large definition is based pretty much on value.

“If it’s a simple job, you don’t require such a detailed invoice,” one captain said. “To me it’s all dollar value, it’s all cost.”

So, the bigger the job, the more detailed the invoice?

“Yes,” this captain agreed. “You need a more detailed scope of work to begin with, and the invoice should reflect the work that was done. Whenever you’re doing a project, especially where flag state or class is involved, the invoices are actually your proof that the work was done.”

“We use the invoices as a record, as well,” noted another captain. “We did a refit five years ago, and we’ve referred back to that book many times during this one to compare prices.”

When invoices become part of the official record of a classed vessel, they cannot have a captain’s or engineer’s notes on them, they said. They must be complete when submitted, so that’s why these captains wanted more details, including part numbers and labor hours.

We were curious to learn if the estimate or pre-work contract could double as the invoice, and these captains said it should not.

“It’s a proposal,” one captain said. “I want a bill for what we had done, including the side jobs along the way.”

“It goes back to pre-planning,” another said.

“Absolutely,” said a third.

“When they sign off on the purchase order I’ve handed them, they’re telling me that that’s what they’re going to bill me when the job’s done,” said the captain who creates purchase orders for the yard work.

“In general, most contractors and vendors do a good job,” one captain said. “On the whole, they understand what we need, and most of the time, that’s what we get. Any good captain will discuss the scope, and it’s planned for at the beginning. The invoicing, the billing, and the payment of the bill is also planned for at that time, before you start, especially with a contractor you don’t know.”

One of these captains’ pet peeves was late invoices. They mostly agreed that invoices should be submitted as close to the end of the job as possible, but certainly no longer than a week or two later.

“But sometimes you don’t get it for a month afterward,” one captain said as others groaned. “I have left a yard with basically everything paid and arrive three weeks later in Nantucket and there’s an email that shows up. ‘Here’s another $18,000 we didn’t have ready when you left.’ ”

“That’s the frustrating part, because you’ve declared the project complete with the owner,” another captain said. “And then all of a sudden, there’s some discrepancy. Your job is to represent the interests of the boat and the owner. I’m not sure you can do it fairly with everybody at that stage, a couple weeks later, a couple months later, trying to recount what was done. Is it a legitimate bill? Is it truly the work that they did?”

“That’s why I want a version of the invoice at least every two weeks,” a third captain said. “When I get that final bill, the most I want to be looking at is the last two weeks because we already agreed to everything to this point.”

When it comes to paying, there’s a shift happening where owners and the owner’s accounting people would rather not pay by credit card, which invariably includes the 3 percent processing fee that businesses normally absorb. So checks, especially electronic checks, and wire transfers are preferred.

Except for that last bill.

“For that final bill, just the last couple of weeks, a credit card is the fastest and best way to get out of the yard,” a captain said.

“The problem with paying by credit card is you pay the invoice, and three weeks later when you’re trying to balance accounts, they don’t match because the fee has been tacked on.”

These captains offered this advice for vendors, subcontractors and shipyards that supply invoices:

1. Make sure there’s a clear description of the work done.

“You can’t just say bottom job,” one captain said. “How much paint did you use? I insist in gallons, not in coats. For zincs, tell me how many you replaced and where. If you replaced them all, then that’s fine, say that.

“And each one of those jobs is its own little P.O., it’s own job number.”

2. And a separate list of parts. For engine room repairs, they want the part numbers, too, or at least a description of the equipment worked with.

“That’s something you can show to the flag state or class and say ‘this is when it was last replaced’,” a captain said.

3. With technical work, include the name of the technician so next time (if the work was good) the captain can ask for someone specifically.
4. They prefer hours to be broken down and, when appropriate, divided among driving time, shop time and onboard time.

“Most of the time you don’t get the time sheets; all you get is a summary of the hours,” one captain said. “One of the things I like to do is have the mate, or whoever is on watch that day, log whoever is coming on board and just roughly keep track of it.”

“I can never get that to match, by the way,” another captain said as others chuckled in agreement.

“You never will, but if you have a rough idea, it helps,” the first captain said.

5. The best practice was to include a purchase order or job number for every item so that time can be logged to each job.

“I don’t want to see that there were four guys on the boat today and their 32 hours are all on this project and none on this job down here,” a captain said, referring to a spreadsheet labor tally.

“One thing I’d like to see on invoices, and quite often it’s not there, is a simple phone number,” another captain pointed out.

“That’s why our P.O. system works so well,” a captain said. “We have it right there on the PO.”

6. These captains also want payment and/or wiring instructions, too. If not included on the invoice, then attached and accessible.

“And please, just go ahead and send the credit card authorization form along with the invoice so I don’t have to ask for it a second time,” a captain said.

Lucy Chabot Reed is publisher and founding editor of The Triton. Comments on this story are welcome at [email protected]. Captains who make their living running someone else’s yacht are welcome to join in the conversation. Email us for an invitation to our monthly From the Bridge captains roundtable discussion.