18/06/2022
Drop it like it’s hot!
Is APA becoming a hot potato?
Advance Provisioning Allowance, otherwise known as APA, is the spending money of charter guests provided to a yacht before their arrival on board.
Its value is around 10% of the charter fee in general. Funds are sent to the vessel so that the crew can provision in advance, organize their arrival and keep up with the expenses of the guests during their stay on board.
The responsibility of following the APA and controlling the bottom line is shared between the boat and the shore. The lion part, around 90% of it, falls on the crew and ultimately to the Captain or Purser on board.
The remaining 10%, which consists of receiving the funds, verifying the confirmed balance, following up issues and closing the APA, is done on shore. Big brokerage houses usually provide this service. However, APA accounting often ends up with the management company of the vessel or the family office.
There used to be a time when all of this was just petty cash and bills would flow like champagne on board. But regulations have changed. Operating with cash became inconvenient and undesirable. Cash was replaced by bank cards and bags full of cash turned into bank transfers. The idea was that the new system will be more transparent and accurate. On the paper it certainly is. But keeping funds separate in a bank account isn’t like keeping funds in separate envelopes in a drawer. As soon as APA is transferred to an operational account, it is not possible not to mix funds. It is only possible to stay on top and to keep within limits.
There is just one problem: APA isn't the vessel’s money. APA is the “holiday-fun money” of a third party. Financial authorities want more transparency and they want it to be applied now. In order to keep up with the audit trail, APA can be accepted only by the stakeholders and the owning company. Under these strengthened international financial laws and regulations, APA can end up being refused by banks and classified as coming from unjustifiable sources.
As no-one wants to get their fingers burnt, this may cause headaches for some and push to review their APA management. But managing APA can be stressful and requires availability and attention in the buzzing charter season when many have “better things to do”.
On the other hand, there isn’t anything worse than ruining a happy holiday experience over money matters. A client can get frustrated if bothered with money issues even before their arrival, as much as it can leave a bad taste in their mouth to close off a successful charter with a dispute over pennies.
As a matter of fact, managing APA well is important in many ways: to help the crew to prepare and provide a smooth service to the guests; to keep clients happy with a professional service;and to keep in line with regulations.
ASAP was founded to provide solutions where others see only trouble and our goal is that no-one gets burnt. So drop the APA, we will catch it while it’s hot.
