Accounting Information System for Shipping Companies TRANS-Account Introduction Case Study Interview in Singapore

Establish the corporation supported by stable system in Singapore as well

Mr. Kamiya Osamu, Chief Financial Officer

DIAMOND STAR SHIPPING PTE. LTD., a subsidiary of Mitsubishi Corporation, is engaged in ship owning and chartering business in Singapore. Since its foundation in 2011, it has been seeking more opportunities to acquire a new business in Singapore, which is functioning as a hub of international maritime industry. Why did it introduce TRANS-Account in constructing business management infrastructure by IT?

We couldn't encounter any information system solution that we would like to adopt in Singapore

-- Please tell us your background story leading to the introduction of TRANS-Account.

Mr. Kamiyai: DIAMOND STAR SHIPPING was established in Singapore in 2011 as a wholly-owned subsidiary of Mitsubishi Corporation. The first thought from the CFO's (Chief Financial Officer's) perspective in launching a shipower company in Singapore was "to build a company supported by a stable system infrastructure."
Primary transaction data in the shipowner business will be shipbuilding contracts exchanged with ship builder, charter party with charterers, and loan agreements with financial institutions. We would like to execute efficiently and effectively a series of business processes leading up to accounting treatments from ordering to a shipyard to a delivery, chartering and sales of ships as well as settlement and credit/debt management by building a mechanism in which the system centrally controls the data to be shared by the relevant divisions and transfers them to subsequent processes.
We expected, specifically, that the work efficiency in business analysis, risk management, budget development, and financial closing would be dramatically improved by creating an environment which enables our relevant personnel(middle office and back office divisions) to utilize in a timely manner according to his/her respective needs, basic transaction information such as customers and suppliers, contract date, contract amount, type and age of ships, charter hire, currency, and settlement terms inputted by the front office (contact division in contracting).
At that time, we started the system selection work in Singapore, expecting that there would be such ERP(Enterprise Resource Planning) software for the shipping industry in Singapore, where there are many maritime clusters.
In spite of the efforts of investigating and studying about systems available in Singapore by visiting our customers, suppliers and affiliates, or directly contacting vendors, to get information on the features and usability of each system, we had a hard time finding a system as we wanted immediately and finally narrowed down to AIS's TRANS-Account and TRANS-Owner. As TRANS-Account was equipped with almost all the accounting features required in the shipowner business, we were able to introduce the system in a short period.
On the other hand, as TRANS-Owner was insufficient in the functions of controlling upstream business processes including contract control, etc. as mentioned above though it retained the features of financial projection simulation and budget data import for ship management, we decided to introduce the Integrated Maritime Operations System(IMOS) to partially supplement the charter contract control function, and interface the two systems.
In addition, as for shipbuilding contracts and ship management our fellow subsidiary MC Shipping is working on the precedent introduction of customized TRANS-Owner.

We required a business base enabling us to remove as much room as possible for human errors to occur in recent financial closing

-- Why is such a consistent system base necessary?

We thought that, for managing dozens of the ships we own and SPC(Special Purpose Companies) while aiming to expand the scale of fleet in the future, if we continue controlling important transaction and accounting data with a spreadsheet software, etc., we would come to a deadlock sooner or later.
Spreadsheet software is highly flexible in altering and processing data, but on the other hand, data tend to be easily overwritten at the discretion of each division. As a result, data to be maintained as the company-level data are scattered and thus data integrity is damaged, which requires double and/or triple data entries to correct. Besides, the continuity of data control can be lost due to personnel relocation or resignation.

Since our individual financial statements data need to be linked to consolidated accounting of our parent company Mitsubishi Corporation, both accuracy and speed are required in each quarterly financial closing procedures. With the adoption of the International Financial Reporting Standards(IFRS) and disclosure of off-balance data, the recent financial closing process is getting more and more complicated and sophisticated, and therefore in order to respond to such requirements, it is necessary to establish such management base enabling us to remove as much room as possible for human errors to arise.
Overseeing the company's business risks, I have been frightened in actualizing human error risk. Though it is hard to prevent human errors completely in the course of business operations, it is the key to improvement of work efficiency to leave simple, massive tasks requiring speedy processing such as transcription and collation that IT is very good at to an IT system as much as possible. It is essential to establish a system that allows human beings to concentrate on making proper judgments by effectively using information obtained from the system.

System introduction will differ depending on whether the system to be introduced is "ready-to-wear or made-to-order"

-- To what points did you pay attention in the introduction of the new system?

Mr. Kamiyai: In system introduction, it is also important to distinguish typical and core information from atypical information. EUC(End User Computing) is suitable for atypical information because EUC is capable of responding flexibly to changeful management needs. However, if you desire to solve all these with a core system, it will take a great amount of system investment.
In system introduction, sometimes there arises a discussion as to whether to develop a system fit to its business process or alter the business process fit to a standard-type system to be introduced. To use the metaphor of clothes, it may be a matter of a choice between "ready-to-wear, or made-to-order.".
In making this judgment, we believe that it is important to review our own transactions and business workflow. Another important work is to determine how different our transactions and business process are in comparison with those of the industry standards and review the business process in the organization and roles of the divisions as well as the necessity and importance of each work itself to make our IT-based systematization successful.
In addition, in customization and system development, it is required at the stage of defining requirements between a user and a vendor to sufficiently communicate and reach shared understandings after clarifying such needs as expected accounting functions, internal control, risk management, and streamlining business operations, etc.

-- You mean a sense of purpose is important for IT-based systematization?

Mr. Kamiyai: Aspects of fundamental risk held by IT also need to be paid attention. While IT is working normally in daily business operations, we are not specially aware of it, but once any problem occurs we will be reminded how much effect it has. Also, if users feel it hard to use in day-to-day work or system bugs are found at each alteration or correction, it can't be said that we, as a company, are able to respond to IT appropriately.
It tends to be taken for granted that a system is operating, but for this purpose, it is important that you don't neglect advance confirmation and procedures at the stage of requirement definition or user's acceptance test before a system starts to operate, and including these, it is necessary to face IT appropriately.

We expect further functional enhancement as a business system, not just as an accounting system

-- Please tell us about the functions you actually introduced and their effects, your expectations and plans for future systems.

Mr. Kamiyai: We have established a system for data related to charter party and ship management contracts to be inputted by the operation division and confirmed by the accounting division, and with this system our business is operating efficiently. Further, thanks to that the Fixed Asset module and Loan Management module are built in to the system, a series of business process is conducted smoothly and TRANS-Account is effectively working.
In addition, we perform consolidated financial closing process efficiently by synchronizing account titles and customer/supplier codes with those of the parent. We expect TRANS-Account to have its features as a business system further enhanced beyond the accounting field, its area of specialty in order to control transaction data of the upstream process as mentioned before.
Future evolution of TRANS-Owner is much anticipated by shipowner and operator companies. We hope that it will evolve further as the de facto standard ERP software suited for shipping industry through grasping users' needs and voice.


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