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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.


Screenshot showing job card and flight costing input screen in Dynamics NAV

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

 



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