November 28, 2011
This month’s survey has some good news and some bad news when it comes to the matter of a yacht’s unpaid bills.
The bad news is that, over the course of their careers, three-fourths of the 131 captains and crew who took our survey this month have worked for a yacht owner who did not pay his bills or his crew on time.
The good news: just a fifth work for an owner like that now.
“I don't work for those type of owners anymore,” said a captain in the industry more than 30 years.
"The boat was managed by a different captain before,” said the captain of a yacht 140-160 feet. “It took a year or so before he could be trained to get the payments out when needed. Many times it is the captain who needs to manage the owner when it comes time to pay. If you just sit back and let the owner ignore his bills, then of course they will not be paid until vendors and crew are screaming."
“Personally I've never had serious issues with a non-paying vessel,” said a captain in yachting more than 30 years. “Possibly because I've been choosy about the yachts I work on. Consequently, I've had good owners who understood how important paying the bills is. As a captain I've always been forceful about paying. I believe if I had a non-paying boss I'd resign.”
"My past-through-present yacht owners have not defaulted on paying their bills on time,” said another captain in the industry more than 30 years. “The only time a transaction had failed was a clerical error at the point of transfer of funds (the bank)."
Interestingly, however, when we asked Do you think this has happened more often in the past three years or less often?, most -- 78.6 percent of respondents -- felt that it happens more often, even though few work for these types of owners now.
“I have spoken to a few other captains who have had this problem more lately than in the past,” said the captain of a yacht of 100-120 feet. “As for me, the previous owner I just worked a temp job for is still withholding some reimbursement of expenses to me. Why? I do not truly know. I have not had this problem in the past so the indication to me is that this is a trend that is increasing.”
“I have not worked for an owner that has been late paying crew bills in probably eight or 10 years, but nonpayment due to shipyard overbilling or poor quality work seems to be on the increase,” said the captain on a yacht less than 80 feet in the industry more than 30 years. “There seems to be an attitude that times are a little more tough so we should be getting better value for money.”
When we asked Why do you think that is?, two responses stood out, and they were tied for first place. One is the economy.
“With the lingering economic recession, owners are postponing payments for as long as they can for cash flow reasons,” said the captain of a yacht less than 80 feet in the industry less than 10 years.
“Programs that had money issues going into the economic downturn were the first ones to be put on ice or packed in mothballs,” said the chief stew on a yacht 100-120 feet in the industry more than five years. “The lack of money flowing into the industry weeded out frivolous owners and crew.”
“More owners are using the world financial situation as an excuse,” said the captain of a yacht 80-100 feet.
“Let's face it, some owners are in over their heads, period,” said the captain of a yacht 80-100 feet in the industry more than 30 years.
The other most common answer is that wealthy people simply make working people wait for their money.
“Some owners are realizing that buying the boat is the easy part, but you can't finance the expenses,” said a captain of more than 30 years. “A few are willing to play the game of ‘who can I wait the longest to pay’, including their crew.
“I have watched many yacht owners suffer in the past three years,” this captain said. “Most cut back in an honest way, but a few take advantage of others to maintain their lifestyle.”
“I don't think it is a sign of the times,” said the captain of a yacht 120-140 feet in the industry more than 15 years. “I just think that is the mentality of certain people. I have seen an owner argue over a dock bill and get $300 [off] and that made his day. He bragged about it.”
But there were other reasons, as well.
“It’s a combination of brokers’ promises of how much it costs to run a yacht, people over-extending themselves, new owners that feel small business and the crew are less important to pay than other expenses, the office staff trying to look out for their boss’ money, older owners who got ripped off and need to have small businesses and crew overly justify their expenses, and cheap owners that have no reason owning a yacht,” said the captain of a yacht 80-100 feet in the industry more than 30 years.
“We can’t forget poor workmanship and not completing the job,” said the captain of a yacht 80-100 feet in the industry less than 10 years.
“The yacht is on the bottom of the money totem pole,” said the captain of a yacht 100-120 feet in the industry more than 25 years. “When money gets tight, the boat is a forgotten luxury.”
“Money is tight,” said the captain of a yacht less than 80 feet. “There is a different story for each unpaid bill.”
Some blamed management companies.
“Managers just don't care if they pay late,” said the captain of a yacht 160-180 feet in the industry more than 20 years. “Like it or leave it.”
A few respondents were honest that they can’t understand it.
“I don’t know,” said the captain of a yacht 100-120 feet in the industry more than 20 years. “The excuses seem to be more and different than before.”
“I can’t tell if its worse now than before,” said the captain of a yacht larger than 220 feet in the industry more than 15 years. “I had an owner like that back in 1996 on a 78-foot yacht. My second experience was in 2005 on a 105-foot vessel. Both owners were on small yachts and sometimes, they just don’t care.”
Toward the end of the survey, we asked a similar question: In your experience, why do owners do this? And we received similar responses.
Nearly a third said “because they can.”
“I think that they are alright with not paying for 60 to 90 days, or not at all,” said the captain of a yacht 80-100 feet in the industry more than 20 years.
“It’s just his way,” said the captain of a yacht 120-140 feet.
“The name of the game is to break small contractors through late payment,” said the captain of a yacht 120-140 feet in the industry more than 20 years. “It’s the purest form of capitalism.”
“Its not the money; they have plenty of that,” said the captain of a yacht 80-100 feet more than 25 years. “It’s the game. It’s fun for them to see all the reactions."
Thirty percent acknowledged that wealthy people make money when they hold onto their money, so they pay their bills as late as possible.
“At least with the bills due to contractors, the owners sometimes feel that they have an advantage to hold on to their money as long as they can before paying a bill,” said the captain of a yacht 120-140 feet in the industry more than 30 years. “Some will blame the economic situation, but most of them have the money, and are just using that as an excuse.”
Just 9.6 percent gave non-paying owners the benefit of the doubt to say they are just plain busy and don’t get to everything in a timely fashion.
“Everything goes through an accountant after approval by the boss' assistant,” said the captain of a yacht less than 80 feet. “The assistant has too much on her plate and if I don't stay on top of things, crew and bills won't get paid.”
“Sometimes our payments go out a bit late, mostly due to the boss being really busy, on the road, etc.,” said the captain of a yacht 80-100 feet. “I insist our suppliers or contractors contact me within a week or so after the invoice is submitted if payment has not been received. They know I am top of things."
“I have come across two basic kinds of owners who do not pay their bills on time,” said the captain of a yacht 120-140 feet in the industry more than 15 years. “One is the jerk who keeps his money as long as possible (for whatever reason) and keeps all contractors and suppliers waiting and hoping that they will be paid. This is usually the same guy who is late paying the crew the charter tips and sometimes their wages. Surprise, surprise, this is the same yacht that has a high turnover of crew.
“The other is the owner who has a secretary or business employee that takes care of the bill payments,” this captain said. “This person is usually so busy that they forget or prioritize the bill payments so that the yacht is at the bottom of the list. This is a great boss and people love working for him.
“The unfortunate thing is that the outside perception of the yacht and owner by contractors and shipyards is the same as if he was the jerk who was not paying the bills on purpose.”
“I think it is a combination of ‘all of the above’,” said the captain of a yacht larger than 220 feet. “In addition, some owners lack trust in suppliers, contractors and captains and feel they are being targeted due to the old rumor that ‘everything cost more when it contains the word marine.’ True or not, those who prefer to think they are targeted will undoubtedly take longer to approve payment.”
We crunched these numbers a little further to see if this thesis that wealthy people withhold payment as a matter of course held true for the richest owners (those with the largest vessels of more than 220 feet). None of the captains or crew on those vessels put their boss in delinquent payment category.
Actually, the opposite held true.
The largest group of respondents (57.5 percent) in the “because they can” group came from captains and crew on yachts of 100 feet and less.
This survey was the suggestion of a captain who was experiencing his crew not getting paid, and hearing from several charter captains that tips and bonuses were not paid. So we were curious to learn what sorts of bills were not paid?
It was an interesting blend of both exterior bills to contractors, shipyards and marinas, and interior sorts of bills, including crew salaries, promised bonuses and charter tips.
The most common type were contractor/vendor bills, about 50 percent more than any other kind.
“When I took over a command, there were unpaid bills I was not aware of until I needed to call the contractor back for service,” said the captain of a yacht less than 80 feet. “I got an earful and was told the contractor would never return on account of three outstanding bills more than 6-8 months not paid. I made sure they did get paid right away and re-built a solid relationship with the supplier by making sure they were always paid in a timely fashion every time.
“Same owner did the same thing with fuel,” this captain said. “He would never pay the fuel invoices until they went past due and the supplier would start contacting me (who ordered the fuel) and wanted me to ensure payment was made. Eventually, I asked the fuel supplier to let me know if they are not paid before it goes past due. That worked very well because I would make sure the supplier was paid within the terms agreed upon. It, too, improved the vendor/vessel relationship."
“Today, my engine vendor told me he had not been paid for a small job he did,” said the captain of a yacht 80-100 feet. “He was called to a large yacht because the starter would not engage. The boat was scheduled to be in the boat show and it was an emergency fix. He went there and found the emergency shut off switch was engaged. He disengaged it and started the engine and submitted a bill for $78, and has not been paid. Why not?”
The next few types followed closely together: crew salaries, shipyard bills and season-end crew bonuses.
“I had one owner that held on to crew charter tips for a long time,” said the captain of a yacht more than 220 feet in the industry more than 30 years. “I eventually found out he was funding his cash-flow with our money. Another used the APA charter funds as his personal kitty.”
Other kinds of unpaid bills were for dockage, fuel, charter tips and provisions.
“It was the primary credit card that was not paid or cleared before a trip or right after a yard period (heavy usage),” said the captain of a yacht 80-100 feet in the industry more than 15 years. “The result was a hold up on fuel, dockage, companies, etc.”
When an owner doesn’t pay bills on time, we wanted to know How did you handle it?
In most cases, captains called the boss’ contact person and got it paid.
“The boss is generous and everyone will get paid, even overpaid, but you will wait until he is good and ready,” said the captain of a yacht 120-140 feet in the industry more than 20 years.
Nearly as often, however, the captain or crew member either paid the bill themselves, and submitted the paperwork to be reimbursed, or resolved it by eventually finding another job. (Only one respondent reported quitting on the spot.)
“I have covered some negative petty cash amounts in the past but have always been reimbursed in a short while,” said the captain of a yacht 80-100 feet in the industry more than 10 years. “I may just be lucky but I feel that most owners are responsible and, unless there are misunderstandings, most owners know what the costs of operating and maintaining their yacht will be and are prepared to pay the bill. Honest communication is always the most important factor here, in either direction.”
“With owners of bigger yachts, it’s too much money so crew or captains cannot sponsor them,” said the captain of a yacht of more than 220 feet. “With smaller yachts, you can since the bills are much smaller."
“I have quit two boats because of this,” said the captain of a yacht 80-100 feet in the industry more than 20 years. “Now, I have financial control. I get approval for large items over $10,000, but everything else I pay the day the job is done, or the day the crew departs.”
It was also common to leave it up to the boss to handle, but in some cases, the captain or crew member arranged for an extension on the payment.
“Forward any messages from who is owed directly to the boss and that always gets money fast,” said a captain in the industry more than 25 years.
In this age of more professionalism, we were curious to know at what point does late or lack of payment translate into a bad reputation for the yacht?
The most popular response -- by nearly half of respondents -- was that even once was too much.
The remaining responses were fairly even. Less a fifth said it would have to be regular and consistent before the practice reflected on the yacht.
Less than a fifth said it would have to be at least a few times in the same port.
Less than a fifth said it would have to be at least a few times to the same company or contractor.
We’ve heard captains complain about this practice in Bridge lunches over the years, so we wanted to ask in our survey Who does a reputation for not paying follow, primarily?
Most -- again about half of respondents -- said that reputation follows the yacht.
“The reputation goes with the yacht as long as that owner owns the yacht,” said the captain of a yacht 120-140 feet in the industry more than 15 years. “It is still a small industry and word does travel.”
“I think the bad reputation applies to both the boat and the skipper,” said the captain of a yacht 80-100 feet in the industry more than 20 years. “I am lucky in that we (boss, myself and vessel) have a great reputation and are extended credit or billed later as need be. We have never, do not and will not ever owe our suppliers or contractors. Without them, we don't move.”
Nearly a third believes that reputation follows the owner.
“When owners are slow to pay, they end up costing themselves more,” said the captain of a yacht 80-100 feet in the industry more than 30 years. “Quality vendors shun them. The yacht world is small and once an owner gets a bad reputation, it is forever.”
Just 18 percent of respondents believe the bad reputation for not paying on time follows the captain. Yet in our next question, Do you think unpaid companies, vendors and crew hold the captain responsible?, an overwhelming majority said yes. The captain ordered the work; the captain must make sure the bills are paid.
“They [owners] order work they know they can’t afford but want the boat pristine,” said the captain of a 100-120 feet in the indusrty more than 20 years. “Then they blame it on the captain for the bill not being paid when they know they didn't send me the money.”
“Captains should not order repairs or supplies if you know the yacht will not pay,” said the captain of a yacht 100-120 feet in the industry more than 25 years. “Tell the owner the vendors want cash or check. Do not pay for any of the owner’s expenses with your money. At some point you will get burned. You are not a bank; you are a paid employee of the owner/yacht. Yachts that are known to stiff vendors make it difficult for captains to operate without a lot of cash, not to mention the bad reputation.”
Less than 40 percent thought that those waiting payment know it’s the boss who controls the money.
“Even though they understand that the owner is the one not paying them, it still reflects upon you,” said the captain of a yacht 80-100 feet in the industry more than 15 years. “There is nothing more embarrassing than having to tell people you owe money to that you will pay them as soon as possible, even though you know your boss is not going to pay. It is just a bad situation, and that is the reason I left.”
Given the response to the previous question about who’s reputation gets tarnished when bills aren’t paid, we were surprised that most felt captains are held responsible for paying bills on time.
“Captains are not blameless,” said the captain of a yacht more than 220 feet in the industry more than 30 years. “Some captains receive cash to pay crew, day workers, suppliers, etc., and many stories abound where captains don’t pay their crew on time and/or the agreed amount, especially with green and/or foreign crew members.
“And don't get me started on the captains who accept backhanders and/or kick-backs from vendors, suppliers, shipyards, painters, etc.,” this captain said. “This is very hard to prove, but is still too common.”
We also crunched these numbers a little further to better understand the 37 captains and crew who said they paid bills themselves. Of those, slightly more than 60 percent believed captains are held responsible for unpaid bills.
Even more interestingly, however, is that nearly 40 percent said captains were not considered responsible, yet they paid the yacht’s bills anyway.
The number of years these captains and crew had in yachting had no impact on whether they paid the bill themselves, so not even longevity teaches this lesson. It takes experience.
To read more comments from captains and crew about this survey, click here.
We conduct our monthly surveys online. All captains and crew members are welcome to participate. If you haven’t been invited to take our surveys and would like to be, register for our e-mails online at www.the-triton.com.
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